First-time purchasers often face many uncertainties, especially regarding the required documents, expected timeline, and overall costs involved. This guide provides a clear overview for both Purchasers and Vendors to help ensure a smooth and properly managed conveyancing process from start to finish.
1. Preparation before Sale and Purchase Process Begins
It is important for a Purchaser to first identify the type of property you intend to purchase, whether it is freehold or leasehold, the type of title, and the type of property. This is because each type of property involves different procedures.
In any property transaction, parties must take into account several ancillary costs, commonly referred to as “hidden costs”, which include:
● Stamp duty for the transfer instrument (Form 14A);
● Stamp duty for the loan agreement (if applicable);
● Legal fees for the SPA and loan documentation;
● Estate agent fees; and
● Real Property Gains Tax (RPGT), where applicable.
Once a Purchaser confirms interest in a property, the Purchaser may engage a registered Real Estate Negotiator (REN) under Lembaga Penilai, Pentaksir, Ejen Harta Tanah dan Pengurus Harta (LPPEH) to facilitate property search, negotiations, and coordination between parties.
2. Preparation of Agreement to Purchase/ Offer to Purchase/ Letter to Purchase
In the situation where REN is appointed, the Purchaser will be provided an Agreement to Purchase/ Offer to Purchase/ Letter to Purchase that sets out the preliminary terms, including:
● Purchase price;
● Deadline for payment of initial deposit; and
● Timeline to obtain loan approval.
At this stage, an earnest deposit may be required from the Purchaser which typically 2% to 3% of the purchase price. Hence, the Purchaser must ensure sufficient liquidity to cover this initial commitment.
In Institut Teknologi Federal Sdn Bhd v IIUM Education Sdn Bhd [2007] 7 MLJ, the court held:
“It was held that negotiations for a contract, no matter how advanced, cannot amount to a contract, notwithstanding the payment of the earnest deposit by the Purchaser.”
This principle confirms that the Agreement to Purchase does not bind either party. Only the SPA creates a legally enforceable obligation to proceed with the transaction.
3. Housing Loan Application
Once the purchase price has been determined and agreed upon, the Purchaser may proceed with a housing loan application if bank financing is required. The Purchaser should be mindful of the loan approval timeline as the period for payment of the balance of the 10% deposit is usually fixed. Failure to make such payment within the stipulated time may entitle the Vendor to terminate the property transaction.
4. Preparation of Sale and Purchase Agreement
The Sale and Purchase Agreement (SPA) serves as the principal legally binding document between the Purchaser and Vendor. It governs the entire transaction, including vacant possession date, obligations of each party, and remedies for breach of contract.
The SPA negotiation and execution process typically takes around 14 days or more in which the Purchaser’s solicitor and the Vendor’s solicitor will negotiate and finalise the terms to protect their respective clients’ interests.
5. Completion of Transaction
The completion process for a property transaction generally takes between 3 to 6 months. During this period, the solicitor will handle matters relating to the payment of stamp duty for the transfer of property, application for state authority consent (if required), discharge of title from the vendor’s bank (if the property remains charged), and all necessary filings and registrations at the Land Office.
At Azreen Azmi & Associates, we ensure our clients receive timely updates on the progress of their transactions. We believe transparency and clear communication form the foundation of a smooth and efficient conveyancing process from commencement to completion.
6. Conclusion
Many individuals assume that legal services in a property transaction only begin at the stage of preparing the Sale and Purchase Agreement. However, we believe that the better approach is to obtain legal advice at an earlier stage which is before any documents are signed.
By consulting a solicitor beforehand, Purchasers will be able to gain a clearer understanding of the process involved as well as the implications of each step taken. The solicitor may also assist in taking preliminary steps such as conducting property searches, bankruptcy searches, reviewing the title status, and ensuring that all relevant documents are complete and in order.
We believe that a more structured, transparent, and secure transaction process from the outset until completion can be ensured by engaging legal professionals earlier.