REAL ESTATE AGENCY PRACTICE II

REM252

DR. HILMI MASRI

TOPIC 1:
SALE AND PURCHASE OF LAND IN MALAYSIA

At the end of the session student will be able to get the

overall ideas about :
❖Different stages and procedures in property transaction
❖Role of solicitors
❖Contract and clauses in the contract
CONTENT
• The three (3) stages of contract including the
contract including the pre contract stage, post
contract and registration
• Terms and conditions of contract
• Key contract clauses that affect vendors and
purchasers
Transaction has 3 stages:
• Contract stage (including pre
a contract)

• Post contract stage

b

• Registration stage
c
STAGES IN SALE AND PURCHASE OF PROPERTY
TRANSACTION IN MALAYSIA
Agree
Contract stage (including pre-
contract)
Negotiation
– covered
last sem Satisfied

Fulfilled
Post contract stage

Registration New owner

stage
a. Contract Stage (including pre contract
stage)
Condition and
particulars of
sale (i)
Requisition
Deposit
as to title
(ii)
(vi)

The Sale and

Description
Purchase
of property(v)
agreement(iii)
Survey and
other
enquiries(iv)
i. Conditions and particulars of sale
✓Negotiation complete, buyer will seek for service of solicitor
✓Solicitor will ask detail for both parties
✓Owner then proposed to discharge encumbrances
ii.Deposit and advance payments
✓Common practice 10% of purchase price, upon signing
agreement
✓Pay to owner if satisfied otherwise lawyer as stakeholder
iii.Sale and Purchase document
✓After verifying title, draft of agreement will be prepared
✓Draft sent to vendor/solicitor for approval and incorporate
any amendment if any then send for adjudication for loan
purposes
✓Parties acting on behalf or on their own –power to sign
iv.Survey and other enquiries
• Enquiries from other departments for any proposed plans
• Land Mines Department (eg: land acquisition), Survey
Department (on boundaries) , Town and Country Planning
Department (zoning and density)
v. Description of property
• Describing the type, locality, acreage,
title and plans
• As easier to locate the exact property
vi.Requisition as to title
• Any unregistered interest that not mentioned in the title
• It present on the land or property but not mentioned in the
title.
 b. Post contract stage
❖ Consist of 4 main items to be considered:
i. Lodging a private caveat
• To safeguard pending registration of transfer
• Prevent owner from further dealing
ii. Completion
• Purchaser pay the balance purchase price
• Deliver title free from any encumbrances
• Vendor handover duly completed statutory form
• Solicitor as stakeholder until transfer registered in the
title Registry
iii. Valuation
• By the government valuer for stamp duty and capital gain
tax (if any)
iv. Memorandum of transfer
• All documents and information required in order
• Procedural requirement of NLC otherwise rejected by
Registrar of Title (ROT)
Submission for Adjudication
• Adjudication of Form 14A / Deed of Assignment (DOA)
• Form 14A / DOA will be submitted to Stamp Office / LHDNM for
adjudication.
• Submission can be made either manually or online through the website
known as e-Stamping is available to legal firms, banks, company
secretaries, accounting firms and companies
• The Stamp Office will issue a Notice of Assessment either manually or
online.
• The Notice of Assessment will indicate the stamp duty payable for the
transfer of property.
• The rate of chargeable stamp duty will depend on the value of the
property as prescribed by the Stamp Act, 1949.
c. Registration

❖ is the final stage complementing the transaction

❖ New name will be entered into the title
❖ The Land Administrator will endorse the name
of the buyer in the Register Document of Title
❖ 2 types:
i. With document of Title
For property that already has the individual
title
ii.Without Title
For property which do not has or in the
process of getting the individual title.
Registration process and documents
For registration of property, submission of the duly stamped Form 14A at the
Land Office / Registry must be accompanied with Fees as prescribed by the Land
Office / Registry; together with required documents:
Deed of Assignment Of Property – for properties
without title
• No DOT yet
• Can be sold or change hands by means of a document called the Deed of
Assignment (“DOA”).
• A DOA is a legal instrument used as a means of conveyance of rights to
property whereby the Seller (“Assignor”) assigns his rights and title to the
property to the Buyer (“Assignee”).
• Once the DOA is duly executed and stamped, the Assignee acquires legal
rights and title to the property assigned. The only difference is that it is not
registered at the Land Office / Registry.
• The DOA has to be adjudicated in a similar manner as for property with title
but instead of Form 14A, the original copy of the DOA is submitted
ROLE OF SOLICITORS
• 2 main roles:
i.Stakeholder
➢ problem in payment who want to act first.
➢Lawyer kept the money till title validity is satisfied
ii.Act for both parties
➢ Solicitor act for both as a witness
➢ Not allowed to act on behalf for both parties
➢ Solicitor usually act for purchaser.
TERMS AND CONDITIONS OF CONTRACT
• The purchase price including the deposit.
• The date the sale will be finalized ("closed") and the
date the buyer will move in
• Items to be included in the sale, such as carpeting,
lighting fixtures, appliances and so forth
• Items not included in the sale
• A legal description of the property and the seller will
provide clear title to the home, or other legal
document
• Provision for adjustments to be made to land tax,
council rates and other outgoings (house-related
expenses through the closing date )
• The rights of the parties to cancel the contract.
• Discharge
• Breach of contract
 KEY CONTRACT CLAUSES (OBLIGATIONS) THAT
AFFECT VENDOR AND PURCHASER
CLAUSES AFFECT VENDOR
1. Agreed to sell the property (the said
property) free from encumbrances and
vacant possession
2. Agreed to sell the ‘Agreed Sale Price’ as
specified in the schedule attached in the
agreement
3. Upon execution of sale the vendor shall
execute and deliver a valid and registrable
memorandum of transfer
4. Vacant possession of the said property shall
be delivered by the vendor to the purchaser
upon full payment of the purchase price
5. The vendor shall be responsible to submit
the necessary returns any tax shall be levied.
6. The vendor shall pay the stamp duty
registration fees and solicitors cost if any
7. The vendor shall settle the quit rents, rate
assessment and other outgoings
8. The proper time for deposit to be collected
CLAUSES AFFECT THE PURCHASER
1. Agreement to purchase -The purchaser agreed
to purchase
2. Purchase price - shall be the sum specified in
the agreement
3. Mode of payment ( cash, loan, etc). - The
balance of the purchase price shall be paid via
solicitor within period specify in the agreement.
4. Release of Purchase Price -shall be releases by
the solicitor to the vendor on presentation of
the transfer
5. Specific Performance- The purchaser
performing and observing the terms and
conditions in the agreement
6. Acceptance. - deemed to purchase with
full notice in all respect of the actual state and
condition of the ‘said property’
7. Costs. - The costs of and incidental to the
agreement including the stamp duty
registration fees and solicitors costs shall be
duly paid by the purchaser
8. Notice. -shall be sufficiently served
9. Time. - shall be of the essence of this
agreement
END LECTURE
 Topic 2: ADVANCED PAYMENTS

At the end of the session, students are expect to

understand:
a.The different types of advance payment

b.Option, the nature and exercising it

 Topic 2: ADVANCED PAYMENTS

Contents:

Recovery of deposits
▪ Part payments and other payments

▪ earnest money, booking fee, installment and progressive payment

▪ Earnest money deposit

▪ Meaning of option

▪ Nature of option

▪ Exercise of option

▪ Caveatable interest of an option holder

▪ Option in leasing
 ADVANCED PAYMENT

* Is any Payment made by a purchaser to the vendor

either before or after a contract for the purchase of
property

* Different types of advance payments:

a. Earnest money
b. Booking Fee
c. Deposit
d. Part payment
e. Installment
f. Progress payment
 Advance payment

