Preparation of Sale and Purchase Agreement in Malaysia

A sale and purchase agreement, commonly called the SPA, is the contract that records the sale of a property and binds both parties to complete it. In Malaysia the SPA is prepared by a solicitor, and the buyer and the seller normally each appoint their own.

What a sale and purchase agreement does

The SPA fixes the purchase price, the deposit, the completion period, the condition in which the property is handed over, and what happens if either side fails to complete. Once signed and stamped it is the document a court will look at if the transaction breaks down.

Everything agreed verbally with the agent or the owner before signing has no effect unless it is written into the agreement. That includes furniture and fittings, outstanding maintenance charges, tenancy arrangements and any promise to repair.

Sub-sale purchases and developer purchases are not the same

In a sub-sale, where you buy from an existing owner, the terms are negotiated and your solicitor drafts or reviews them. There is real scope to protect you on completion extensions, late delivery of vacant possession, and the release of the deposit.

In a purchase directly from a developer of housing accommodation, the agreement follows a statutory form prescribed under the housing development legislation, and its terms are largely fixed. Your solicitor's role there is to explain what you are bound to, check the schedule of payments, verify the developer's licence and permit position, and deal with the differential sum and consents.

When you need a lawyer

• Before you sign an offer to purchase, a booking form or a letter of offer, not after
• Before any deposit changes hands
• When the property is tenanted, jointly owned, or held by a company or an estate
• When the seller still has a bank loan on the property
• When the property has no individual or strata title yet
• When the buyer is a foreigner, or the title carries a restriction in interest or a bumiputera condition

What we do for you

1. Conduct a land search and, where relevant, bankruptcy and company searches on the other party
2. Draft or review the agreement and negotiate the terms that carry risk for you
3. Hold the deposit as stakeholder where the agreement provides for it
4. Attend to stamping and to any state authority consent or developer consent required
5. Deal with the buyer's and the seller's financiers on redemption and release of the balance price
6. Prepare the transfer instrument and carry the matter through to registration

What to prepare before you instruct us

• A copy of the title or, if there is no title yet, the previous sale and purchase agreement and the deed of assignment
• Identity documents of every buyer and seller, or company documents if a company is a party
• The agent's offer to purchase or booking form, if one has been signed
• The latest quit rent, assessment and maintenance or service charge statements
• The seller's loan redemption statement, if there is an existing loan

Common mistakes

• Signing the agent's offer to purchase without legal advice, then discovering the terms are already binding
• Paying the deposit directly to the seller instead of to a solicitor as stakeholder
• Agreeing a completion period that is shorter than the buyer's loan can realistically be released in
• Leaving out the fixtures, fittings and appliances that were promised during viewing
• Ignoring arrears of maintenance charges, which can block the issue of documents needed for transfer

Frequently asked questions

Who prepares the sale and purchase agreement, the buyer or the seller?

In a sub-sale it is normally the buyer's solicitor who prepares the agreement, and the seller's solicitor reviews it and advises the seller. In a purchase from a developer, the developer's solicitor prepares the statutory form and the buyer appoints a solicitor to advise and to act on the transfer.

Can I use the seller's lawyer to save cost?

You can, but the same firm cannot advise both sides on terms where their interests conflict, such as deposit forfeiture or an extension of the completion period. The saving is small compared with the risk if the transaction goes wrong.

Is a booking form or offer to purchase already binding?

It can be. Depending on how it is worded, a signed offer to purchase or booking form may already create a binding contract on price and property, which limits what can be renegotiated later. Have it read before you sign it.

What happens if the buyer's loan is not approved?

That depends entirely on the agreement. A properly drafted sub-sale agreement deals with what happens on non-approval, including whether the deposit is refunded. Without that clause the buyer may be in breach.

Does the agreement need to be stamped?

Yes. Stamping is attended to by the solicitor within the time allowed, and an unstamped agreement cannot be relied on in court without penalty. Your solicitor handles the adjudication and payment as part of the transaction.

Related services

• Memorandum of Transfer (MOT)
• Loan Agreement
• Land Search
• Caveat of Property
• Discharge of Charge
• Tenancy Agreement
• Lease Agreement
• Property Transfer & Transaction
• Foreigners Buying Property
• Property Lawyer Malaysia

This page is general information about property law procedure in Peninsular Malaysia and is not legal advice for any particular situation. How a matter is handled depends on the title, the state and the facts, and Sabah and Sarawak have their own separate land legislation. Speak to a lawyer about your own circumstances.