Buying and Selling of a Property

The following are information on buying and selling a property in Malaysia

Buying a Property

ELIGIBILITY

1A) Foreign Investment Committee ( " FIC " )

B) Application for FIC Approval

2A) State Authority ( Section 433B NLC )

2b) Application for State Authority Consent

LAND TITLES

There are two categories of Land titles :-

( a ) Freehold - which gives the owner perpetual ownership ( held in perpetuity );

( b ) Leasehold - which allows the owner to stay in possession only for a specified period. Land owned by the state and lease are for the term of usually for 60 or 99 years.Renewal of leases is fairly easy for further equivalent term with payment of premium to the State.

Foreigners can acquire both Freehold and Leasehold Properties.

THE LEASEHOLD FALLACY

The Land Laws of Malaysia is governed by the National Land Code, 1965 (Act 56 of 1965). Section 40 of the National Land Code, 1965 states that all state land belongs to the State Authority. When state land is disposed off by the State Authority to an individual in perpetuity for an indefinite period, this land is now granted as Freehold title. When the state land is disposed off by the State Authority to an individual for a term of years, by virtual of law, not exceeding 99 years, this land is now granted as Leasehold title. Upon expiry of the period of the lease, the land should be reverted to the State Authority.

Theoretically, comparing to the leasehold title (within 3 to 99 years) with land tenure for a fixed term of years the market value of land under freehold title would definitely be having a better market value and in demands, apart from it's locality. The price of land held under leasehold title will be affected seriously when the lease term is going to be expired.

DOCUMENTS OF TITLE

Freehold or Leasehold Properties are either issued with:

1) Individual Title - issued under the National Land Code 1965 (" NLC ") for land, houses, commercial properties that are commonly not multi-storey; or

2) Strata Title - issued under the Strata Titles Act 1985 (" STA ") Commonly issued for multi-storey buildings e.g.apartments, condominiums, commercial properties and now even for houses in gated and guarded communities.

Both types of titles have same legal status and rights and are protected equally under the NLC.

WHAT PROPERTIES CAN FOREIGNERS ACQUIRE?

All residential and commercial properties EXCEPT these types which are restricted:

1. Low and medium cost properties as determined by the State Authority;
2. All properties built on Malay reserve land;
3. Properties allocated to Bumiputera ( Bumiputera quota ) in any property development project as determined by the State Authority;
4. Stall and Service workshop; and
5. Agricultural land developed on the basis of the homestead concept.

BANK FINANCING FOR FOREIGN PURCHASER

• Local or foreign based Banks offer loan packages.
• Currently, loan are available between 60% and up to a maximum of 90% of the purchase price of the property.
• Loan approvals subject to the foreign purchaser`s financial standing.
• Loan will be disbursed to Developer or owner of property upon satisfaction of all documentation, payment of the difference between the purchase price and loan amount granted and commonly upon payment of fees ( legal, bank`s processing fees, registration fees and property taxes )

PROPERTY TAXES

Real Property Gain Tax

Any disposal of chargeable assets by Foreigner or Malaysian Citizen has been exempted from Real Property Gains Tax as from 1st April 2007.

Inheritance Tax

There is no inheritance tax charged in Malaysia.

VAT And Other Taxes

There is no VAT in Malaysia, but a Government Sales Tax (GST) of 5% is charged.

TYPES OF PROPERTY

1) Developments In Progress

Common for developer to sell properties before building

Residential Properties

- Governed under the Housing Development(Control & Licensing ) Act 2005 (" HDA").

- Mandatory to use standardized Sales & Purchase Agreement ("SPA") from HDA.

- Payment of purchase price is periodic and by installments based on stages of work done and

- Completion of SPA is within 24 months (houses) or 36 months(apartment/condominium) from date of SPA.

- Memorandum of Transfer will be executed upon issuance of title to the property.

Commercial Properties

- A standardized format of SPA is adopted but not a mandatory form like the Residential Properties.

- Payment of purchase is periodic and by installments based on stages of work done and

- Completion of SPA is usually within 36 months from date of SPA.

- Memorandum of Transfer will be executed upon issuance of the title for the property.

2) Completed Properties

Houses or commercial property building that are completed.

• Terms are usually " as is where is basis "
• Residential properties not governed under HDA
• Commercial properties are also not governed under HDA
• Payment of purchase price is usually within 3 months from date of SPA
• Completion of SPA is usually upon full payment and then ownership of property is transferred
• Memorandum of Transfer will be executed simultaneously upon execution of SPA is title is available.

LOCAL TERMINOLOGY TO DESCRIBE SOME TYPES OF RESIDENTIAL PROPERTIES

1) Bungalow.A detached house on its own land.

2) Semi-D.Short for semi-detached house and refers to a house joined to another.Two houses make up one building.

3) Terrace.Several units of houses that adjoined on both sides with each other where the end or corner unit connected on onw side with usually some land space.

4) Apartments / Condominiums. Multi-storey building or buildings comprising accommodation parcels within a land with shared services and facilities.

5) Gated & Guarded Community.Generally refers to houses guarded with security system and perimeter fencing for the surrounding development and usually with some shared services or facilities.