Here’s What You Need To Know About Buying Properties In Malaysia

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Malaysia is one of the friendliest and most hassle-free countries in the Asian region for foreigners and expats who are on the lookout to acquire properties. There is no limit on the number of residential properties a foreigner can purchase, and aside from certain rules and restrictions, the entire buying process for a foreigner is the same as a local buyer. It’s one of the most flexible countries when it comes to legal issues relating to buying of properties.

Rental agreements

Now that you have your dream property, the next step is rental agreements. In Malaysia, landlords and potential tenants are free to negotiate the rental amount as rent control has been abolished. Having an estate agent who is well versed in the legal proceedings will be useful and is highly recommended as he or she will be able to help negotiate on your behalf. However, it’s a plus point for you to know what the main factors are when it comes to renting. Thus, here are the basic guidelines for property renting in Malaysia.

Lease agreement
Once you have found an ideal property rent, you’ll need to contact the landlord, usually via an estate agent, to make an offer. In Malaysia, most landlords are open to negotiation on the amount of rent to be paid. This is usually handled by the estate agent as they would have a good idea of the amount the landlord is hoping for. It is advisable for you to do your homework on the local rental market value to be able to negotiate a good price for the property.
After all the negotiations are settled, an earnest deposit, which is usually one month’s rent, has to be paid. This acts as a booking fee, which means that once this deposit has been made, the landlord cannot allow other tenants to view the property or rent it to anyone else. A letter of offer is signed at the same time, which outlines the basic terms and conditions of the lease, as well as what other payments are due and when. During the following week, you would need to make payment on a security deposit of two months’ rent and a utility deposit. The value of the security deposit can vary, with half of the monthly rent being the usual amount. These are kept by the landlord to be returned at the end of the tenancy period, minus any costs for damages incurred and unpaid bills.
Tenancy agreement
The agreement is usually arranged and prepared by the landlord’s lawyer. It usually is drawn up for one to three years, the tenancy agreement must be stamped so that it can be used as evidence in a court of law. Note that tenancy renewal and any rent adjustments should be agreed in advance. Here is what you can expect from a standard form of tenancy agreement:
  • Details of both parties
  • Beginning and end date of the agreed tenancy period
  • Rent payment details
  • Responsibilities of both the tenant and landlord
  • The person who is responsible for maintaining the property and is responsible for damages
Normally, landlords require that a property is returned to its original state once it is vacated. Therefore, it is highly advisable to discuss and come to an agreement as to what are the necessary measures needed to be taken a couple of months in advance of vacating the property. Note that this makes it more likely for you to get your deposit back in full without any mishaps.
Diplomatic clause

This clause comes into effect if or when the tenant has to leave the country and requires the contract be terminated early. The clause states that the landlord is either compensated for at least two months’ rent or is given two months’ written notice prior to the tenant leaving. A tenant who wants to terminate a contract early often has to provide evidence that they are leaving, such as the cancellation of a work permit. In most tenancy agreements, an exit clause does not take effect in the first 12 months of the lease.

Residential property restrictions for foreigners

On June 30, 2009, the Economic Planning Unit (EPU) produced a comprehensive set of guidelines on property acquisition by foreigners in Malaysia to replace the previous approving authority under the Foreign Investment Committee.

Following this, the EPU had revised the minimum threshold on the acquisition of properties by foreign interests from RM500,000 to RM1 million, effective March 1, 2014, which is stipulated nationwide. It was increased from RM 500,000, partially in an effort to curb speculation from foreign investors. Note that although the EPU guidelines on property acquisition by foreigners apply nationwide, the acquisition is still subject to the respective state authorities’ approval.
The minimum purchase price for foreign property buyers are based on three things:
  • Where the property is located (typically which state it’s in)
  • The title of the property – strata or individual title
  • Whether the buyer holds a Malaysia My Second Home (MM2H) visa or not (more on this below)
Property Minimum Purchase Price According to State in MalaysiaProperty Minimum Purchase Price According to State in Malaysia part 2

Penang, Selangor, and Melaka are stricter on minimum purchase prices, particularly for landed properties (or those on individual titles) whilst offering more leniency for those on strata titles. Property ‘title’ usually refers to your ownership rights. In Malaysia, you’ll need to be familiarised with three types of title:

A master title usually refers to the ‘top-level’ title held by a property developer, which affords the developer full control and rights over the land they own. Typically you’ll find references to the master title when new properties are being constructed before individual or strata titles are granted.
A strata title is usually granted to a property owner who buys a property in a shared building (i.e. non-landed property). So, for example, owners of condominiums usually have strata titles.
An individual title is similar to a strata title, but it typically refers to landed properties like houses, bungalows, semi-detached houses and so forth – where the property owner has a discrete piece of land, usually below the property.
Note that Penang, Melaka, and Johor imposes a ‘state levy’. Penang imposes a state levy of 3% whilst Melaka and Johor charge a state levy of 2%. This can no doubt significantly bump up your buying costs.
Selangor is probably the strictest of all states, although it doesn’t impose a levy state, they only allow foreigners to buy landed properties if they have strata titles. This usually limits foreigners from buying in gated developments.

For new developments in Selangor, foreigners are not allowed to purchase more than 10% of the total number of properties set aside for non-Bumiputera (each new development has a quota set aside for Bumiputera, or the indigenous Malay people, called “Bumi Lot”). Foreigners are also not able to buy property at auction or buy agricultural land in Selangor.

Property purchasing procedure

Here are seven main procedures you’ll need to be familiarised with as it sums up the process of acquiring a property in Malaysia:

1. Sign the developer’s sales form or the offer to purchase form with the vendor, for sub-sale transactions.
2. Apply for financing if necessary.
3. Provide these following documents to the solicitor:
  • Photocopy of passport
  • Correspondence address and contact numbers
  • ·       Income tax number and the place of submission of the income tax, note that this is applicable for sub-sale purchase only
4.  Within 14 days from the date of signing of the sales form, or offer to purchase, sign the Sale and Purchase Agreement (SPA), deed of mutual covenant and other transactional documents. Pay the 10% deposit to the developer.
5. Solicitor to apply for state authority consent. Purchaser to provide the following documents to the solicitor:
  • One certified true copy of the SPA
  • One certified true copy of the Foreign Purchaser’s passport
  • One certified true copy of the constitution in the case that the purchaser is a foreign company
  • Latest quit rent and assessment receipt of the property
  • Application form under the Section 433B of the NLC
6. Pay the balance purchase price in accordance with the Third Schedule of Schedule H Housing Development (Control and Licensing) Regulations 2015 or the SPA.

7.  Pursuant to Schedule H, the developer shall deliver vacant possession of the property within 36 months from the date of the SPA, or a later date as may be approved by the relevant authority. Upon delivery of vacant possession, the developer shall deliver the strata title and certificate of completion and compliance to the foreign purchaser. In the case of a sub-sale transaction, the vendor shall deliver vacant possession to the purchaser in accordance with the terms of the SPA.

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