SUB SALE

INTRODUCTION
➔ A SUB-SALE of a property (“Property”) occurs when a Purchaser
purchases a Property from a Vendor who is the proprietor having full
ownership of the land.
➔ This can be done through regulated contract under HDA and private
contract.
Transfer By Way of Sub Sale
➔ Parties
◆ Between Vendor(having full ownership of the land)
and Purchaser
CLAUSES IN SPA
What is Sales and Purchase Agreement

The Sale and Purchase Agreement (SPA) is a legally binding contract outlining the
agreed conditions of the buyer and seller of a property (e.g., a corporation, land
transaction).

It is the main legal document in any sale process. In essence, it sets out the agreed
elements of the deal, includes a number of important protections to all the parties
involved and provides the legal framework to complete the sale of a property. The SPA
is therefore of critical importance to both Purchaser and Vendor.
Sales and Purchase Agreement

1. The SPA is a legally binding contract which outlines the details of a sale
between a buyer and a seller.
2. It is important that these conditions are mutually agreed upon between both
parties, hence the term “agreement.”
3. The SPA protects the buyer by ensuring the seller cannot change the terms and
conditions to their benefit.
4. The buyer here can refer to anyone purchasing the property, whereas the seller can
be the previous owner in the case of a sub-sale property, or the developer if you’re
buying it brand new.
5. Do note that upon signing your SPA, you’re essentially closing the deal. No
further negotiations can take place and both parties need to respect the terms
Example of SPA
What are the main clauses in Sales and Purchase Agreement (SPA)

● Date of Agreement
● Recital ( details of party, property, any encumbrances)
● Terms and Conditions
● Signing and Attestation
Clauses that we will discuss on

● Date of Agreement
● Recitals-
○ Detail of Parties
○ Property
○ Any encumbrances
○ The Purchase Price Agreed
● Terms and Condition
○ Vacant Possession
○ Mode of Payment @ Default in Payment
○ Non-Registration of Transfer
○ Passing of risk and insurance
○ Force Majeure
● Signing and Attestation
 1. Date of Agreement
As time is the essence of a contract of sale, dates are important.

Your SPA should be dated the day you paid the first 10% of the purchase price.
 2. Recitals

DETAILS OF PARTIES
Example:

‘The Vendor is the Registered Proprietor and beneficial owner of the property’

‘The purchaser,____________ has agreed to buy the property from the Vendor’

This clause will clearly state the parties involved in the SPA as to provide certainty
and to avoid any confusion.
Property

This clause will mentioned and describe the property involved in the transaction as to
include its address and description.

We do not want to be receiving the wrong unit right?

Moreover, it is not uncommon for developer to trick Purchaser by cutting corners and
take advantage to cut corners and take advantage of unknowing buyers by giving false
description of the property.

Chang Yuen Yin v Chia Seng Yook- description of property must be clear and correct.
Vendor’s representation of property must be accurate as misdescription affects the
substance and root of contract.

Misrepresentation of property to besold gives right to Purchaser to terminate the

contract and get refund of money paid.

Tan Tien Seng v Grobina Resorts

Property for sale described on the highest floor but in the SPA stated otherwise.
Encumbrances

A Property sold by the Vendor may be encumbered, i.e. the Vendor may have charged
the Property to a bank to secure a loan granted by the bank to the Vendor.

Where no individual title or strata title has been issued for the Property, the security
taken by the bank is an assignment of the rights, title and interest of the Vendor in the
Property and the Vendor's agreement with the Developer
Encumbrances

This clearly state any existing encumbrances on the land or that the land is free from
any encumbrances. This is important as the Vendor has a duty to transfer land which is
free from all encumbrances as in Lee Chin Cheng Dengkil Oil Palm

Example:

‘The Vendor has agreed to sell and the Purchaser has agreed to purchase the
property on an “as is where is” basis, free from all encumbrances’
The Purchase Price

This is one of the most important clause that must be stated in SPA as it is the
consideration for the the transfer of the Property. The Purchase Price must be
mutually agreed by both parties and it must be clear and without any uncertainty.
 3. TERMS AND CONDITIONS

VACANT POSSESSION
Receiving a Delivery of Vacant Possession from your developer is an exciting part of
your property journey.

With all the hassle of endless financial documents, the joy and heartbreak of house
hunting, as well as the potential wait for a property to be completed, you’re finally ready
to take ownership of your home.
Vacant Possession

Vacant possession is a term to describe the usual basis on which a vendor must deliver
a property to a buyer on completion of the sub-sale
Failure to deliver vacant possession has implications for a vendor. To avoid potential
breaches of contract or Sales and Purchase Agreement, Vendor and Purchaser should be
fully aware of the terms of any contractual commitment to deliver vacant possession.
Mode of Payment/ Default in Payment
The most important factor in the SPA will be the manner of payment, for both the
vendor and the purchaser. Penalty will be incurred if the Purchaser unintentionally
neglects the manner of payment of purchase price. Besides having to avoid the penalty,
the purchaser will need to plan their cash flow ahead.

