Understanding new property handover procedures in Malaysia

Finally! After a long wait since your Sale and Purchase Agreement (SPA) signing, your property in Malaysia is ready for handover by the developer. Here are some things to keep in mind to ease the experience of taking over your new home.

Issue of Vacant Possession

Vacant Possession (VP) refers to the condition of a property when it is fully completed but not fit to be occupied. To protect your interest, developers are required by law to obtain proof, a certificate by the architect, which certifies that the building is ready for water and electricity connection before issuing the VP. Also, an application for Certificate of Fitness for Occupation (CFO) will need to be submitted and accepted by the state authority before the developer can hand out VPs. A CFO is similar to the Temporary Occupation Permit in Singapore. You can only move in after receiving your CFO.

You should also know that under the Housing Development Act, for multi-storey (strata titled) developments, developers are obligated to hand over the VP within 36 months from the SPA date, with the entitled common facilities completed. If the developer fails to adhere to the timeline, you will be compensated for 10 per cent of purchase price per annum.

Inspecting for defects

After obtaining the VP, proceed with an on-site inspection. Thoroughly check that your ceiling, doors, windows, piping, tiles and installations conform to the descriptions in your SPA. A tip: Pay a visit to your new home when it is raining heavily, so that you can better see if there is any leakage.

After the initial inspection, there will be a Defects Liability Period (DLP) where any defects found must be submitted in writing to the developer. Malaysia requires developers to give you up to 24 months of DLP.

Defects Liability covers any defects due to defective material and workmanship at the developer’s own cost.

Maintenance fees, sinking funds and taxes

After delivery of the VP, you will need to start paying dues for maintenance fees and sinking funds. Maintenance fees fund the repair and maintenance of common properties and amenities – like air-conditioning and the swimming pool – for the occupiers.

Sinking funds are collected for big-ticket expenditures to upgrade or renew the common properties for your building.

You will also need to pay taxes on your property. Property owners need to pay annual Quit Rent (minimal amount) and a twice-yearly assessment tax imposed by the state government. A 26 per cent tax will also be levied on the rental income. Additionally, there is a 5 per cent real property gains tax imposed on you if you sell your property within five years (from the date of SPA).

Loan Servicing

Do not fret if you receive notices about progressive payment in the period between SPA and VP. It is normal industry practice for developers to request for the release of payments from your mortgagee bank once they have reached certain stages of construction. The notices is only to keep you updated.

Buyers under Developer Interest Bearing Schemes (DIBS) – offered to early bird clients – do not need to worry about loan servicing until the VP is issued.

Familiarise yourself with services provided

Some luxury strata developments provide additional services for residents, such as concierge services. Property buyers should learn what services are provided by their concierge, especially for investors targeting expatriates as their main tenants, to let tenants have a realistic expectation of what their concierges are capable of.

By Aileen Han – country manager for E&O Property (Singapore), part of the E&O Group.

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