Sold

Agreed

Earnest money Advance

Booking fee payment
Earnest Deposit

Instalment
Progress payment
Successful

Full payment
a. Earnest money
◼ Preliminary payment made by a purchaser as he
agreed and serious to purchase the property
◼ Commonly practiced for subsale transaction.
◼ Amount to be paid is subject to the negotiation
between purchaser and owner or seller
◼ Usually about 2 -4% but not more than 5% from
the purchase price.
◼ It is part of the deposit , if the transaction goes
forward.
◼ It is forfeited when the transaction falls through,
by nearest of the fault or failure of the buyer
 b. Booking Fee
◼ Payable by purchaser to a housing developer
◼ Paid before legally binding contract is entered
◼ 2 types:
a. Booking for any unit in the housing project,
usually of high demand, fee will be refunded if
unsuccessful ;
b.Special unit reservation eg.corner lot; fee will be
forfeited if unsuccessful
◼ Considered as part of payment if transaction
proceed
◼ Amount depends on developer ; normally 1% not
exceeding 2.5% of the price
◼ Purchaser has an option or right to purchase
 c. Deposit (Earnest)
◼ Payment by purchaser as a guarantee that he
will complete the purchasing process.
◼ Considered as part of payment of the purchase
price.
◼ Amount of deposit subject to negotiation
between seller and buyer
◼ Most common amount 10% of the purchase price
◼ If purchaser default, he will lose the deposit
◼ For tenancy: deposit kept as security on
performing the tenancy
◼ Amount depends on type of rental and
agreement between parties
◼ Paid upon signing of agreement.
 d. Part payment

◼ Any payment paid at the time a contract is

entered
◼ Paid as a part of the consideration
◼ Amount paid for booking fee, and deposit
included as part payment when transaction goes
through
◼ Amount paid using installment and progress
payment will consider as part of the payment;
recoverable by purchaser if breach of contract.
 e. Instalment
◼ Payment of balance purchase price in
terms of few times of installment.
◼ Number of installment agreed by both
parties; endorsed in the agreement.
◼ Usually no interest charged
◼ Seldom practiced; normally for small
amount of transaction
◼ Number of installment usually 3 to 6
times.
 f. Progress Payment
◼ Payment of balance purchase price paid in stages
according to the progress of development on site.
◼ For property or building under construction.
◼ Progress of work is certified by architect or
engineer for the site.
◼ The stages is predetermined and endorsed in the
sale and purchase agreement.
◼ Payment usually through lawyer upon receiving the
certificate
◼ Bank release the payment by crediting on buyer’s
housing loan account to the developer.
 How Estate Agents handle Earnest
deposits

◼ Agree to pay to the Agents clients account as stake holders

◼ Money to be quickly placed in clients account with proper records;

and temporary receipt is to be issued upon deposits collection.

◼ Money to be left in clients account until SPA is signed or when all

conditions become unconditional.

◼ Not to deduct any fees, cost or charges from the EDv unless the

client has given authority to do so

◼ Monies received in the form of cash can be paid direct to a client
or to a third party in the course of the day need not be banked into
the clients account usually for normal transaction or case.
 Summary of Advanced
Payment in a transaction

Earnest
Cash
money
Installments

Offer and Full

price Deposit Part payment consideration
determination
Installments
Progress
Booking payment
Fee
Cash
 OPTION
◼ A contract guarantying the exclusive right to buy
for a limited time
◼ An option is a right given by the grantor, usually
the vendor to the guarantee, the buyer to buy the
land within stipulated time in prescribed manner.
◼ The person granting the option is called optionor
and the beneficiary of the option is optionee
◼ For an option to be enforceable, it must be
supported by a valuable consideration.
◼ Is a contract guaranteeing the exclusive right to
buy for limited time.
◼ Is a unilateral contract
◼ Happen during pre-contract stage
 Nature of option
◼ an option is an offer to sell the land to the
buyer together with a contract not to revoke the
offer.
◼ An option is a conditional contract
◼ Elements of an option:
i. Offer
ii. Acceptance
iii. Consideration
iv. Prescribed manner
v. Stipulated time (the validity period of the
option )
 Exercise of an Options
◼ Must be exercised in a manner prescribed by
seller or owner.
◼ Within stipulated time.
◼ Grantee gives notice of intended exercise or
makes payment as part of purchase price.
◼ Once option exercised, it immediately binding
contract for sale.
◼ An option can be exercised by:
a. The vendor or owner

b. Developer
c. Lawyer or solicitor

d. Person who has power to act on behalf

 Caveatable interest of an option holder

◼ Option holder can enter a private caveat under Sec 32 of

NLC.
◼ Option holder has an interest in the land similar to that or
purchaser under an uncompleted contract for the sale of the
land.
◼ Difference of option and SPA is Option gives right to buy, SPA
if accepted by the seller; is a binding contract to buy.
◼ Court case: Ku Yu Sang vs Tay Joo Sing & Anor
Both signed an option ;RM5,000 as option fee, pay within 14 days . Tay received cheque
RM5,000 as part of consideration. 2 days later Tay Joo Sing not agreeable to sell when Ku
Yu Sang paid the balance of purchase price still within 14 days.
Judgment: All the element of option had been exercised; therefore Ku has to sell the land to
Tay, and has caveatable interest

Subramaniam Chettiar Vs JC Chang
▪ JC is the owner of the land and gave option for 4
months to purchase land. At RM782,306.
▪ 10% deposit was paid and JC has to assist plaintiff
to obtain planning approval by signing plans and
forms for the application
▪ Planning was not approved and the option was
extended on month to month basis until 8 months
▪ JC gave notice to terminate the agreement
Judgement:
✓ Where no time is stipulated in an option for its
exercised within a reasonable time.
✓ Reasonable time is depend on each case on
circumstances which actually exist and nature of
business,
✓ The offeree has allowed too long a time lapse
Teo Siew Peng V Guok Sing
Ong & Anor
▪Teo paid consideration of an option for
RM2,000 where the option needs to pay
10% in order to exercise the option.The
amount RM2,000 is less than 10%
amount needed.
Judgement:
✓The court held that the full 10% of the
purchase price, without any deduction
whatsoever was envisaged for a valid
option
✓The option holder had not complied
with the terms of the option agreement
✓No binding contract came into
existance
 Option for Leasing (Rent or Lease)
◼ Option to rent can be in the form of:
a. Period of renting
b. Type of rental payment agreement:
Graduated rent/ Percentage rent/ Index rent/ Fixed rent/
Net rent or Gross rent
c. Whether the rent is reviewed or revised at certain
interval.
▪ Option for lease can be in the form of:
a. The type of lease
Sale and leaseback /Ground lease/Normal or property lease
(building)
b. Period of lease
✓ A long tenancy (more than 3 years) is considered as
lease
✓ Must be registered with Land office and governed by
NLC
✓ Period can be 10,22,30,60,99 years
Option in a transaction
Offer Sale

Option

Exercise of Caveatable
an option interest

Binding
contract
 GUIDELINE ON THE
ACQUISITION OF PROPERTIES
(Effective 1 March 2014)

Economic Planning Unit, Prime Minister’s Department

 Economic Planning Unit, Prime Minister’s Department

CONTENTS
I. INTRODUCTION........................................................................... 1

II. APPLICATIONS.............................................................................. 1

III. CONDITIONS FOR ACQUISITION................................................ 2

Equity Condition

Paid-Up Capital Condition

IV. COMPLIANCE PERIOD OF THE CONDITIONS.......................... 2

V. EXEMPTIONS............................................................................... 3

VI. RESTRICTIONS............................................................................ 3

VII. PROCEDURES ON SUBMISSION OF APPLICATION................ 3

VIII. DECISION ON APPLICATION...................................................... 3

IX. APPEAL......................................................................................... 3

X. CORRESPONDENCE ADDRESS AND ENQUIRIES…................ 4

XI. EFFECTIVE DATE.......................................................................... 4

XII. REPEAL.......................................................................................... 4

XIII. DEFINITIONS.................................................................................. 5

APPENDIX I – EXEMPTIONS......................................................................... 8

APPENDIX II – PROCEDURES ON SUBMISSION OF APPLICATIONS...... 10

 Economic Planning Unit, Prime Minister’s Department

GUIDELINE ON THE ACQUISITION OF PROPERTIES

I. INTRODUCTION

1. The purpose of this Guideline is to clarify the procedure on the acquisition of

properties.

II. APPLICATIONS

2. This Guideline shall apply to the following transactions:

2.1 All property acquisitions, except for residential units, that require
approval of the Economic Planning Unit, Prime Minister’s Department
as follows:

(a) direct acquisition of property valued at RM20 million and above,

resulting in the dilution in the ownership of property held by
Bumiputera interest and/or government agency; and

(b) indirect acquisition of property by other than Bumiputera interest

through acquisition of shares, resulting in a change of control of
the company owned by Bumiputera interest and/or government
agency, having property more than 50 percent of its total assets,
and the said property is valued more than RM20 million.