The manner of payment in a sub-sale agreement will be less complicated as the

transaction period is shorter and the property is usually ready to deliver. The norm will
be the first 2-3% booking fee upon signing the Letter of Offer, the remaining of the
10% deposit upon the signing of the SPA, then the remaining purchase price of 90% to
be settled within 3 months after signing the SPA.
Non- Registration of Transfer

This clause relates to situation where the transfer of the property cannot be registered
or perfected for any reason not due to the conduct of both party.

For Example, The State Authority does not consent the transaction.

This clause normally entitled either party to terminate the Sales and Purchase
Agreement.
Passing of Risk and Insurance

This clause concern on the passing of risk of loss or damage in the Property shall pass
to the Purchaser.

Transfer of risk clause, considered the underlying tenet of transactions. It is a risk

management technique where risk shifts from one party to another. Risks may transfer
between the Vendor and Purchaser.
Force Majeure

All standard contract used in Malaysia contain a force majeure clause and it is very
important that those entering into Property Agreement fully understand the reasons for
its inclusion and how it should be administered.

The reason for inclusion of a force majeure clause in a contract is to clearly define the
party’s obligations and liabilities in the event of force majeure occurring (as defined in
the contract) and to prevent the contract being frustrated in the event that there is no
mechanism to extend the time for completion.
Example of Force Majeure:
Natural Disaster such as hurricane, flooding, lightning strike and Acts of God
 4. Signing and Attestation

The last part of the SPA whereby parties will sign the agreement and attested by the
respective solicitors.
PRE-CONTRACTUAL MATTERS
- Before executing the contract between the Vendor and Purchaser, two stages will be
followed namely as the Preliminary Stage and Formation of Contract.
- But, before doing so, the Vendor might choose way to deal with the Purchaser of the said
property;
Deal through agent – appoint an estate agent to assist with the advertisement and finding
potential buyers.
Direct Dealing – personally advertise and negotiate with the Purchaser
- Then, the Vendor would appoint solicitor to complete the sale of his property to Purchaser

PRELIMINARY STAGE:
1. VS would interviewing the client (Vendor) - to obtain the details of Vendor, V’s property and T&C
of the contract.
a. Status of the Vendor in regards to the ownership of the property/land.
b. The material details of the land -
i. Whether the land is subjected to RII or not.
ii. Whether the land is subjected to charges or not
c. The terms & conditions of the sale agreement.
The purchaser then would also appoint his solicitor in order for him to obtain indefeasible title over
the land.
2. The PS then would interviewing the client (Purchaser) - to obtain details of the Purchaser,
property, T&C of the contract and conducting land search etc.
a. Details of - Purchaser, property/land & terms and conditions of the agreement.
b. Way of purchasing - whether Purchaser is cash buyer or obtaining loan to finance
the said purchase.
c. Conduct land search - to ascertain:
- the status of the land and its ownership
- whether the land is the subjected to any encumbrances or caveat or
prohibitory order.
It is important for the PS to conduct a land search (private/official) accurately as failure
to do so might cause the solicitor to be liable for any loss especially those who conduct a
private search.
Tirai Kristal Sdn Bhd v Pengarah Tanah Galian Wilayah Persekutuan
d. Enquiries - any arrears in payment of annual assessment and other utilities.
 FORMATION OF CONTRACT
- Once all prerequisite inquiries has been carried out, the next step is to prepare the documentation for the sale of
the property.
- It is a norm that the Purchaser Solicitor will prepare the relevant documents so that the Purchaser will obtain
indefeasible title over the said land without any difficulties.
- On the other hand, the Vendor Solicitor will vet the documents and witnessing the execution of such
documents by the vendor.
- Basically, the solicitors duties are:
No. Purchaser’s Solicitor Vendor’s Solicitor

