New Property Handover Procedures in Malaysia
Finally! After such a long wait since your Sale and Purchase Agreement (SPA) signing, the property you purchased is ready for the developer to hand over.
The first property handover process always brings back fond memories of the day you first attended college: nervousness, anxiety, excitement, and, most of all, uncertainty about the right things to do.
This article helps you quell those questions and provides the right knowledge to ease the experience of taking over your new home from the developer.
Step 1: Delivery of Vacant Possession
Vacant Possession (VP) is a critical step in the handover process. It refers to the condition of the property where it is fully completed but not fully fit to be occupied as some final tasks, such as final defect rectification, might be outstanding.
When the developer issues a VP notice to the buyer, it is often accompanied by the following documents:
- A Certificate of Completion and Compliance (CCC) signed by the architect or engineer certifying that your house is safe and suitable for occupation.
- A notice to schedule an inspection date.
- The keys and access cards for the property.
Under the Housing Development Act (HDA), developers are generally required to hand over the property to the buyer within 24-36 months from the SPA date for landed properties and 36-48 months for multi-storey (strata-titled) development.
Not only that, common facilities that you are entitled to will have to be completed within the timelines as mentioned based on the property type.
In the event that the developer fails to adhere to the timeline, buyers are able to claim Liquidated Ascertained Damages (LAD). LAD will normally be found in a Sale and Purchase Agreement (SPA), where the parties involved will usually have a clause to cover what happens in the event of a delay.
Step 2: Inspection for Defects
The Defect Liability Period (DLP), is a legally established timeframe that typically extends for 24 months following the date of VP. During this period, property buyers have the right to report any defects they discover in their newly acquired property.
These defects can encompass a wide range of issues, including but not limited to structural problems, substandard workmanship, malfunctions in plumbing or electrical systems, and imperfections in the property’s finishing.
As of 2024, there is an increased focus on ensuring superior craftsmanship and the use of high-quality materials in property development. To meet this demand, developers are increasingly turning to independent inspection agencies to verify that buildings meet the necessary standards prior to handover.
Property buyers are strongly advised to conduct a comprehensive inspection of their property during the DLP. This thorough examination allows them to identify and report any defects or issues that may not be immediately apparent. The developer is legally obligated to fix the defects without extra cost to the buyer.
This arrangement serves to protect the interests of property buyers, ensuring that they receive a property that meets the expected standards of quality and functionality.
The following checklist will guide you through the key areas to inspect, ensuring that any defects or issues are noted and rectified within the DLP.
Property Exterior
| Walls and paintwork | • Check for cracks and signs of poor workmanship • Make sure external paint is even and consistent |
| Doors and windows | • Open and close all windows and doors to ensure smooth operation and check window latches and door locks for any faults • Inspect door and window frames for any scratches, misalignment or warping |
| Roofing and ceiling (for landed property) | • Look for signs of water leakage or damage • Ensure there are no visible cracks or deformities in the ceiling • Best to check when it rains to ensure there are no leaks |
| Balcony and outdoor areas | • Check for loose railings, loose screws or cracks on floor tiles • Check that balcony drainage is functional and identify where the water outlet leads |
| Grilles and gates | • Check that safety grilles (if installed) are secure and not rusted or broken |
| Parking bay | • Inspect your assigned parking bay for sufficient space and proper markings, with no structural issues or obstructions |
| Shared facilities (strata properties) | • Check the functionality and condition of shared amenities such as gyms, swimming pools, and playgrounds |
Interior
| Floors | • Check the condition of flooring (tiles, parquet, marble, etc.) for any cracks, chips, or uneven floors • Ensure the tiles are properly aligned and not hollow (test it by using a coin to check for hollow sounds; tap the tiles lightly) |
| Walls | • Look for cracks, dents or uneven surfaces on walls • Ensure there is no visible water damage or peeling paint • Check that plastering and skirting finishes are neat |
| Ceiling | • Inspect ceilings for cracks, stains, or uneven surfaces • Ensure there are no leaks, especially in bathrooms and kitchens • Best to check when it rains to identify if there are any leaks |
| Doors and windows | • Open and close all doors and windows to ensure they fit properly and are not misaligned • Check for loose hinges, poorly fitting frames, or damaged finishes • Ensure that windowpanes are free of cracks and all latches work |
Plumbing and Sanitary Ware
| Pipes and water pressure | • Turn on all taps and showerheads to check for consistent water pressure • Ensure there are no leaks from taps, faucets or pipes • Test the flushing system in the toilets to ensure they work properly • Check that bathroom fixtures (toilet, sinks, bidets) are installed correctly and function properly |
| Drainage | • Check the sinks, showers, and floor traps to ensure water drains properly • Watch for signs of slow drainage, which may indicate blocked pipes |
| Water meter | • Confirm that the water meter is working and recording usage is accurate |
Electrical
| Lights and power points | • Test all light switches and ensure all fixtures are working • Test all power outlets with a plug to ensure they provide power |
| Fans and air-conditioners | • Turn on fans and air conditioning units to check if they work properly and cool the space adequately |
| Circuit breaker | • Test the functionality of the breaker by tripping and resetting it to ensure safety features work |
Fixtures and Fittings
| Cabinets and wardrobes | • Open and close cabinets and wardrobes to check that hinges and drawers are functioning smoothly • Inspect built-in cabinets for proper alignment and finish |
| Kitchen counters | • Check that kitchen countertops are free from cracks, chips, or stains • Test the sink installation and drainage in the kitchen area |
Most developers allow the buyer to use an independent surveyor or professional to assist in the inspection. A common practice is to create a “defects checklist” detailing any issues to be addressed. After submitting the checklist, the developer is responsible for rectifying the issues.
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-day 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 the Housing Development Account.
Step 3: Maintenance Fees, Sinking Funds and Taxes
After delivery of VP, buyers are required to settle any outstanding payments, including the final instalment of the purchase price, which is typically 5%. Additionally, for strata properties, buyers may also be required to pay for:
Maintenance Fee
Buyers will be required to pay a share of the maintenance fees to fund 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.
Sinking Fund
This fund covers major repairs, renovations and upgrades to the common areas of your building. High-cost activities like repainting the building, purchase of movable assets 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 the sinking fund.
It is essential that buyers review their SPA and ensure all outstanding fees are cleared to avoid any delays in taking possession of their property.
Additional Taxes
Besides 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, you will need to declare it during your annual income tax filling. Here, you could be taxed from 0% to 30% based on a progressive rate of your rental income.
Additionally, a 15% Real Property Gains Tax is 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 serves to you is only to keep you updated on what’s happening behind the scenes. Rest assured that everything is fine; the sky is not falling down. So just sit back and relax.
Step 5: Sorting Out The Next Steps
Upon receiving the VP notice, buyers must undertake several administrative steps, which include the following:
Execution of Transfer of Title: The buyer’s name will be registered on the property title at the Land Office for freehold properties. In the case of leasehold or strata properties, the transfer of title may be delayed, as the relevant authorities must first issue strata titles.
Stamp Duty: Buyers must pay stamp duty when transferring the property title. This fee is determined based on either the purchase price or the property’s market value, with the higher amount being used for the calculation.
Other Documentation: Buyers must also fill out various forms, including the Borang 14A for the Memorandum of Transfer (MOT), and stamp these documents at the appropriate government offices.
These are some useful guidelines for new residential property owners. Hopefully, this article will clear up any doubts you might have about the handover process and let you enjoy the pleasant experience of living in your new house.