2.2 All property acquisitions by foreign interest that do not require the
approval of the Economic Planning Unit, Prime Minister’s Department
but fall under the purview of the relevant Ministries and/or Government
Departments as follows:

(a) acquisition of commercial unit valued at RM1,000,000 and above;

(b) acquisition of agricultural land valued at RM1,000,000 and above

or at least five (5) acres in area for the following purposes:

(i) to undertake agricultural activities on a commercial scale

using modern or high technology; or

(ii) to undertake agro-tourism projects; or

(iii) to undertake agricultural or agro-based industrial activities

for the production of goods for export.

(c) acquisition of industrial land valued at RM1,000,000 and above;

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 Economic Planning Unit, Prime Minister’s Department

and

(d) transfer of property to a foreigner based on family ties is only

allowed among immediate family members.

2.3 Acquisition of residential unit by foreign interest valued at RM1,000,000

and above. This acquisition, however, does not require the approval of
the Economic Planning Unit, Prime Minister’s Department but falls under
the purview of the State Authorities.

III. CONDITIONS FOR ACQUISITION

3. Conditions for the acquisition of property as described in paragraphs 2.1 (a)

and (b) are subject to equity and paid-up capital conditions as follows:

Equity Condition

3.1 Companies to have at least 30 percent Bumiputera interest

shareholding;

Paid-Up Capital Conditions

3.2 Local company owned by local interest to have at least RM100,000 paid-
up capital; and

3.3 Local company owned by foreign interest to a have at least RM250,000

paid-up capital.

4. Acquisition of property provided for in paragraphs 2.2 (a), (b) and (c) are also
subject to the condition that the said property must be registered under a locally
incorporated company.

IV. COMPLIANCE PERIOD OF THE CONDITIONS

5. For direct acquisition of property, the equity and paid-up capital conditions
imposed by the Economic Planning Unit, Prime Minister’s Department must be
complied with before the transfer of the property’s ownership.

6. For indirect acquisition of property, the equity and paid-up capital conditions
imposed by the Economic Planning Unit, Prime Minister’s Department must be
complied with within one (1) year after the issuance of written approval.

7. The conditions imposed on the acquisition of property in paragraph 2.2 must be

complied with and notified to the Economic Planning Unit, Prime Minister’s
Department before the property is transferred.

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 Economic Planning Unit, Prime Minister’s Department

8. Compliance of the equity and paid-up capital conditions must be notified to the
Economic Planning Unit, Prime Minister’s Department.

V. EXEMPTIONS

9. This Guideline SHALL NOT APPLY to transactions listed in Appendix I.

VI. RESTRICTIONS

10. Foreign interest is NOT ALLOWED to acquire:

10.1 Properties valued less than RM1,000,000 per unit;

10.2 Residential units under the category of low and low-medium cost as
determined by the State Authority;

10.3 Properties built on Malay reserved land; and

10.4 Properties allocated to Bumiputera interest in any property development

project as determined by the State Authority.

VII. PROCEDURES ON SUBMISSION OF APPLICATION

11. All applications must be submitted in accordance with the procedures described
in Appendix II.

12. Applicants are responsible for the accuracy of the information submitted.

VIII. DECISION ON APPLICATION

13. Decisions on all complete applications will be given within ten (10) working
days.

IX. APPEAL

14. Applicants must submit a completed UPE R/2009 form.

15. All appeals pertaining to the decision of the Economic Planning Unit, Prime
Minister’s Department will be considered based on the merit of each case.

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 Economic Planning Unit, Prime Minister’s Department

X. CORRESPONDENCE ADDRESS AND ENQUIRIES

16. All applications that require the approval of the Economic Planning Unit, Prime
Minister’s Department must be submitted to:

Economic Planning Unit,

Prime Minister’s Department,
Level 5, Block B5,
Federal Government Administrative Centre,
62502 Putrajaya, Malaysia.

17. Enquiries can be forwarded to the Economic Planning Unit, Prime Minister’s
Department at:

Tel. No. : 603-8872 5350/5576/5339

Fax No. : 603-8888 2790
E-mail : perolehan.hartanah@epu.gov.my

18. This Guideline and the application forms are also available on the Economic
Planning Unit, Prime Minister’s Department’s website:

Website : http://www.epu.gov.my

XI. EFFECTIVE DATE

19. This Guideline is effective from 1 March 2014.

XlI. REPEAL

20. With the issuance of this Guideline, the Guideline on the Acquisition of
Properties dated 1 January 2011, is repealed.

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 Economic Planning Unit, Prime Minister’s Department

XIII. DEFINITIONS

21. In this Guideline, except when the context requires otherwise:

acquisition means any transaction involving direct and/or indirect

transfer of property ownership from one party to another.

agricultural land means land categorized as agricultural land under the

National Land Code 1965.

Bumiputera means:

(a) for Peninsular Malaysia,

Malay individual or aborigine as defined in Article

160(2) of the Federal Constitution;

(b) for Sarawak,

individual as defined in Article 161A (6)(a) of the

Federal Constitution;

(c) for Sabah,

individual as defined in Article 161A (6)(b) of the

Federal Constitution.

Bumiputera means any interest, associated group of interests or

interest parties acting in concert, which comprises:

(a) Bumiputera individual; and/or

(b) Bumiputera institution and trust agency; and/or

(c) local company or local institution whereby the

parties as stated in item (a) and/or (b) hold more
than 50% of the voting rights in that local company
or local institution.

control means any individual, company or parties acting in

concert:

(a) having interests of more than 50% in a local

company or local institution; or

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 Economic Planning Unit, Prime Minister’s Department

(b) empowered to make and implement decisions

pertaining to the business or administration of a
local company or local institution.

commercial unit means area, premise or building used for business

purposes such as shop house, shop office, shop lot, office
space, business space or show room.

foreign means a foreign company as defined in the Companies

company Act 1965.

foreign interest means any interest, associated group of interests or

parties acting in concert which comprises:

(a) individual who is not a Malaysian citizen; and/or

(b) individual who is Permanent Resident; and/or

(c) foreign company or institution; and/or

(d) local company or local institution whereby the

parties as stated in item (a) and/or (b) and/or (c)
hold more than 50% of the voting rights in that local
company or local institution.

government means the Federal Government and State Government.

government means the Statutory Bodies, non-listed Government

agency Linked Companies, Government Linked Investment
Companies including their subsidiaries.

industrial land means land categorized as industrial land under the

National Land Code 1965, factory or factory lot.

immediate means individuals related through marriage (husband and

family wife) or blood ties (grandparents, siblings and children
including step children) and adopted children certified by
the National Registration Department.

interest means holding voting rights or equity or any other rights in

a company.

local company means a company incorporated in Malaysia under the

Companies Act 1965.

local institution means organization, association and corporation

registered under the Corporations Act 1966.

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 Economic Planning Unit, Prime Minister’s Department

local interest means any interest, associated group of interests or

parties acting in concert, which comprises:

(a) individual who is a Malaysian citizen; or

(b) local company or local institution whereby

Malaysian citizens hold more than 50% of the voting
rights in that local company or local institution.

permanent means an individual who is not a Malaysian citizen and

resident has been granted Permanent Resident status by the
Government of Malaysia.

property means commercial unit, agricultural land, industrial land

and/or residential unit.

residential unit means an area, premise or building for dwelling.

voting right means:

(a) for a local public company, the power to vote

attributable to the share capital of a company, which
is exercisable at an Annual General Meeting or
Extraordinary General Meeting; or

(b) for a private limited company, the power to vote in

the company.

public company means a public company as defined in the Companies Act

1965.

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 Economic Planning Unit, Prime Minister’s Department

APPENDIX I

EXEMPTIONS

1. The transactions listed below are exempted from requiring the approval of the
Economic Planning Unit, Prime Minister’s Department:

1.1 Any acquisition of residential unit under the “Malaysia My Second Home”
Programme;

1.2 Multimedia Super Corridor (MSC) status companies are allowed to

acquire any property in the MSC area provided that the property is only
used for their operational activities including as residence for their
employees;

1.3 Acquisition of properties in the approved area in any regional

development corridor by companies that have been granted the status by
the local authority as determined by Government;

1.4 Acquisition of properties by a company that has obtained the

endorsement from the Secretariat of the Malaysian International Islamic
Financial Centre (MIFC);

1.5 Acquisition of residential units to be occupied as a hostel for company’s

employees. However, local companies owned by foreign interest are only
allowed to acquire residential units valued at RM100,000 and above and
this matter is under the jurisdiction of the relevant state authorities;

1.6 Transfer of property to a foreign interest pursuant to a will and court

order;

1.7 Acquisition of industrial land by manufacturing company;

1.8 Acquisition of properties by Ministries and Government Departments

(Federal and State), Ministry of Finance Incorporated, Menteri Besar
Incorporated or Chief Minister Incorporated, State Secretary
Incorporated and listed Government Linked Companies;

1.9 Acquisition of properties under the privatization projects, whether at the

Federal or State level, provided that it involves the companies that are
the original signatories in the contracts for the privatized projects; and

1.10 Acquisition of properties by companies that have been granted the status
of International Procurement Centers, Operational Headquarters,
Representative Offices, Regional Offices, Labuan entities and Bio-Nexus
or other special status by the Ministry of Finance, Ministry of International
Trade and Industry and other ministries

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 Economic Planning Unit, Prime Minister’s Department

1.11 Acquisition of residential unit for accommodation purpose by:

(i) foreigner with expatriate status who is serving the Government;

or

(ii) foreigner with expatriate status who is serving non-government

organization and receiving a minimum monthly salary of
RM8,000, or

(iii) Permanent Resident who holds a red Identity Card.

