The Sale and Purchase Agreement is the single most important document in a Malaysian property transaction. It binds you to pay hundreds of thousands of ringgit. Yet most buyers sign it after a 10-minute flip-through at the lawyer's office. They know more about their phone contract than the document that commits them to 30 years of mortgage payments. Read it before you sign it.
Every clause has a financial consequence. Some are five-figure sums. Understanding the SPA does not require a law degree. It requires reading 20-30 pages carefully and asking your lawyer about anything unclear.
What Is an SPA?
An SPA (Sale and Purchase Agreement) is a legally binding contract between the buyer and seller of a property. Once both parties sign and the SPA is stamped, neither party can walk away without legal and financial consequences.
In Malaysia, SPAs come in two forms depending on the property type.
New Development (Under HDA 1966)
For new developments by licensed housing developers, the SPA format is standardized by law:
| Property Type | Prescribed Form | Legal Basis |
|---|---|---|
| Landed (terrace, semi-D, bungalow, townhouse) — sell-then-build | Schedule G | Housing Development (Control and Licensing) Regulations 1989 |
| Strata (condo, apartment, flat, serviced residence) — sell-then-build | Schedule H | Housing Development (Control and Licensing) Regulations 1989 |
| Landed — build-then-sell (BTS 10:90) | Schedule I | Housing Development (Control and Licensing) Regulations 1989 (amended 2007) |
| Strata — build-then-sell (BTS 10:90) | Schedule J | Housing Development (Control and Licensing) Regulations 1989 (amended 2007) |
These are not optional formats. Developers are legally required to use the applicable schedule under the Housing Development Act 1966. They cannot modify the prescribed clauses to the buyer's disadvantage. This is buyer protection built into the law — it standardizes payment schedules, completion timelines, penalty calculations, and defect liability terms. Note: Schedule I and J apply to the build-then-sell concept where the buyer pays 10% at SPA signing and 90% upon completion.
Some "commercial title residential" properties (SoHo, SoFo, serviced apartments on commercial land) fall outside the HDA 1966. The HDA only governs residential housing development — commercial properties are not covered. Their SPAs are not prescribed. Be extra cautious — the developer has more freedom to set unfavorable terms.
Subsale (Secondary Market)
For subsale transactions, the SPA is drafted by a lawyer — typically the seller's lawyer or the buyer's lawyer, depending on who is appointed. There is no prescribed format. The terms are negotiable between buyer and seller.
This means subsale SPAs require more scrutiny. The lawyer drafting it may include clauses that favor their client. If you are the buyer and the seller's lawyer drafted the SPA, have your own lawyer review it before signing.
Key Clauses Every Buyer Must Check
Not all clauses are created equal. These are the ones that cost you money if you get them wrong.
1. Purchase Price and Payment Schedule
The SPA states the agreed purchase price and how it is to be paid.
New launch (Schedule H example):
| Stage of Construction | % of Purchase Price | Cumulative % |
|---|---|---|
| Upon signing SPA | 10% | 10% |
| Completion of foundation | 10% | 20% |
| Completion of reinforced concrete framework | 10% | 30% |
| Completion of walls | 10% | 40% |
| Completion of roofing | 10% | 50% |
| Completion of electrical wiring, plumbing, drainage | 10% | 60% |
| Completion of roads, drains, water reticulation | 10% | 70% |
| Issuance of Certificate of Completion and Compliance (CCC) | 12.5% | 82.5% |
| Upon VP and water/electricity connection | 12.5% | 95% |
| Defect liability period expiry (24 months after VP) | 5% | 100% |
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Subsale: The payment schedule is simpler — typically 2-3% earnest deposit upon booking, balance downpayment within 14-21 days of SPA, and the loan amount disbursed within 90 days (3+1 months from SPA).
What to check: Ensure the payment schedule aligns with your cash availability and expected loan approval timeline. If the SPA requires balance payment within 90 days and your bank takes 60 days to approve, you have a tight 30-day window for disbursement.
2. Completion / Vacant Possession Date
New launch:
- Landed property (Schedule G): 24 months from SPA date
- Strata property (Schedule H): 36 months from SPA date
These are maximum periods prescribed by law. If the developer delivers earlier, you take possession earlier. If they deliver later, they owe you compensation.
Subsale: VP date is negotiated and stated in the SPA. Typically 3-4 months from the SPA date — enough time for loan disbursement and title transfer.
What to check: For subsale, ensure the VP date is realistic given your loan processing timeline. If the seller wants VP in 60 days and your bank needs 90 days for disbursement, there is a conflict. Negotiate upfront.
3. Late Delivery Penalty (LAD)
If a developer delivers your property late, they must pay you Liquidated Ascertained Damages.
LAD formula (prescribed in Schedule G/H of the Housing Development Act 1966):
LAD = 10% p.a. x Purchase Price x Number of Days Late / 365
Example: Purchase price RM 500,000. Developer is 180 days late.
