New Property Handover Procedures in Malaysia

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Finally! After such a long wait since your Sale and Purchase Agreement (SPA) signing, the property you purchased is ready for handover by the developer.

The first property handover process always brings back some fond reminiscence of the day when you first attend college. Nervousness, anxiety, excitement and most of all, unsure of the right things to do.

This article is written with the aim to help you quell those questions and back you up with the right knowledge to ease the experience of taking over your new home from the developer.

 

These are other Guides you may want to check out along the way:

 

Step 1: Delivery of Vacant Possession

Vacant Possession (VP) refers to the condition of property where it is fully completed but not fit to be occupied.

To protect your interest, developers are required by law to obtain prove, a certificate by architect, which certifies that the building is ready for water and electricity connection before issuing VP.

Besides that, application for Certificate of Fitness for Occupation (CFO) will need to be submitted and accepted by the state authority before developer can hand out VP of housing units.

CFO is similar to Temporary Occupation Permit (TOP) in Singapore, you can only move in after receiving CFO for your home.

You should also know that in Housing Development Act, for multi-storey (strata titled) development, developers are obligated to handover VP within 36 months from the SPA date.

Not only that, common facilities that you are entitled to will have to be completed within the 36 months time as well.

In the event where developer fails to adhere to the timeline, you will be compensated for 10% of purchase price per annum.

 

Step 2: Inspection for Defects

After obtaining VP, you should proceed with on-site inspection. Make sure to thoroughly check your ceiling, doors, windows, piping, tiles, installations, and etc conform to the descriptions in your SPA.

Here’s a small tip: pay a visit to your new home when it is raining heavily, so that you could better see if there is any leakages!

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

Defect Liability covers any defects due to defective material and workmanship (same as initial on site inspection) on developer’s own cost.

If the defects are not made good (after 30 days), you may notify the developer by sending a notice furnished with estimated costs and perhaps a paragraph of furious complaint.

Then, give them another 14 days grace period to carry out the rectification.

If the developer still fails to respond to your notice, you could proceed with the rectification and charge the cost through the stakeholder lawyer who is holding 5% of purchase price in Housing Development Account.

 

If you bought the property for investment, you may want to check out these other Guides:

 

Step 3: Maintenance Fees, Sinking Funds and Taxes

After delivery of VP, you will need to start paying your dues for maintenance fees and sinking funds.

Maintenance fees, as the name suggest, funds the repair and maintenance of common properties and amenities for the occupiers.

Things like air conditioning, clubhouse, landscaping, swimming pool, guard house, security guards, and common corridors require constant upkeep to maintain them in their tip-top condition to serve you better.

As for sinking fund, it is collected for big-ticket expenditures to upgrade or renew the common properties for your building.

High-cost activities like repainting the building, purchase of movable asset for use as common properties, renewal or replacement of fixtures and fittings as well as any other expenditure deemed necessary by the Joint Management Committee or Management Corporation, will be paid using sinking fund.

Beside these fees, you will need to pay taxes on your property as well.

Property owners also need to pay annual Quit Rent (minimal amount) and a twice-yearly assessment tax imposed by the state government.

If you bought your new property for investment purposes, do take note that a 26% tax will be levied on the rental income.

Additionally, there is a 5% Real Property Gains Tax imposed on you if you sell off your property within 5 years (from the date of SPA).

 

Step 4: Loan Servicing

Do not fret because you received a couple of notices telling you about progressive payment in the period between SPA and VP.

It is a normal industrial practice for developers to request for the release of payments from your mortgagee bank once they have reached certain stages of construction.

The progressive payments notice serve to you is only to keep you updated on what’s happening behind the scene. Rest assured that everything is fine; the sky is not falling down. So just sit back and relax.

 

This guide will tell you how much to pay at which stage:

 

Step 5: Familiarize yourself with services provided

A number of luxury strata developments in Malaysia also provide additional services for residents. Concierge service is one good example.

Property buyers should definitely learn what are the services provided by their concierge, especially for investors that target expatriates as their main tenants.

As concierge is typically expected to be able to “achieve the impossible”, it is better to let tenants have a realistic expectation of what their concierges are capable of.

These are some useful guidelines to help new residential property owners. Hopefully this article helps in clearing up doubt that you might have in the handover process and let you enjoy the pleasant experience of living in your new house.

 

*Article contributed by Aileen Han, Country Manager E&O Property (Singapore) Pte. Ltd and edited by PropertyGuru

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