They are allowed to purchase only one residential unit valued at minimum
RM250,000 (except in Kuala Lumpur, Johor Bahru and Penang) and the matter
is under State Authorities jurisdiction.

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 Economic Planning Unit, Prime Minister’s Department

APPENDIX II

PROCEDURES ON SUBMISSION OF APPLICATION

1. Each application must be accompanied by the following documents:

1.1 Form UPE H/2009;

1.2 Forms Proforma I/2009 and/or Proforma II/2009;

1.3 One (1) copy of the relevant agreement;

1.4 One (1) copy of the Board of Directors resolution;

1.5 One (1) copy of the letter/license from the ministries or Government
agencies (if applicable);

1.6 One (1) copy of the approval letter on the same proposal from other
ministries or Government agencies (if applicable);

1.7 One (1) copy of the confirmation letter from the Company Secretary on
the company’s current equity structure;

1.8 One (1) copy of the latest valuation report (transaction that involves
Government agencies must be accompanied with a valuation report from
Jabatan Penilaian dan Perkhidmatan Harta);

1.9 One (1) copy of the company’s current audited financial report;

1.10 Declaration Letter UPE SA/2009 to be signed by the

Chairman/Managing Director/ Chief Executive Officer of the company or
any member of the company’s Board of Directors or any authorized
personnel/individual; and

1.11 Any other document considered necessary by the Economic Planning

Unit, Prime Minister’s Department.

____________________________________________________________________________
10
 TOPIC 3:
REGULATIONS AND BODIES affecting REAL ESTATE
TRANSACTIONS
At the end of the session student will be able to get the overall
ideas about the regulations affecting the real estate transaction.
CONTENT -
Housing Development (Control and Licensing) Act 1966 (Act 118) &
Regulations
Scope of the Act
Regulations affecting the contract of sale
Effect of non-compliance with the provisions of the Act
 REGULATORY BODIES affecting in REAL ESTATE TRANSACTION
➢ Land Office/Registrar Office
- Amalgamation, subdivision, surrender of land , category of land use ,
Caveat, Charge , Strata title and Quit rent
➢ Inland Revenue Office
Stamp duty, RPGT and stamping document
➢ Town and Regional Planning Department
Zoning, Planning permission and planning provision
➢ Local Authority
Assessment
➢ Survey Department
Acreage and boundaries determination
➢ Valuation and Property Service Department
Property Valuation
➢ Economic Planning Unit (EPU) and BOVAEAPM
The guideline for foreign buyer and foreign properties entering Malaysia
 Renamed from The
Housing Developers
(Control and
Licensing) Act 1966
Housing Development
(Control & Licensing)
Act 1966 (Act 118) &
Regulations -
Peninsular Malaysia

1. Check abuses of the

then infant
housing/residential
The focus – to protect the interest of
industry
purchaser
2. To regulate the
activities of housing 1980s – dark spot – abandoned projects –
developers mismanagement , inadequacy of law
3. To protect house
buyers 2009 – 2015 – 216 abandoned projects
• Housing Developers (Control & Licensing) Act
1966, 1972, 1988, 2002, 2012, 2022 coming
soon
• Housing Development (Control & Licensing )
Act 1966 Act 118 – enforced 2007 until
present
• Our lecture base on Housing Development
(Control & Licensing) Act 1966 ( As at
27/4/2022)
End Lecture
 Act 118

The contents of Act 118

Part 1 – preliminary
Part 2- licensing of housing developers
Part 3 – duties of a license housing developer
Part 4 – Investigation and enforcement
Part 5 – Powers of Minister
Part 6 – Tribunal for homebuyer claims
Part 7 - Miscellaneous
• Section 3 -
• Certificate of completion and compliance – completed and is
safe and fit for occupation
• Housing development – developing more than four units of
housing accommodation
• Stakeholder – solicitor holding moneys for payment to a
housing developer pursuant to SPA
• Tribunal – Tribunal for Homebuyer claims
• Housing Development Account – account opened and
maintained by a licensed housing developer – refer sect 7A
• Protecting the purchasers
SEA Housing Sdn Bhd vs Lee Poh Choo, 1982 2
MLJ 31
The purchase sued the developer for breach of
contract – the house completed 23 months
instead of 18 months(SPA). Delay due to
shortage of building materials – won
Appealed to Federal Court – dismissed
 Act 118

1. Controlling Developers
a.Monitoring and enforcement of the Act is done by the Housing and Local
Government Ministry’s Monitoring and Enforcement Division.
b.Handling and monitoring work by Housing Controller, Housing inspector and
Officers (Housing and Local Government Ministry)
i. Housing project which had been given the license by the housing controller
are progressing as scheduled
 ii. Developer conform with the law stipulated under the Act/regulations such as:
✓Processing license or permit for advertising or sale
✓Proper maintenance of the Housing Developers Account
✓Standardization of the sale and purchase agreement in accordance to
regulation; Schedule G (Land and building), Schedule H (Multi-unit
buildings such as flats, apartments, condominiums and town houses.
c. Monitoring of the projects are done through:
i. Inspectors and survey reports received from developers Form 7(F) twice a
year
ii.Review of advertisements published by developers whether they comply with
the law
iii.Inspection at the project site, area and office
iv.Monitoring the project based on the information and complaints received
from public
d. The monitoring and enforcement division will take the necessary steps,
including legal action against the housing developers who flout the law
• Deposit for developers license from RM200K to 3% of the estimated cost of
construction of a housing development – weed out weak players. If got license b4
2015 but not yet pay deposit then still RM200K
• Renewal developers license – shorten from 60 days to 14 days before expiry
• Advertisement prohibits:
1. offer free legal fees
2. projected monetary gains and rental income
3. Claim for panoramic view
4. Travelling time from housing projects to popular destination

Collection of payment outside a SPA – previously developers were prohibited to

collect any payment such as booking fee before signing SPA but amended – No
person including parties acting as stakeholder shall collect any payment whatever
name called except as prescribe by the contract of sale
Financial facility – purchaser must obtain facility within 30 days after receipt of
stamped SOA. If facility not approved, Developer must refund within 30 days
Cost to be borne – developer shall bear the cost for consent from SA
Abandoned project by developer – fine between RM250 k and RM500K or
imprisonment for a term not exceeding 3 years or both
Section 7A – Licensed housing developer to open and maintain Housing
Development Account
• Each housing development
• Each phases

Monies received is to deposit in the account

Cannot withdraw except as authorized by regulation and cannot used for any
kind of payment by developer to settle credit or adjudication order
Housing Development Account not apply for housing accommodation that
sold after completion and issuance of CCC
If fail to comply –fine > RM 250K but < RM 500K or < 3 years imprisonment or
both
2.The provision is to safeguarding the house buyers:
i. Housing controller can revoke or suspend the Developer’s license if it is
endangering the interest of the house buyers or the public
ii. Buyers reminded to ensure that developers have valid license and permits to
advertise and sell
iii.Tribunal was set up to hear simple disputes between purchasers and housing
developers not subsequent purchaser and claim not more than RM50,000
iv.Section 22E – Stakeholder who release any money to housing developer
which contradict with SPA shall be guilty and liable to fine RM10,000 to
RM100,000
v. Section 22F – Certificates produced by architect or engineers issuing on the
programmed certificate not according to the actual work done is liable to fine
RM 10,000 to RM100000.
End Lecture
 HOUSING TRIBUNAL – Tribunal for homebuyer claims