LAD = 10% x RM 500,000 x 180 / 365 = RM 24,657.53
This is automatic. You do not need to sue for it. The developer is obligated to pay upon demand. In practice, some developers delay payment — if they do, you can lodge a complaint with KPKT or the Tribunal for Homebuyer Claims (filing fee RM 10, max claim RM 50,000 per claim).
What to check: For non-HDA properties (commercial title residential), the LAD clause may be different — lower rate, longer grace period, or caps on total LAD. Read carefully.
4. Defect Liability Period (DLP)
After VP, the developer is responsible for fixing defects at no cost to you. The standard DLP is 24 months from VP date, as prescribed in Schedule G and H of the Housing Development Act 1966.
What qualifies as a defect:
- Cracked tiles or walls
- Water seepage / leaking pipes
- Uneven flooring
- Faulty electrical wiring or sockets
- Poor drainage
- Defective windows or doors
- Structural cracks
Normal wear and tear, renovation damage, and cosmetic preferences do not qualify. Report defects in writing with photos. The developer must repair within 30 days. For subsale properties, there is no DLP — you buy as-is.
5. Loan Rejection Clause
This clause determines what happens if your bank loan is rejected after you have signed the SPA.
For HDA properties (Schedule G/H): The prescribed SPA includes a clause allowing the buyer to terminate the agreement if the loan is rejected, with the refund of deposit minus administrative costs (typically 1-2% deduction).
For subsale: This clause is negotiable and not automatic. If the SPA does not include a loan rejection clause, and your loan is rejected, you may forfeit your entire deposit.
What to check: Before signing any subsale SPA, ensure there is a clause stating:
- If the buyer's loan application is rejected by [X number of] banks, the SPA may be terminated
- The deposit will be refunded minus [specified amount or percentage]
- The timeframe for obtaining loan approval (typically 60-90 days from SPA)
This is the most commonly missed clause in subsale SPAs. Insist on it.
6. Encumbrances and Title Status
The SPA should state that the property is free from encumbrances — caveats, charges, liens, or other third-party claims. If the seller has an existing mortgage, the SPA should specify that the seller's loan will be discharged using the sale proceeds.
What to check:
- Conduct a land title search (your lawyer does this) to confirm ownership and check for caveats
- If the property is still under the developer's master title (no individual strata title yet), the SPA is actually a Deed of Assignment — different legal mechanism
- Confirm the seller is not bankrupt (bankruptcy search through Insolvency Department)
- For strata properties: check for outstanding maintenance fees and sinking fund arrears — these become the buyer's liability upon transfer
SPA Timeline: What Happens After Signing
| Day | Event | Who Handles It | Deadline/Note |
|---|---|---|---|
| Day 0 | SPA signed by buyer and seller | Lawyers for both parties | Both parties must sign |
| Day 1-14 | SPA submitted for stamping at LHDN | Buyer's lawyer | Must stamp within 30 days of execution |
| Day 1-14 | Loan application submitted (if not already) | Buyer | Apply immediately if not pre-approved |
| Day 14-30 | SPA stamped at LHDN | Buyer's lawyer | MOT stamp duty paid |
| Day 30-60 | Bank loan approved | Bank | Letter of Offer issued |
| Day 30-60 | Loan agreement signed | Bank's panel lawyer | Separate stamp duty on loan agreement |
| Day 60-90 | Loan disbursed | Bank | To seller's lawyer (stakeholder) |
| Day 60-90 | Seller's existing loan discharged (if any) | Seller's bank/lawyer | From sale proceeds |
| Day 90-120 | Vacant Possession (subsale) | Seller | Keys handed to buyer |
| Day 90-180 | MOT registration at land office | Buyer's lawyer | Title transfer completed |
| Day 90-180 | Bank's charge registered | Bank's lawyer | Property as collateral |
For new launches, replace days 60-120 with the construction schedule — VP is 24-36 months from SPA date, not 90-120 days.
Stamp Duty on SPA
The SPA triggers stamp duty — specifically the MOT (Memorandum of Transfer) stamp duty under the Stamp Act 1949. This is calculated on the purchase price or the market value (as assessed by LHDN), whichever is higher.
MOT Stamp Duty Rates:
| Property Value Tier (RM) | Stamp Duty Rate | Cumulative Duty (RM) |
|---|---|---|
| First 100,000 | 1% | 1,000 |
| 100,001 - 500,000 | 2% | 9,000 |
| 500,001 - 1,000,000 | 3% | 24,000 |
| Above 1,000,000 | 4% | Varies |
Worked examples:
| Property Price (RM) | MOT Stamp Duty (RM) | As % of Price |
|---|---|---|
| 300,000 | 5,000 | 1.67% |
| 500,000 | 9,000 | 1.80% |
| 700,000 | 15,000 | 2.14% |
| 1,000,000 | 24,000 | 2.40% |
| 1,500,000 | 44,000 | 2.93% |
First-time buyer exemptions: For SPAs on residential properties up to RM 500,000, first-time buyers may qualify for 100% MOT stamp duty exemption. Check the latest budget announcements for current eligibility and expiry dates. Full details in our stamp duty guide.
