Sales And Purchase Agreement

The sales and purchase agreement (SPA) is a legally binding contract that outline the details of a property sale between buyer and seller.

The SPA ensures that both parties mutually agree on the terms and conditions of the property transaction, It protects by preventing either parties from altering the agreed-upon terms to their advantage.

Upon signing the SPA the deal is essentially closed, No further negotiations can occur and both parties much adhere to the terms and specified in the agreement.

Importance of SPA

The SPA is a legally binding contract that outlines the terms and conditions of a property transaction, whether you’re buying a new property from a developer or a secondary market property.

The SPA lays out all transaction details, terms and conditions in meticulous details in case anything goes wrong, there’s hard proof to fall back on, safeguarding the interest of both parties.

SPA involves two parties which is the Seller (who sell the property) and the Buyer (who purchase the property), The seller must legally own the property or have authority to deal with it .

Pre-contract documents ( such as Letter of Offer or Booking Form) may precede the SPA with the buyer paying an earnest deposit to firm the deal.

In a property transaction the Seller transfer ownership (property) to the buyer in exchange for cash payment.

Cancellation

In the case of buyer need to cancel SPA there may be consequences, standard SPA’s often include a clause impose a penalty ( usually 10% of the purchase price) for cancellation.

But if the seller wants to exit the deal, it’s challenging to do so once the SPA is signed.

Restrictive Covenants

These may conditions or restrictions impose on the property include limitations on alterations, use or development (especially in Land deal).

Warranties and Indemnities

Warranties are assurances given by the Seller regarding the property’s condition, title and legality.

Conditions Precedent

There are some conditions that must be fulfilled include obtaining financing, obtain regulatory approvals (consent to transfer) etc.

Completion mark the transfer of ownership from Seller to Buyer, it involve the payment of the purchase price and the handover the keys.

After completion the Buyer becomes the legal owner and any post-completion matter such as utilities transfer are addressed.

Vacant Possession

The Sale and purchase process for a property in Malaysia involve several parties including the vendor, purchaser, land office, Inland Revenue Board, lawyer, developer and valuer thus times it takes can be vary.

The entire process for sub-sale properties in the secondary market may take up to 4 months or more subject to Freehold or Leasehold property.

Vacant possession is a legal term that means the property is in a state fit to be occupied. In simpler words, this means the delivery of access keys and cards to your newly purchased property.

For Properties development by developers, vacant possession has to be delivered within 24 months for landed property and 36 months for high rise stratified building.

Tenancy Binding

The SPA is subjected to the tenancy when the purchaser is purchasing a tenanted unit. The purchaser will be getting the legal possession as the owner of the property but not the keys to the unit. Effectively, the rental and deposits shall be delivered to the purchaser by way of assignment of tenancy.

Defect Liability

If you have purchased a house in secondary market, you will not notice the ‘Defect Liability Period’ clause in the SPA. A defects liability period is the warranty period which the Developer is contractually obliged to repair the defects which have appeared within the period of time due to defective in construction works and material.

Contrary to the privilege of having developer’s warranty, the purchase of sub-sale properties requires sufficient due diligence of the purchaser when viewing and inspecting the property before entering into the SPA.

Due diligence includes checking every part of the house especially sewage, piping, leakage, electrical appliances, rooting and any other fixtures and fittings to prevent any undesirable situation arise. Should the purchaser require the repair of anything prior to vacant possession.