•The Tribunal for Homebuyer Claims was set up on 1 December, 2002 to

resolve house buyers’ dispute with their housing developers.
•It is specifically tailored to hear disputes arising from house buyers against
their developers.
•Housing Tribunal only handles arguments arising from the Sale and
Purchase Agreements (SPA) signed between a developer and a purchaser
with the first buyer only.
•Members are: Chairman, DC, Members ( 5 or >) and secretary
 HOUSING TRIBUNAL (cont)
➢ The tribunal have jurisdiction to determine a claim where the total
amount in respect of the claim does not exceed RM50K

➢ Time limit for making a claim, not later than 12 months from:

a. the date of issuance of the Certificate of Completion and

Compliance (CCC) for the housing accommodation or the
common facilities
b. The expiry date of the defects liability period as set out in the
SPA
c. The date of the termination of the SPA by either party and such
termination occured before the date date of issuance of the CCC
 Incomplete or non-availability of
common facilities (in part or in
whole)

Compensation for
late delivery
Jurisdiction of Housing
Tribunal to determine a
claim not exceed RM50K. Omission of work
Claims can be made on:
Damages for deviation of
plans or omission of
work

Refusing/neglecting to
remedy defects, Compensation for adjustment in land
shrinkage or other area as compared to the measurements
faults to the building in the Agreement
FOREIGN INVESTMENT COMMITTEE (FIC) MALAYSIA
Foreigner or non citizens wishing to invest/buy properties in Malaysia must refer to
FIC which is a section of the EPU of the Prime Minister’s Department. FIC
guideline was deregularised on 30/6/2009 and new guideline is known as

Guidelines on The Acquisition of Properties - effective from 1 March 2014 and

applicable throughout Malaysia

Foreign interest –
✓ individuals not Malaysian citizen and or
✓ PR and or
✓ foreign company/institution and or
✓ local company that have >50% share of the above
1. All properties acquisition by foreign interest that do not require the approval of
EPU but fall under the purview of the relevant Ministries and or Govt
Department: But must notify EPU before the property is transferred

• Acquisition of commercial unit valued at RM 1M and >

• Acquisition of agr land valued at RM1M and > or at atleast 5 acres for:
to undertake agr activities on a commercial scale using modern or high tech
or
to undertake agro-torurism projects
to undertake agr or agro based industrial activities for the production of
goods for export
• Acquisition of industrial land valued at RM 1M and > and
• Transfer of property to a foreigner based on family ties in only allowd among
immediate family members
• 2. Acquisition of residential unit by foreign interest value at
RM 1M and >. It does not require the approval of EPU but fall
under State Authorities

Restriction :
Foreign interest is not allowed to acquire:
❑ Properties valued < RM 1M per unit
❑ Low and medium cost house as determined by the State
Authority
❑ Properties built on Malay Reservation Land
❑ Properties allocate to bumiputera interest in any property
development project as determined by SA
• Exemptions from approval of the EPU:
1. Local companies that owned by foreign interest are only allowed to acquire
residential units valued at RM100k and above and this matter is under the
jurisdiction of the relevant state SA

2. Transfer of property to foreign interest purusan to a will and court order

3. Acquisition of residential unit for accommodation purpose by:
✓ foreigner with expatriate status who is serving the Govt or
✓ foreigner with expatriate status who is serving non govt organization with
minimum salary of RM8,000 per month
✓ PR with red IC

They are only allowed to purchase only one residential unit valued at minimum
RM250K (Except in KL, JB and Penang) and the matter is under SA jurisdiction
2. Foreign Properties Marketed In Malaysia – BOVAEAPM
• Foreign estate agents shall engage the services of a local estate agent to jointly
market or sell foreign properties in Malaysia under the following conditions:-
i. The local estate agent must obtain written permission from the Board before the
sale or marketing of the foreign property.
ii. The foreign party must declare to the Board the profit sharing arrangement made
with the local estate agent. In this respect any deviation from the Seventh
Schedule should be highlighted to the Board and its approval should be obtained.
iii. The local estate agent must play a major role and actively participate in the
transaction.
iv. The local estate agent must have adequate knowledge of the property and that
country's framework of real estate law and practice before accepting the
assignments.
v. Due prominence must be given to the local agent in all advertisements.
vi. The approval number given by the Board shall be prominently displayed in all
advertisements
EFFECT OF NON-COMPLIANCE WITH THE RULES IN ACT 118
• Fined will be charged on: (under Act 118)
i. Construction activities without a proper license can be fined RM
100,000 or 5 years imprisonment or both.
ii. Fail to open Housing Development Account RM100,000 or 3 years
imprisonment
iii. Other offences RM 100,000 fine or 3 years imprisonment or both
depends on the rules they violate
• Criminal penalty for non-compliance (Housing Tribunal)

i. Any person who fails to comply with an Award made by the Tribunal
commits an offence and shall on conviction be liable to a fine not
exceeding RM10,000 or to imprisonment for a term not exceeding two
years or to both.
ii. In the case of a continuing offence, the offender shall in addition to the
penalties, be liable to a fine not exceeding RM1,000 for each day the
offence continues after conviction.
• THANK YOU
 Topic 4: PROPERTY FINANCE

Aim: Content:
At the end of the topic student • Types of mortgage financing
should understand:
• Terms of finance
a.The type of mortgage
financing • Financing sources
b.Term of financing
c.Sources of financing
 Types of mortgage financing

There are 3 types of mortgage financing available for

private sector
a. Stock finance – at early stage of development
b. Bridging finance – during development for
developer
c. End finance – for buyer/end user to purchase
 a. Stock Finance
• Referred as Pre-Bridging Finance/Pre-Development
Finance
• Financing the purchased of land
• This type of finance is of limited scale, high interest
rate and is rather selective because of the high risks
involved.
• The future development is not certain; therefore the
return is also uncertain.
• This is the reason why many financial institutions are
unwilling to grant long term loan to the developer at
the initial stage of a project
 b. Bridging Finance
• A term implies that a fund required to "bridge” the shortfall
between the realization of adequate funds from partial
sales of the project and the initial expenditures for
construction that sales have either yet to be launched or is
insufficient.
• Bridging finance means extending finance to an individual
or an organization involves in the building industry
• Bridging finance is given only after planning approval has
been obtained and expired after the construction works are
finished
• This type of finance is usually extended by financial
institutions as construction loan.
• It is usually granted on a short term basis to finance site
work construction, infrastructure and the initial stage of
the main building operation
 Types of Bridging Finance
i. Direct Loans
• These are bridging loans obtained in total amount from a single financial
institutions, commercial bank or insurance company.
• Normally the amount of loan obtainable is small and has a low risk of
failure
ii.Syndication Loans
• A single loan jointly financed by a consortium of financial institutions to
provide financing for large projects
• A borrower approaches an agent to raise a certain amount of loans and
call in a few other banks or financial institutions to participate
• Normally exercised for a very large project which involves a large sum of
money.
• Usually the merchant banks will acts as agents while commercial banks,
financial institutions and insurance companies becomes the lender.
 Syndication Loan (cont)

Example: • Board of Director’s responsibilities:

• The components might change To declare the changes in the
from time to time share structure.
• Every participant will have their
representative in the Board of
To prepare bi-annual report on the
Director for the Project project
concerned To declare dividend to be
segregated for the project
Bank B 20% Every members to declare any
Bank A 30%
interest if any related to the project
Member to declare any personal
Institution Bank E
C 30% 10% loan to the Board
Institution D
10%
 c. End Finance
 An arrangement with a project developer to provide loans to property
purchasers to help them finance the purchase price of the property.
 Usually 80% to 90% of the purchase price
 End Finance can be available in 2 ways:
i) Directly from the financial institutions
ii) Indirectly from the financial institutions, that is through the
Developer
 End Finance is normally in the form of mortgage loans for a period
ranging from 10 to 30 years depending on age of the borrower and
repayment period
 The property to be mortgaged should be freehold/leasehold
 Margin of financing is assed on:
 Type and location of property
 Age and Income of the borrower
 End Finance (the nature)

• End Finance is finance given by the banks/financial institutions

to individuals in order to purchase property
• Designed to assist qualified purchasers in obtaining bank
loans to partially finance property purchased
• Is offered once a house has been advertised for sale
• End Finance are granted to the purchaser so as to enable them
to pay in successive stages to the Developer when houses are
under construction
• Repayment of End Finance is normally by equal monthly
installment
• Monthly installment commonly should not exceed 1/3 of the
borrower household gross income
 Term of Finance

a.Short Term Finance

b.Medium Term Finance
c.Long Term Finance
d.Combination of short and long term finance
 a. Short Term finance
In construction business