1 Sale and Purchase Agreement Vetting the SPA

2 Form 14A Witnessing the execution of docs by vendor

3 Preparation & Submission of Form CKHT2A Application for consent to Transfer (if applicable)

4 Preparation & Submission of Form 502 Preparation and submission of Form CKHT1A / 3

5 Entry of Private Caveat (Form 19B)

6 Withdrawal of Private Caveat (Form 19G)

7 Witnessing execution of docs by Purchaser

EXECUTION OF CONTRACT
WITH TITLE
EXECUTION OF CONTRACT - WITH TITLE

- After all terms and conditions have been agreed, Purchaser will execute or sign:
- SPA
- Form 14A
- Form 19B & 19G
- CKHT2A
- Consent Form (if applicable)
- Purchaser has to pay deposit and PS’s bill then the PS will attest the Signature of Purchaser on SPA Form 14A
and forwards the same together with the consent form (if applicable) to VS.
- VS will ask Vendor to execute:
- SPA
- Form 14A
- CKHT 1A
- Consent Form (if applicable)
- Vendor has to pay VS bill.
- VS has to ensure that the Vendor will bring along copies of:
- Current and duly paid assessment receipt & quit rent receipt
- VS is needed to attest the signature of Vendor on SPA and Form 14A and return it to PS.
- PS will stamp the SPA and adjudicate Form 14A
- Then, PS will forward those duly stamped SPA to Purchaser and VS.
● Deposit : Part payment of the purchase price paid by the
purchaser upon signing of the SPA
○ Sun Properties Sdn Bhd : It is an advanced payment by the
purchaser in favour of the vendor
● Reasonable amount of a deposit: 10%-20% of the purchase price
○ Linggi Plantations v Jegatheesan : Practice of paying more
than 10% for deposit is considered as valid and enforceable
● Forfeiture of deposit:
○ Applies if expressly provided in SPA
○ Once forfeiture clause is incorporated, vendor need not prove
actual loss
■ Morello Sdn Bhd v Jacques : Vendor is not required to prove
that he had suffered damage before forfeiting the deposit
■ Kulim Rubber Plantation : The obligation to pay the
purchase price is a fundamental obligation which goes to the
root of the contract, thus failure to do so will terminate and
forfeit the deposit
EXECUTION OF CONTRACT
WITHOUT TITLE
EXECUTION OF CONTRACT - Without Title

DOCUMENTS FOR EXECUTION

1. Five copies of the Sale and Purchase Agreement

2. Four copies of the Deed of Assignment
a. A document assigning rights and interests under the principal Sale and Purchase
Agreement and there is no necessity to spell out terms and conditions already stated in
the SPA
3. One copy of CKHT2A
4. The purchaser’s section of the form for application for consent of transfer
 Vendor Solicitor
● Provide details of vendor
● Apply redemption
statement
● Prepare R&R
Purchaser’s Solicitor Purchaser Bank Solicitor
● Prepare SPA & DOA by ● Prepare security document
way of transfer ● Pay redemption sum
● Conduct land of search ● Obtained letter of
undertaking from
Developer, Vendor,
Purchaser Solicitor, and
Bridging Financier(if
applicable)
● Land & Bankruptcy search
● Upon receipt of R&R, sent
for stamping DOA by way
of transfer, security
document
● Forward the PA to HC
● Advise release of BPP to
vendor
WHAT HAPPENED IF VENDOR DIED AFTER HE HAS EXECUTED BUT BEFORE
REGISTRATION OF THE FORM 14A?

According to section 292(4) of the National Land Code 1965:

- The death of any person who has executed an instrument of
dealing will not affect the validity of the instrument.
- The instrument may be presented for registration as if the death
had not occured.
- It shall be noted that this is only applicable when the date of
the said instrument must be before the date of the person’s
death
POST SPA
 ADJUDICATION

● If the property is subjected to restriction in interest, F.14A will only be

adjudicated after PS has received a copy of the letter of consent to
transfer which was issued by SA from VS.
● In practice, V is given 3 months to obtain the consent to transfer from SA.
● Upon receipt of the consent letter, VS will have to forward a copy of it to
PS so that the time frame given to pay the BPP will start running.
● Purchaser’s solicitor must ensure that the SPA and form 14A are
completed and duly executed and that the deposit had been paid.
 LODGEMENT OF A PRIVATE CAVEAT

● Private caveat: To protect the purchaser’s interest over the land before the
transfer is registered, the Purchaser’s solicitor should lodge a private caveat on
behalf of the purchaser.
○ In order to do so, the purchaser must show that he has caveatable interest
over the land as required under Section 323 (1)(a)
○ Ong Chat Phang : A purchaser has caveatable interest once he has signed
SPA and made payment of deposit
● Lodgement of PC requires payment of registration of fees and to
be borne by P. No stamp duty will be imposed as PC is not a
dealing but restraint of dealing.

● Once registration fees is paid and Form 19B is accepted,

Registrar will endorse the RDT under the hand seal of the
Registrar.

