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See also: Tenancy Agreement Malaysia
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If you are keen on buying property, especially for the first time, you’ve probably heard about the importance of the SPA.
The Sales and Purchase Agreement (SPA) is a contract for the purchase of new uncompleted properties. It is an important instrument that protects the buyer by ensuring the seller cannot change the terms and conditions to their benefit however they like. Any changes or amendments of terms in the agreements are rendered void and unenforceable.
Thanks to the Housing Development Act (HDA) in Malaysia, all housing developers who sell off the plan residential properties are mandated to follow a standard format for the SPA, whereby the prescribed formats are known as Schedule G (landed property) and Schedule H (strata property). The stated laws are enforced by the Malaysian Ministry of Housing and Local Authority.
With that in mind, however, there is no one-size-fits-all template in drafting up a SPA. Individual and strata-titled properties both have their separate SPA. If the properties are completed and then sold by the developers, the SPA would be enforced by Schedule I and Schedule J.
Most people don’t see the power of their SPA until things go south. Therefore, it is vital to know about the different Schedules prescribed in the SPA to protect and safeguard the interest of home buyers.
In this article, let’s explore what Schedule G, H, I, and J are, and another important document which is the Certificate of Fitness for Occupation (CFO). Check it out below:
Depending on the type of housing accommodation, the developer and the buyer will adopt either one of the SPAs as prescribed under Schedules G, Schedule H, Schedule I, or Schedule J of the Housing Development (Control & Licensing) Rules 1989 (HDR). These schedules are issued according to the type of property and its purchase method.
It is important to note that when you’re buying from developers, the terms and conditions in the SPA are non-negotiable. The terms and conditions are legally defined following standard templates, as mentioned, in the form of Schedules G and Schedule H (used for STB model), or Schedule I and Schedule J (used for BTS model) under the HDR. The schedules will specify the developer’s and buyer’s obligations, including when the former should deliver the property and when the latter should make payment.
With the STB system, the developer is allowed to collect money from potential home-buyers before the houses are still being constructed. The money collected from home buyers can be used to finance the development.
Under the BTS system, housing developers have to complete a housing project before selling houses to buyers. There are currently two variants of BTS – the complete BTS 0:100 and partial BTS 10:90.
The complete BTS is where the developer only sells the house when it is fully completed with a Certificate of Completion and Compliance (CCC), which we will explain later. There will be no down payments or progress payments involved.
With the partial BTS, the developer can sell house units before completion. It is a much safer model for home buyers as it requires the buyer to make only an initial payment of 10% of the agreed purchase price as a down payment, and pay the remaining 90% only upon completion of construction with the relevant Certificate of Completion and Compliance (CCC).
With a better understanding of the 2 systems, let us explore the different schedules below!
Schedule G is used for the selling and purchase of landed residential property – under the Sell-Then-Build (STB) system – which is sold under individual titles, this includes semi-D houses, terrace houses, and bungalows.
These titles are then issued to the purchaser when they sign the transfer form, which is a document from the housing developer to transfer the property to the purchaser. With the individual titles in their name, this means that the purchaser will have their right of ownership to the plot of land and the building.
In most cases, these titles are kept by the banks that have financed the purchase of the property. Even so, the purchaser’s name is on the title, and this means that the property is theirs, and they have the right to use it as they wish. Landowners can also transfer their title to anyone else.
It is a little more complicated when it comes to the use of Schedule H. Schedule H is used for the sale and purchase of a housing accommodation in a subdivided building in the form of a parcel of a building or land intended for subdivision into parcels – in simple terms, Schedule H is used for residential strata properties delivered under the STB system such as apartments, flats, or condominiums.
Purchasers will have their right of ownership of the unit they purchased, also known as strata title; while the land usually belongs to the owners of the property, which are the developers. So, buyers will typically see a high-rise where their unit is marked with a highlighted drawing on a piece of paper that is shown at the end of the SPA. Other than that, the prescribed SPA will also show the buyers’ existing parcels like their parking space or any other accessory parcel that is sold with the property.
There are more details in Schedule H with regards to the SPA as it will also have this part involving the ownership of common properties. Common properties are the things or spaces that you share with other owners within the development. This can be the swimming pool, tennis court, garden, visitors’ parking, corridors, and other facilities. This is the dynamic of strata living.
Schedule I is used for the sale and purchase of Build-Then-Sell (BTS) landed property following the Housing Development (Control and Licensing) Regulations 1989 amended in 2015. Similar to Schedule G, Schedule I shall be adopted for properties with separate individual titles – which are issued to a landed property such as a terrace, semi-detached, bungalow, or villa which has its own land.