1. For 2 - 3 years loan.

2. The principal sources of finance are the commercial banks, hire purchase
companies and trade credits.
3. Short term finance is required to pay the development costs over the
development period and this include land purchase and payments to building
contractor and professional fees
4. The short term finance is relatively expensive to borrow because there is
limited security in the land and the building under construction and the interest
rate is high.
5. The ability of the developer to repay the short term loan on completion of the
project will depend on the availability of long term finance or his ability to sell
the property.
6. Therefore, the banker’s willingness to provide short term finance depend on
whether the developer can prearrange long term finance or a commitment from
an investor to buy the completed property
• Other types of Short Term Finance given by banks/FI

1. Bank Overdrafts,
2. Deferred Payment,
3. Credit Facilities,
4. Retained Profits and
5. Banker's Guarantee
 Bank Overdrafts (OD)
• An extension of credit from a lending institution when an account
reaches zero; allows the individual to continue withdrawing money
even if the account has no funds in it.
• Given to account holder by charging FD (fixed deposit account) or a
property as a security
• Basically the bank allows people to borrow a set amount of money ;
cover through cheques which would otherwise bounce
• pay interest on the outstanding balance of an overdraft loan ;
interest is lower than credit cards.
• Intentional short-term loan - The account holder finds themselves
short of money and knowingly makes an insufficient-funds debit.
 Deferred Payment,
 A debt which has been incurred and will be paid back at some
point in the future
 A loan arrangement in which the borrower is allowed to start
making payments at some specified time in the future.
 Deferred payment arrangements are often used in retail settings
where a person buys and receives and item with a commitment
to begin making payments at a future date.
 This type of term is very useful for contactors and developers,
however only suitable for small project of small part of the
whole development.
 Usually given to the established developer and contractor who
has a good track record in the development
 Credit Facilities
 A variety of different loans that a company brings on to meet its financing needs
 A credit facility is a type of loan or debt strategy that is often used in a business
or corporate setting; used as part of the overall process of arranging equity
financing.
 Credit facilities can involve several different forms of credit, ranging from
revolving credit to a line of credit that is available for the company as a source
of standby funding.
 While there are several reasons why a company would establish some type of
credit facility, the strategy is usually a means of creating a backup source of
revenue for various projects.
 For example, a corporation may choose to issue a bond as a means of raising
money for a specific project. Along with establishing the bond issue, the
corporation arranges a standby line of credit or possibly a term loan to function
as a backup in the event that the project fails to generate enough revenue to
honor the terms of the bond
 Retained Profits
There is 2 forms of Retained profit:
i. Retain profit after Distributed profit
 is the profit kept in the company rather than paid out to shareholders as a dividend.
 Retained profit is widely regarded as the most important long-term source of finance for a business
 the amount of profit remaining after tax and distribution to stockholders that is retained in a
business and used as a reserve or as a means of financing expansion or investment
 As for project the profit distribution will be determined an agreed in an agreement
ii.Retain profit from development
 A special agreement where Bank agree to finance the construction cost of the project
 At the end of the development an agreed profit will be retained among bank and developer who is
also the land owner.;example of distribution; for 10 units, 4 will belong to bank and another 6 belong
to the owner.
 Bank can sell the retain units or retain for further investment.
 This method is very popular for small development but situated in a very strategic location.
 Banker's Guarantee
• An undertaking by the bank to guarantee payment of a debt or
performance obligation by the applicant.
• This allows developers or contractor to undertake projects with
minimal capital outlay
• For most viable projects, Bank can either undertake to provide all the
necessary funding.
• Applicantion usually accompanied with supporting documents related
to projects concerned.
• Usually given to regular and established bank’s customer with good
track record
 b. Medium Term
 For 3-10 years loan
 The rate of interest charged on medium-term bank
lending to large companies will be a set margin,
with the size of the margin depending on the credit
standing and riskiness of the borrower.
 the rate of interest charged will be adjusted every
three, six, nine or twelve months in line with recent
movements in the Base Lending Rate
 These loans are required to finance major
expansions of a company, purchased of
machinery’s, plants and equipments
 The medium term finance is used when the
development is large with longer construction
period
 c. Long Term
 For >10 years loan

 Required to
1. finance new buildings,
2. purchase of equipment
3. permanent expansion of company assets
4. End financing

 The borrower has the advantages of receiving money at a fixed rate of

interest over a relatively long period and did not have to repay until the end of
the term.

 The main disadvantages to the lender is that the money is lent for a
considerable period of time often at a fixed rate of interest and the effect of
the inflation is to depreciate the value of the capital (value of money)

 The Long-term finance is available as loans, sales and leaseback, mortgages,

equipment leasing and hire purchase.
 Combination of short and long term finance
• If the developer wishes to retain the building as a permanent investment, then he will
need to raise 2 types of finance short term and long term finance
• The ability of the developer to repay the short term loan on completion of the project
will depend on the availability of long term finance or his ability to rent out the
property.
• Location and demand factors will be very important.
• Therefore, the banker’s willingness to provide short term finance depend on whether
the developer can prearrange long term finance or a commitment from future tenant
renting the property especially the anchor tenant.
• All the cost invoved and future flow of income will be realized in the form of ‘Cash
flow’ of the project from initial until completion and leasing period for loan
repayment.
• Usually awarded to an established developer with good track record and project of
small to medium size only.
END LECTURE
 SOURCES OF FINANCE
 The sources of finance for can be divided into :
a. Public sector b. Private sector
 In determining the sources of finance, there are Cost of finance to be considered which
include:
i. The amount of interest paid to finance institution/ banks on loan acquired for the
execution of the project or development or unit purchased – It dependa on the Base
Lending Rate (BLR) of that particular finance institution/ banks + the interest rate -
BLR is the benchmarks for the cost of finance (determine by Bank Negara)
ii. Percentage of interest rate charges will vary from from one financial institution to
another
 Factors that influence the cost of finance
1. Amount of Loans
2. Type of Loans – short, medium or long
3. Base Lending Rate (BLR)
4. Financing Institution/ Banks Policy
5. Government Policy
 a. Public sector
 Parties involved in the Public Sector are:
i. Federal/Central Government
ii. State Government
iii. The Local government/Authority

Full finance – utilities and infrastructure

 Join venture and turnkey

Joint venture scheme ; the most being practice is privatisation projects and affordable housing scheme (Skim Rumah Mampu Milik) The key
issues to consider in a joint venture are ownership, control, length of agreement, pricing, technology transfer, local firm capabilities and
resources, and government intentions.

Through government agencies such as UDA for rural area and a small scale development through “Turn key concept of development” A turnkey
project refers to a project when clients pay contractors to design and construct new facilities and train personnel.

The developer may obtain their loans or cooperation from external and internal sources
i. Internal source (informal financing) are mainly confined to nationalized industries where internal cash flows provide a source of
finance for the industry’s investment. For example: discounted prices, taxes, tariff, levy, sale of stock, sale of fixed asset, debt
collection, selling or surplus inventories, accelerating collection of receivables

ii. External sources of finance ( formal financiang ) are from domestic market for examples treasury bills and government bonds,
provided by investors, lending institution,

iii. Loan from overseas bank (World Bank, Asia Dev. Bank, etc)
 a. Public sector Finance

Infrastructure development projects

Financed through the Government Development Budget. But with the

introduction of PPP, it has shifted to private sector – alleviate financial
burden on the govt – multi lane highways in Malaysia are tolled

Local roads – still borne by Governments

 b. Private Sources of Finances
 2 ways of obtaining private financing:
i. Financial institution by nature
a. Commercial Banks
b. Merchant Bank
c. Malaysian Building Society Berhad (MBSB) and Borneo Housing Mortgage Finance Berhad
(BHMFB)
ii. Non Financial Institution
a. Insurance Company
b. Cooperative such as Koperasi Guru, Koperasi Polis and Lembaga Tabung Angkatan Tentera
(LTAT)
c. Tabung Haji
d. REITS companies

Banks/ FI are common. All banks offer different advantages, whether personalized service or
customized payment – shop around and find the banks that meet your specific needs
• Public Sector Home Financing Board – in 2019 to
disburse RM12 Billion civil servant – joint loan –
price - exceed eligibility – Apply to BSN and BIMB
– online application – insurance MRTA
 Private Finance Initiative (PFI) in Malaysia