Loan agreement stamp duty: Separate from the MOT stamp duty. Calculated at 0.5% of the loan amount. For a RM 450,000 loan: RM 2,250. First-time buyers may also qualify for exemption on this.
Use our stamp duty calculator for exact figures based on your property price and buyer status.
SPA for New Launch vs Subsale: Side-by-Side
| Aspect | New Launch (HDA) | Subsale |
|---|---|---|
| SPA format | Prescribed (Schedule G/H) | Drafted by lawyer |
| Can clauses be modified? | No (buyer-favorable, locked by law) | Yes (negotiable) |
| Payment schedule | Progressive (construction stages) | Lump sum (deposit + loan) |
| VP timeline | 24 months (landed) / 36 months (strata) | 3-4 months from SPA |
| LAD for late delivery | 10% p.a. (automatic) | N/A (seller vacates per SPA) |
| DLP | 24 months from VP | None — "as-is" |
| Legal fees | Often absorbed by developer | Paid by buyer |
| MOT stamp duty | Often absorbed by developer | Paid by buyer |
| Loan rejection clause | Standard (prescribed) | Must be negotiated |
| Title status | Under master title (Deed of Assignment until individual title issued) | Individual/strata title (usually) |
| Risk level for buyer | Lower (HDA protection) | Higher (fewer statutory protections) |
Key takeaway: New launch SPAs offer stronger buyer protection because the format is standardized by law. Subsale SPAs are more flexible but riskier — the quality of your SPA depends entirely on your lawyer. Never sign a subsale SPA without independent legal review.
What Can Go Wrong
Developer delays: Developer misses 24/36-month VP deadline. You are entitled to LAD at 10% p.a. Developers may offer non-cash alternatives — you are not obligated to accept. Remedies: letter of demand, Tribunal for Homebuyer Claims (claims up to RM 50,000), civil court, or KPKT complaint.
Seller fails to vacate (subsale): Include a per-day penalty clause (e.g., RM 100/day) for late VP. Without it, you rely on general contract law — slower and less certain.
Loan rejected after signing: With a loan rejection clause, you get your deposit back minus admin costs. Without one, you forfeit the deposit. Prevention: always include the clause, apply to multiple banks, get pre-approval first.
Undisclosed defects (subsale): No DLP for subsale — you buy as-is. Prevention: hire a professional inspector before signing. Cost: RM 300-1,000. Cheapest insurance available.
Title issues: Unreleased caveats, outstanding charges, ownership disputes. Prevention: your lawyer conducts a title search at the land office before you sign. Ensure this happens before commitment, not after.
The Lawyer's Role
Your lawyer handles three phases: before signing (title search, bankruptcy search, SPA review, stamp duty advice), during execution (proper signing, stakeholder deposit, LHDN stamping within 30 days), and after signing (loan documentation coordination, MOT registration, bank charge registration, fund disbursement, VP enforcement).
Legal fees are regulated under the Solicitors' Remuneration Order 2023 (which replaced the SRO 2005, effective 15 July 2023). For a RM 500,000 property, SPA legal fees are approximately RM 5,000-6,500 including SST and disbursements. See our legal fees guide for the full fee schedule.
SPA Cancellation: What It Costs
Walking away from an SPA is not free. The financial consequences depend on the terms and who initiates cancellation.
| Scenario | Buyer Loses | Seller Consequence |
|---|---|---|
| Buyer cancels (no valid reason) | Forfeits earnest deposit (2-3% of price) | Keeps deposit, relists property |
| Buyer cancels (loan rejected, with clause) | Minimal — deposit refunded minus admin (1-2%) | Must refund deposit, relists property |
| Seller cancels (no valid reason) | N/A | Must refund deposit + may owe damages |
| Mutual cancellation | Negotiate — typically deposit refunded minus legal costs already incurred | Negotiate |
For a RM 500,000 property, forfeiting a 3% earnest deposit means losing RM 15,000. That is the cost of changing your mind after signing. Make sure you are committed before you sign.
Practical Advice
1. Read the SPA yourself. Every page. Mark what you do not understand and ask your lawyer.
2. Appoint your lawyer before booking. The 14-day clock to SPA signing starts immediately.
3. Negotiate subsale SPA terms. VP date, penalty clauses, loan rejection terms, fixtures — all negotiable.
4. Keep certified copies of everything. SPA, stamping receipt, payment receipts, correspondence. Digital and physical.
5. Verify developer licenses for new launches. Check with KPKT's EHOME system for valid APDL (Advertising Permit and Developer's License). Unlicensed developers are not bound by HDA protections.
For the complete property buying process, read our step-by-step house buying guide. For subsale-specific considerations, see our subsale process guide.
Sources
- Housing Development (Control and Licensing) Act 1966 — Schedule G, H, I, J — KPKT
- Housing Development (Control and Licensing) Regulations 1989 — HBA
- Stamp Act 1949 — MOT Stamp Duty — LHDN
- Solicitors' Remuneration Order 2023 — Malaysian Bar
- Tribunal for Homebuyer Claims — KPKT
- KPKT EHOME — Developer License Verification