In this case, buyers can see the house first before they decide to buy it. This helps buyers and it overcomes the problem of abandoned housing projects, delays in delivery, building defects, inaccurate marketing brochures, and poor home quality by irresponsible developers.
Schedule J is used for the selling and purchase of strata properties delivered through the BTS system – as mentioned earlier, this includes high-rise developments such as flats, apartments, condominiums, townhouses, as well as strata landed homes.
Advocated and campaigned by The National House Buyers’ Association (HBA) years after years, Schedules I and Schedule J were legislated under the SPA schedules after the amendments made to the HDR in April 2007. Under that amendment, the partial BTS 10:90 delivery concept was implemented through the statement of the statutory agreements of Schedule I and Schedule J.
The partial BTS system requires buyers to make a 10% down payment to reserve a particular house unit upon signing the SPA, while the remaining 90% is to be paid when the house is ready.
No, not yet.
Okay, now that you’ve learned about the right agreement you are responsible to sign off to purchase your home, but that’s not it. It is vital to note that all buildings in Malaysia must be certified before they can be used, this is how buyers are assured that the building is safe to be lived in without compromising their health and safety.
Essentially, a document called the CCC is meant to indicate that. This is one of the most important documents given to you by the developer upon the completion of the building you purchased. In fact, before the introduction of the CCC, a document called the CFO was used – let’s get into what those actually mean!
The Certificate of Fitness for Occupation (CFO) is a certificate issued by the local government authorities under the Uniform Building By-Laws of the Street, Drainage and Building Act 1974 (Act 133). This document is an official recognition that the building is fit for the purpose it was built for, which means that it has been well-constructed and suitable for occupants to live in.
A developer is usually allowed to hand over the Vacant Possession (VP) of a building to the buyer upon receiving the confirmation letter from the relevant authority, through the verification of Form E, a statutory form used for CFO application. Once the form is duly submitted and approved by the appropriate authority, this means that the building has been inspected and verified that it’s safe for occupation.
One of the main weaknesses of the CFO system raised was that it took a long time for site inspections by the local authorities especially on the technical elements like structural parts, electrical conducting, and building materials used because they are not specialists about the construction progress and quality for the materials. Besides, LA’s representatives usually only come during the completion of works for site inspections.
This, in turn, resulted in backlogs and delays of project sign-offs for Malaysia’s property development industry. Common problems also include homebuyers unable to renovate their unit and unable to move in to their house earlier due to the late issuing of Vacant Possession (VP), which is usually issued together with the final certificate.
In April 2007, the Certificate of Completion and Compliance (CCC) was introduced from the Street, Drainage and Building (Amendment) Act 2007 to replace the previous CFO system to smoothen and accelerate the whole building process. The CCC system replaces the weakness of the CFO system, which was often a lengthy and overly cumbersome process due to the lack of resources in local authorities to complete these important site visits to provide the necessary approval.
Under this new system, the CCC is issued by an industry professional in the private sector with an overview of the construction, known as the Principal Submitting Person (PSP), instead of the local authorities. The PSP can either be a Professional Architect, Professional Engineer, or Registered Building Draughtsman who submits building plans to the Local Authority (LA) for approval.
That being said, the local authorities are still involved in the process of issuance and still hold the highest power in the CCC process, as they are required to approve the planning permissions and building plans, as well as conducting random checks at the construction site if they notice any conditions that need to be fixed.
Other than submitting building plans for the LA’s approval, they are in charge of supervising the erection and completion of the building in conformity with the approved plans and the requirements of the provisions of Acts or by–laws. They also need to ensure all technical conditions imposed by the LAs have been duly complied with and ensuring that the building is safe and fit for human habitation.
To ensure credibility, the PSP must be registered under the relevant law relating to their certificate of registration thereof, for example, the Architects Act 1967 or Registration of Engineers Act 1967(Revised 1974).
Aside from submitting and complying with the approved building plans, the CCC is only issued after 6 essential services are in place, which includes:
The quality of construction work can be supervised easily and immediate action can be taken on by the party who has failed to work according to the planned requirements set out in the building works. It works well with developers and homeowners as the former can deliver the Vacant Possession (VP) for buyers to occupy their homes as soon as possible.
In fact, the entire process of CCC has its checks and balances, as it is an offence under the law for any parties to produce false declarations, certificates, applications, or representations of any form of the CCC process.
Given the large amount of money you put into the purchase of property these days, it certainly pays to protect your legal interests. Familiarising yourself with property-related laws including knowing about Schedule G, Schedule H, Schedule I, Schedule J, and Certificate of Fitness for Occupation (CFO) will help you better understand your basic responsibilities and rights as a home buyer.
Always be careful and check the final documents you receive before officially signing them. If you still have questions about the nitty-gritty details surrounding the SPA and certification, feel free to drop us a line in the comment section below!
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