• Introduced by the Govt under under Ninth Malaysian Plan – the

involvement of private sector in delivering public services – when EPF
was used as main source of project financing.. However a study was
made not agreed EPF as main source. Under ninth Malaysian Plan , EPF
agreed to invest RM20 Billion in terms of loan

• is a tool to bring together the strengths of both public and private sector
to deliver Mega projects and services. Combination the resources of the
public and private sector to provide more efficient public services
• Is a type of Public-private partnerships (PPP) where project financing
rests mainly with the private sector
The unique characteristics in PFI
1. Service focus – buildings and infrastructure as ‘assets’ to ‘service’ provided by the
private sector
2. Ownership – buildings are typically owned by the private sector during the period
of the contract and lease back to the public sector client
3. Risk transfer – to the private sector
4. Innovation – private sector come out with the design that meets public sector
requirement
5. Performance – the payment to private consortium is based on the extent that the
required service is delivered and the clients standard performance requirements are
met

Involving design, construct, operate, manage and maintain the facility throughout the
concession period. In return, the Govt will be contracted to pay the services based on
performance and standard provided.
• Example of PFI project – Medical City @ Enstek
(Ministry of Higher Education) – Nilai RM1.7 Billion
• 9Bio Sdn Bhd – Ministry of Health

• 880 project under 9th Malaysian Plan – 425 was done

under PFI

• UiTM Tapah
END OF LECTURE
 TOPIC 5: TENANCY MANAGEMENT

At the end of the topic; student should understand the

management of tenancy in Malaysia
 CONTENT
• Preparation of contract
• Types of lease, usual terms and condition
• Deposit for rent and utilities
• Inventory Checklist and Handover;
• Payment of Rent ;
• Notice of termination
• Obligation of landlord and tenant
• Escape clauses
• Turnover rent, rent and rent reviews
• Eviction Proceedings
• Determination of income and outgoings
• Occupancy ratio, solving vacancy problems, tenant selection
 Preparation of contract
Tenancy agreement
➢Tenancy agreement is legal agreements between two parties consist in
this agreement about the properties rental which involve parties knowing
as the landlord and the tenant.
➢Before a tenant moves in, the landlord and tenant need to complete a
tenancy agreement, which sets out the key things the landlord and tenant
agree to do.
➢Both the landlord and tenant must sign the agreement, and the landlord
must give the tenant a copy before the tenancy begins
➢Tenancy agreement can be divided into three types, which usually used.
The types of tenancy or lease are:
▪ Building or residential tenancy agreement
▪ Agriculture or vacant land tenancy agreement also known
as ground lease
▪ Commercial tenancy agreement
 TYPE OF LEASES/TENANCY

Tenancy for years – fixed Tenancy at sufferance –

period(agreed both), tenant remain even
though expired term, stay
have expired date, no without right (holdover
terminated upon death of tenant), evict or accept
the previous rental
both parties

Periodic tenancy – month

to month or year to year,
no termination date,
automatic renewed, Tenancy at will-terminate with their
desire, automatic terminate in either
notice to quit if want to party died
cancel
 USUAL TERMS AND CONDITIONS
The written tenancy agreement as per the rule must be with the consent between the two parties;
including signature and witness; and the landlord must give the tenant a copy before the tenancy
begins; commonly must include the following.
i. The the lessee and the lessor who sign the agreement ( both must be over 18 years old)
together with their addresses; for servicing notices for both the landlord and the tenant
ii. The address of the property and its description.
iii. The type of tenancy, duration and the date the tenancy will end if it is a fixed-term tenancy.
iv. The date the tenancy agreement is signed; and to begin.
v. The rent amount and frequency of payments; posssession,maintenance and
outgoing,improvements and any condition imposed and exceptions to the lessee’s right
vi. The amount of deposit; the forms or in any form of bond or security.
vii.The place or bank account number where the rent is to be paid.
viii.Any fees (real estate or solicitor’s) to be paid (if applicable).
ix. The lessee’s benefit; with special covenants, conditions and provisions such as list of any
chattels (like furniture and fittings) provided by the landlord.
 Deposit for rent and utilities
• Two main things for a renter to be concerned before start to rent
Earnest deposit – once orally agree after the negotiation - for booking – to show your interest in renting
the units/property. Once deposit paid, the landlord is not suppose to show the property to any other parties
unless you back out of the deal). It is advised to pay it to agent and it is hold until tenancy Agreement
signed.

security deposit – to protect the owner against i) any damage caused by a renter – may deduct the cost
of repairs from it when the tenant moves out.
ii) Protects the owners from tenants who move out without notice

Commonly 2 months but if the tenant moves out without giving notice, the tenant has the right to deduct
the 2 months rental from the security deposit ( will be mentioned in the Tenancy Agreement) where he has
to use the deposit to repair his home

utility deposit – usually collected when the tenant is in charge of paying the utility bills. Water and
electricity…….. In case the tenant defaults on the utility bill payments, the landlord has the right to deduct
the cost from the utility bill deposit…..leftover balance….. Commonly deposit is one month rental.

If you return the house to the landlord with all your bills paid up, then you are entitled to get this deposit
returned to you
Access card deposit – for gated and guarded house, apartments, condo. To cover the cost of replacement if
you leave without return it
• Forfeiture of deposit- if end tenancy earlier
than agreed upon. Important to negotiate
with landlord before signing the contract
• Purchase of furniture – furnished or unfurnished
Unfurnished/partly furnished/fully furnished ?
- Which one more cost effective? – unfurnished -
tenant buy their own furniture
 Inventory checklist and handover
• Inventory Checklist. This inventory form is for your protection and serves as a
written record of the condition of the apartment upon your arrival. You should fill
it out as soon as you move in, and if possible have the apartment manager go over
and sign it as well.

• Inventory compilation is usually paid for by the landlord since it is in their best
interest to have this compiled to protect their investment. ... “This is the time
when the tenant has the opportunity to ensure that they have input in protecting
their security deposit, by agreeing the contents of the inventory.
 Handover
• Once a tenant has been approved for a property we arrange a meeting to complete
the tenancy agreement. This appointment generally takes approximately 45 minutes
to conduct and includes the signing of the tenancy agreement. We explain in detail
the tenant’s obligations to the agreement and in particular what we expect when
attending for our routine inspections.
• On possession day we arrange to meet with the tenant and provide them with 2 sets
of keys and any remotes. These are documented and signed for by the tenant to
ensure we have a record of what keys were provided at the commencement of the
tenancy.
• Two copies of the ingoing inspection report are provided to the tenant. The Tenant
can dispute or make changes to the report but are required to return the report to our
office within 14 days. If they fail to return the report it will be deemed they are in
agreeance with the report and the original document will become legally binding.
 Payment of rent
• Payment, usually of an amount fixed by contract, made by a tenant at specified
intervals in return for the right to occupy or use the property

• A similar payment made for the use of a facility, equipment, or service provided by
another.

• If tenants don't pay rent ?

• Recurring costs ? -costs that need to be borne periodically by the tenant – mostly
monthly eg monthly rental payment, utility bills, parking fee, maintenance fee
 Notice of termination
• Notice of termination - given to the tenant to vacate within the period stated in
the tenancy agreement before its expiration. The landlord has the right to
vacate possession of the premises from the tenant without payment of any
compensation

• Malaysian legal system is pro-tenant. Because the landlord is prohibited from

evicting the tenant or to recover possession without court order

• Current practice – lodge police report, break the lock in the presence of police
officer ( to avoid further complication) – take photos precaution – tenant would
not later claim loss of properties
 OBLIGATIONS OF LANDLORD AND TENANT
1.Condition and responsibility for commercial and residential tenancy agreement;
which normally incriminate the following:
a. Tenant
➢ To pay rent on the day as mentioned
➢ To pay deposit for security and utilities
or facilities
➢ Have a responsibility to maintain the
lease building
➢ Did not do any activities that illegal by
law
➢ The tenant need to give permission to
landlord to enter the building after the
landlord sending notice for any reason
such as to repair the building and to
inspect the condition of building
➢ Did not do any renovation which involve
the building structure before getting the
permission from the owner
b. Landlord
➢ To pay all current rates, taxes
and assessment which have
been incurred to the building
➢ Repairing the building such
as the agreement stated
➢ To insure the building and
reinstate the same in the case
of damage by fire
➢ Every damage which accrued
by unexpected phenomenon
like earth quake, flood, is
responsible on the owner of
building
2. Condition and responsibility for vacant or agriculture land tenancy
agreement incriminate the following:
a.Tenant b. Landlord
▪ To pay the amount usually on yearly ▪ To pay tax incurred to the
basis as agreed (rental and deposit)
▪ Applied usage of the property with stated land
in the agreement ▪ Give permission to the
▪ Did not carry out any activities that illegal tenant to do activity and
by law to the land receive a rent which have
▪ Did not do the others activities which been started
exceed the power as a tenant before the
owner agreed for example construct a ▪ Did not disturb any tenant
building on that land or carry out any activities which enforce
materials from that land after that will
exceed the term of agreement by law
▪ Will back down the land after the end of ▪ The owner belong to
term make a formal complaint
▪ Overhaul the land condition caused by about tenant if the tenant
the ongoing activities
▪ To pay all penalties, which imposed by do any illegal activities
local authority causes by ongoing such as cultivate
activities cannabis and others
 ESCAPE CLAUSE

• An escape clause is any clause, term, or condition in a contract that allows a

party to that contract to avoid having to perform the contract

• Eg A "Subject to a joint's inspection to tenant's full satisfaction". This clause

effectively allows the tenant to "escape" from the contract if an inspection
reveals any irregularities or defects.

