Understanding the Sale and Purchase Agreement (SPA) in Malaysia: Key Legal Points for Buyers
The Sale and Purchase Agreement (SPA) is a critical legal document in property transactions. Whether involving a sub-sale property or a new development, the SPA sets out the terms, conditions, and obligations that govern the relationship between the buyer and the seller. It is essential for buyers to be aware of the key legal elements of the SPA to ensure their rights are fully protected throughout the transaction.
- Purchase Price and Payment Terms
In sub-sale transactions, the SPA typically stipulates a 10% deposit payable upon signing, with the remaining 90% due within 90 days. An extension of 30 days may be granted, often subject to interest. Failure to complete payment within this period can result in termination of the SPA and forfeiture of the deposit. It’s imperative to ensure that these timelines align with your financing arrangements, and a conveyancing lawyer can assist in coordinating with financial institutions to meet these deadlines.
- Vacant Possession and Liquidated Ascertained Damages (LAD)
For new developments, the developer is obligated to deliver vacant possession within 24 months for landed properties or 36 months for stratified properties. Notably, the Federal Court clarified that the calculation of LAD for late delivery commences from the date the booking fee is paid, not from the date of the SPA. This decision underscores the importance of the booking fee date in determining the commencement of the developer’s obligation to deliver vacant possession.
- Defects Liability Period (DLP)
Upon taking vacant possession, buyers are entitled to a DLP, typically lasting 24 months. During this period, the developer is responsible for rectifying any defects in the property. A retention sum, usually 5% of the purchase price, is held to ensure compliance. It’s advisable to document any defects and notify the developer promptly to facilitate timely repairs.
- Loan Rejection and Termination Clauses
Including a “subject to loan approval” clause in the SPA provides a safeguard for buyers. If financing is not secured, this clause allows for the termination of the SPA without penalty. Absent such a clause, failure to obtain a loan could result in forfeiture of the deposit. A conveyancing lawyer can ensure that this provision is appropriately incorporated into the agreement.
- Consent, Title Issues, and Bumiputera Lots
Certain properties, such as leasehold or Bumiputera units, may require state authority consent before transfer. Additionally, properties with restrictions in title necessitate careful scrutiny. A conveyancing lawyer can conduct thorough due diligence to identify any such requirements and ensure compliance, thereby preventing potential legal complications.
Conclusion
The SPA is more than a mere formality; it’s a legally binding contract that delineates the rights and obligations of both parties in a property transaction. Engaging a qualified conveyancing lawyer is crucial to navigate the complexities of the SPA, safeguard your interests, and ensure a smooth transaction process.
If you are in the process of buying or selling property and require clear, reliable legal support, feel free to reach out to us for our SPA review and conveyancing services. We would be happy to assist you with practical legal guidance tailored to your needs.
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