When buying property in Malaysia, buyers generally purchase either a property directly from a developer or an existing property from an owner. These are commonly known as a developer purchase and a subsale purchase.
Although both transactions involve the purchase of property, the legal process and practical considerations can be significantly different.
A developer property is usually purchased directly from the housing developer.
The property may be:
Under construction;
Completed but not yet occupied; or
A completed property available for immediate purchase.
The transaction is generally governed by the relevant statutory framework and the prescribed form of sale and purchase agreement where applicable.
A subsale property is an existing property purchased from a current owner.
For example, a buyer may purchase:
A previously occupied house;
A condominium unit owned by an individual;
A commercial property; or
A property that has already been transferred to the current owner.
The buyer and seller will enter into a sale and purchase agreement setting out the terms of the transaction.
For a developer purchase, the SPA may follow the prescribed statutory form applicable to the relevant type of housing development.
For a subsale property, the SPA is generally negotiated between the buyer and seller, subject to applicable law.
The SPA may contain negotiated provisions relating to:
The completion period;
Extensions of time;
Vacant possession;
Fixtures and fittings;
Existing tenancy;
Outstanding charges; and
Default by either party.
A new property is generally purchased based on the specifications and plans provided by the developer.
A subsale property is purchased in its existing condition, subject to the terms of the SPA.
The buyer should consider:
The physical condition of the property;
Renovations;
Defects;
Existing tenants;
Fixtures and fittings; and
Any outstanding maintenance charges.
A physical inspection is particularly important for subsale properties.
Both types of purchases may be financed through a bank loan.
However, the timing of financing may differ.
For a developer purchase, the financing may be released progressively depending on the stage of construction.
For a subsale property, the financing may be released upon fulfilment of the relevant conditions for completion.
The buyer should ensure that the financing arrangements are properly coordinated with the SPA.
A common issue in a subsale transaction is that the seller may still have an outstanding housing loan.
In such a situation, the seller's bank will usually provide a redemption statement stating the amount required to settle the outstanding loan.
Part of the purchase price may be used to redeem the seller's existing financing before the property can be transferred free from the existing charge.
This process requires proper coordination between:
The buyer's solicitor;
The seller's solicitor;
The buyer's bank; and
The seller's bank.
Potential advantages may include:
New construction;
Developer packages or incentives;
Modern facilities;
Possible warranty or defects liability arrangements.
Potential considerations may include:
Construction delays;
Waiting period before completion;
Progressive financing costs; and
The need to assess the developer and project carefully.
Potential advantages may include:
The buyer can inspect the actual property;
The location and surrounding area can be assessed;
The property may be available sooner; and
The buyer can understand the actual condition of the property.
Potential considerations may include:
Existing defects;
Outstanding charges;
Existing tenancy;
Seller's bank loan; and
Additional legal work required for completion.
There is no universally better choice between a developer property and a subsale property.
The right choice depends on the buyer's financial position, objectives, preferred location, timing and risk tolerance.
Before signing any document or paying a substantial deposit, buyers should understand the legal and financial implications of the transaction.
Malaysia