• "Subject to 3-days due diligence" clause, which effectively gives the tenant a
3-days buffer period to inspect any and all aspects of the property before
having to commit to the tenancy.

• Escape clauses, although fulfilling a real and sincere purpose in contracts of

all kinds, have the potential of being abused; as the tenant, in other words,
takes advantage of the escape clause to cancel the agreement.
 TURNOVER RENT & RENT REVIEW
Turnover rent – also called as percentage lease – shopping/mall
a rent is a specified proportion of sales or income generated through tenant use of a
property
 A floor or minimum rent may be included to assure the owner of some basic
income from the property.
 rent review is on the percentage of rent.

• Monthly Rental (based on turnover)

• The monthly rental is usually calculated based on the following formula (or a variation of
it), or a percentage of the tenant’s gross turnover (e.g. 15%), whichever is higher:
• Base rent + service charges + promotion charges + % (e.g. 1%) of gross sales
• By comparison, the monthly rental for residential or office unit would usually be a fixed
sum and not subject to the tenant’s gross turnover. As such, depending on the tenant’s
turnover, the rental amount could fluctuate from month to month, and become more of
a variable cost rather than a fixed overhead. The formulae and definitions determining
the monthly rent can get complex and requires close inspection.
 Eviction proceeding
Eviction
two (2) types of evictions are:
i. Actual eviction
a. non-payment of rent
b. illegal use of the property
c. fail to comply other obligations in the agreement
ii. Constructive eviction
 Notice must be given to either party about the default
 Eviction proceeding

If someone is evicted from the place they stayed, they are forced to leave it, usually because
they have broken a law or contract

Eviction means – the action of expelling someone from property/the forced eviction of residents
–sinonim – throwing out, ejection

 If tenants not paying rental – action you might do before legal action
1. make formal demand in writing for the arrears of rent and give them reasonable period to
settle ?
2. Or lock n enter your property and throw out their belongings and change the lock? You will
be sued of trespassing by the tenant!!!!
3. Or getting a court order? But it is too long and costly and need to engage a lawyer or cut
the water supply?

4. Or Go for a distress action (Distress Act 1951) – landlord seize the tenants good and sell
them to recover arrears owed to landlord. But must apply to judge for the issuance of a warrant
for distress for recovery of rent.
 Eviction proceeding (summary)

Causes Arbitration Court

Notice of a. Breaching items
termination b.Cost of remedy
a.Breach of
contract Estimated cost
b. Hold over
tenant with Court cost
/without
permission
Agree
Settle out of
court
 Determination of income and
outgoings

• Income from property is called RENT

• Rent is a requirement of leases – it is an
annual or periodic payment for the use of
property from tenant to landlord – it said to
be agreed sum paid at fixed intervals by a
tenant to the landlord
 TYPES OF RENT

Most common rental payment agreement can be classified as follows:

a. Percentage lease
 An agreement whereby rent is a specified proportion of sales or income
generated through tenant use of a property
 A floor or minimum rent may be included to assure the owner of some basic
income from the property.
 Also known as ‘turnover rent’, rent review is on the percentage of rent.
b. Index lease
Provides either rental adjustment (review) in direct proportion to increase in
taxes and others where it provides the rental increments in proportion to
changes in cost-of-living or wholesale price index
c. Net lease
 Agreement requiring the tenant to pay all maintenance costs, insurance and
other outgoings
 Lease generally run for more than 10 years
d. Gross lease
 also called as fixed-rental or straight , lessor to pay all charges and outgoings
e. Graduated lease
 Calls for the periodic rental increases,for early business and enterpreneurship.
 Helps lowering operating expenses; at new area and review on the market rental .
f. Reappraisal lease
Rental amount to be re-established (review) at agreed interval usually 3 to 5 years
whether to increase or maintain the same amount.
g. Ground lease
Payment of rent for using the site .usually for a long period and paid on yearly
basis. Review on agreed basis between parties.
h. Sale and leaseback
Payment on rent as an income from the sale of the properties then lease back
from the new owner through lease agreement. Review of rental as to the current
rental rate.
 Maximum rent
• Maximum rent for which a property could be
let in the open market on a given set of letting
terms is called Full Rental value

• Letting terms such as – FRI, IR,

 Outgoings
• Are periodic cost incidental to the ownership of property. They are costs
and expenses incurred by the owner or occupier of the property in
connection with its ownership, occupation, use, management and
maintenance – to keep properties in a state to command market rent Eg
of outgoings:
• Repairs – depend on the age of the property
• Insurance
• Management
• Taxes
• Maintenance
• Service charges
• Sinking fund
 Occupancy ratio, solving vacancy
problems and tenant selection
• Occupancy rate is the ratio of rented or used space to the total amount of
available space or the ratio of rental units rented versus the total number in the
building, city, state, etc.

• Analysts use occupancy rates when discussing senior housing,

hospitals, bed-and-breakfasts, hotels, and rental units, among
other categories
• The formula for occupancy rate is:

Occupancy Rate = Units Rented Out / Total Units

For example, let's assume that Company XYZ owns an apartment building that
has 300 units. Of those units, 275 are rented out. Using this information and the
formula above, we can calculate that Company XYZ's occupancy rate is:

Occupancy Rate = 275/300 = 91.67%

Why Does an Occupancy Rate Matter?

• From a real estate investor's standpoint, occupancy rates are predictors of cash
flow, and they provide a method by which the financial attractiveness and
performance of various parcels of real estate can be compared. Clearly, investors
like to see high occupancy rates. Low occupancy rates can indicate that a piece
of real estate has a problem.

•
 Solving vacancy

• Target the right market. ...

• Customize packages and promotions. ...
• Count on events or cultural festivals. ...
• Discounts, loyalty programs
• Create a buzz around your locality, not just your
property.
 Tenant selection
• What are Tenant Selection Criteria?
• One of the most important decisions you will
make as a property owner is whom do you
rent to? Whom do you trust with the home
you own? What can you do to protect yourself
and your property and get a reasonable return
from this investment?
 How to select your tenant
• Tenant Prospects
• Meeting with and touring prospective tenants is a time-consuming and difficult
task. You will need to show your home several times, probably at the prospective
tenants’ convenience, before you find tenants who are seriously interested in the
home and who will complete an application.
• Application? Yes, you will need a completed application that provides the
prospect’s basic personal information. You will use this information to start your
tenant selection
• Monthly Income
• First, establish that the prospective tenant has the means and intent to
pay the home’s monthly rent. Verify the prospect’s employment and that
the income amount they specified in the rental application sufficiently
covers the property’s rental amount plus the usual utilities and monthly
public services. When calculating net income, consider the prospect’s
outstanding debts, child support, garnished wages, car loans, and credit
cards. This can become complicated and a time consuming task.
• Tenant History
• Contact each of the previous landlords listed in the applicant’s history to verify
that the prospect paid rent on time and properly maintained the home.
• As a responsible landlord, you may wish to perform a criminal history investigation
to protect your property.
• Not properly screening tenants can lead to significant issues. For example, a tenant
with a criminal history of drug use could possibly sell or manufacture illegal drugs
in the property and make the home toxic. Do your due diligence to protect
yourself, your family, and your neighbors.
• Doing background research can be a time-consuming and arduous process, but it is
necessary to find a quality tenant for your home.
End of Lecture