How long does it take for a sale and purchase agreement of a property to be completed?

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By Low & Partners managing partner Datuk Andy Low Hann Yong

Discussion with a real estate agent

 

Have you ever wondered how long it takes for the sale and purchase agreements (SPA) to be completed? Does it frustrate you when the delays cost you late payment interests as a purchaser?

Before purchasing a property, you need to consider the time frame involved in the SPA. This allows you to plan accordingly for payments and also for the vacant possession of the property.

There are three ways in which a property may be purchased namely; from a developer, a sub-sale or an auction.

A standard SPA usually takes around three months to complete. The period applies to a straightforward case where it is a freehold property, or when the individual title has been issued and there are no encumbrances on the property.

For leasehold properties, this timeframe, however, may vary depending on other factors such as the fulfilment of preceding conditions. For example, the need to obtain consent from the relevant State Authority. If approval is required, time is needed to obtain the consent, and it may take around six to nine months for the completion of your SPA.

The same applies to purchases made by foreigners whereby consent would also need to be obtained. For strata type properties, the time frame taken is usually the same for properties with an individual title, provided that the strata title has been issued. If the strata title has not been issued, and the property is still under a Master Title, delays may occur.

There are various methods for you to purchase a property and each has a different time frame.

Direct developer

It is easier to purchase a house with cash than on loan. For properties that are purchased directly from the developer, you usually need to pay a booking fee to secure the unit. It is usually the initial payment of your 10% deposit. The remaining balance of the 10% deposit will be paid upon the execution of the SPA with the developer. The 90% balance shall be paid upon presentation of the claim by the developer to you.

These stages of claims are also known as progressive payment, and it shall follow the Third Schedule which can be found in the executed SPA. Bear in mind that every notice for a claim presented by the developer for the instalment due shall be paid within 30 days from such notice. Failure to comply with the notice will incur an interest of 10% per annum charged on a daily basis.

Concerning vacant possession of the property, the developer shall deliver the landed property within 24 months from the date of the SPA. For strata property, the delivery is within a time frame of 36 months.

If you are financing the purchase of a house by a loan, a lawyer will be engaged by the financier for the preparation of loan documents.

The developer’s and/or landowner’s consent has to be obtained in order to assign your property as a collateral to the financier (in cases where no strata title has been issued, and the property is still under the Master Title) or otherwise to present a charge at the land office where the strata title has been obtained to ensure the interest of the financier is secured before the loan can be released.

This process takes time. Therefore it is wise to apply for your loan at an earlier stage or promptly after executing your SPA, thus avoiding any unforeseen circumstances that may result in costly delays for you.

To Read More: Top 9 SPA legal jargons that you should know

Sub-sale

Concerning sub-sale, the vendor and the purchaser would have engaged their respective lawyers for the transaction, each acting in the best interest of their clients. An SPA will be drafted, spelling out all your rights, obligations and liabilities which you as the vendor or the purchaser will need to fulfil.

For example is the time required for the purchaser to pay the balance of the purchase price or the nature in which the vacant possession will be delivered. These terms are drafted to avoid unnecessary conflicts and misunderstandings.

Usually, a 2% booking fee or earnest deposit must be paid upon making an offer to purchase the property. The remaining 8% will be paid upon execution of the SPA. The balance of the purchase price will typically be paid within three months from the date of execution of agreement (in cases where strata title has been issued) or three months from obtaining the developer’s/landowner’s consent (in cases where no strata title has been released and the property is still under a Master Title).

The purchaser will need to deposit the balance of the purchase price to his or her lawyer before the presentation of the transfer at the land office or before the application of consent with the developer or landowner.

The vendor’s lawyer will ensure that quit rent, assessment and utility bills are paid by the vendor and are up-to-date. The redemption statement (if the property is under the charge of the vendor’s financier) is submitted to the purchaser’s lawyer in exchange for the balance of the purchase price.

Only upon the successful registration of the transfer of the property or after obtaining consent from the developer or landowner can the vendor’s lawyer be entitled to release the balance of purchase price to the vendor, at which point the vendor shall deliver vacant possession of the property to the purchaser within a specified time frame.

The same time frame shall apply to the purchaser who is purchasing by a loan. As such, it is best if you can keep a tab on all the time frames even though your lawyer is doing the job.

To Read More: Common problems in a subsale transaction

To Read More: What happens when you buy from a bankrupt?

To Read More: First-time homebuyers should be alert in the secondary market

Auction

Sometimes, you might be interested in purchasing an auctioned property either by a financier or by the court. If so, you must obtain a copy of the Proclamation of Sale (POS) and Condition of Sale (COS) for the property and understand all the terms and condition contained therein.

Generally, upon successful bidding, you would need to pay a deposit of 10% in the form of bank draft or cashier’s order. There may also be situations where there has been an increment to the successful bidding price, and the difference will need to be paid on that day itself. The balance of the purchase price must be paid within 90 to 120 days from the date of the auction.

Please note that the time frame for the payment of the balance shall apply to both properties with a title or without a strata title. As such, you are on a tight timeline when purchasing an auctioned property.

To Read More: Property Auction - The Good and The Bad

To Read More: 10 steps to buy an auction property

To Read More: Buying auction properties? Here’s a checklist before you bid

To Read More: Ask Me Anything: Auction property and stamp duty

To Read More: Hide and seek of auction property

Abandoned projects

There may be instances where a developer has abandoned its project as the company has gone into liquidation. When this occurs, a liquidator, an officer appointed by the High Court or the creditors of the developer will step in. He or she is empowered to act on behalf of the developer.

There may be some delays as a result, but as a purchaser, you may refer back to your rights under the SPA to claim against the liquidator, any liquidated damages calculated at the rate of 10% per annum on a daily basis. Alternatively, you may complain and claim at the Tribunal for Homebuyers Claims.

Under the newly amended law, a purchaser is entitled to terminate the SPA at any time (provided that the Housing Controller has certified that the project has in fact been abandoned.), if the delay has been prolonged, or the developer refuses to carry out the work or cease to carry out work for more than six months without any progress or outcome.

In all situations, it is best to consult your lawyer for all matters relating to the completion of your SPA. Your lawyer will be able to help you keep track of the time frames to be adhered to and ensure that your interest is well protected.

ppty_07032018_datuk_andy_low_hann_yong_cokwong_1-683x1024_1About the contributor

Dato’ Andy Low Hann Yong is a practising advocate and solicitor of the High Court of Malaya. He holds a degree in the Bachelor of Laws (Honour) from the University of Malaya. He is also the founder and managing partner of Low & Partners with offices located in Petaling Jaya, Johor & Penang. He and his firm are nominated as the top finalists for multiple ALB Law Awards in Malaysia & South East Asia. You may contact Dato’ Andy Low here or visit www.lowpartners.com

 

 

 

 

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