● Registrar will serve Form 19A to proprietor notifying of the

lodgement of PC.
 PROCEDURE TO LODGE A PRIVATE CAVEAT

1) Section 323(2): An application in Form 19B must be made and

attested in accordance with Sec. 211 and 5th Schedule of NLC
2) Section 323(3): The application must state the nature of his claim
verified by a Statutory Declaration and accompanied by a
prescribed fee
3) Form 19B and the Statutory Declaration must be registered at the
Land Office
4) Sec. 328: It will last for a period of 6 years
● Statutory Declaration shall be prepared in accordance with
Statutory Declaration Act 1960 & the contents will include:-

1. Details of the applicant

2. Date of SPA
3. Particulars of property
4. Amount of deposit paid
5. Specify clearly that applicant had caveatable interest

● Section 2 of Statutory Declaration Act SD need to be affirmed

before a commissioner for oaths.
 FILING OF CKHT FORMS

● Both CKHT 1A & CKHT 2A must be filed within 60 days from the date of SPA.
● CKHT 1A will include the details of expenses incurred during the acquisition and
disposal of the property by V.
● If property is sold within 5 years from the date it was acquired, it will be subjected
to RGPT.
● If dispose after 5th year, based on Budget 2019, RPGT is payable but at a lesser
rate.
 CKHT 2A & PAYMENT OF RETENTION
SUM

● CKHT 2A will notify LHDN of the date and price of acquisition of the property.
● PS will also submit CKHT 502 together with the retention sum amounting to 3%
of the PP collected from V in pursuant to Section 21B of RPGT Act 1976.
● Payment of the retention sum need to be made within 60 days from the date of
SPA, failing which penalty will be imposed.
 REGISTRATION OF FORM 14A AND
PAYMENT OF BPP
Documents required
● Balance purchase price may be paid by cash for registration
purpose:
or through bank loan.

● If P is paying by cash, registration of Form 14A can ● Form 14A

● Original IDT
only be done after the BPP has been deposited with VS. ● Letter of consent
(if applicable)
● Hence, PS will request for BPP from P and ● Quit rent receipt
● P’s IC
forward it to VS in exchange of the original IDT. ● V’s IC
After the documents PS will confirm with VS
have been presented that presentation has
for registration, PS will been made and VS will release the
obtain a presentation enclose copy of BPP to V.
statement from the presentation statement
land office. of proof.

VS will apportion the

When V receive the
payment of the quit
BPP. V will hand over
rent, assessment and
the keys to VS and VS
sewerage charges as
will forward the keys to
at the date of delivery
P.
of vacant possession.

Once IDT is duly

endorsed, PS to collect
the IDT from the land
Close file
office/registry and ask
P to collect the same
from PS’s office
 REGISTRATION OF MEMORANDUM OF
TRANSFER

PAYMENT BY CASH AND PROPERTY FREE FROM

ENCUMBRANCES
● Full payment must be received
● Upon received, Purchaser Solicitor may send MOT for adjudication together with PDS 15,
copy of SPA and title deed.
● After payment of stamp duty, must be present for registration.
PAYMENT BY LOAN AND PROPERTY FREE FROM
ENCUMBRANCES
PAYMENT BY LOAN AND PROPERTY SUBJECTED TO EXISTING
CHARGE
TWO TYPES OF LOAN

1. Conventional loan
2. Commodities Muharabah

1. PS must prepare form 14A 3. PB, upon receipt of RS, pay

and CKHT2A redemption amount to VB and
lodge private caveat

2. PBS prepare 16A, loan

agreement and annexure 4. VB, upon receipt of redemption
amount, instruct VBS to prepare
16N (stamped)
 5. PS will send duly stamped
form 14A to PBS
6. VBS will send duly stamped,
16N, original IDR, Quit Rent
receipt and fees to PBS.

7. PB, upon receipt of documents, will

send Form 19G, 16N, 14A and 16A for
registration
 STAMP DUTY ON SECURITY DOCUMENTS

Example:

A bought land from B for RM150,000, paid RM15,000 for deposit and obtained a loan to pay for the balance of purchase
price RM135,000 under conventional loan.

a) Four copies of Form 16A b) 4 copies of

loan agreement

(16A as the principle document) = RM10 per

copy x 4

Loan : RM135,000 x 5/1000

= RM40

= RM 675

Another 3 copies of 16A = RM10 per copy

= RM30 + RM675
STAMP DUTY
Schedule 1, Item 32 of Stamp Act 1949
(Act 378)

First 100,000.00 1%

More than 100,000.00 to 500,000.00 2%

500,000 to 1,000,000 3%

More than 1,000,000 to infinity 4%

Example;
Property = RM 1,500 000.00

1% X 100000 = RM 1000

2% X 400000= RM 8000

3% X 500000= RM 15,000

4% X 500000= RM 20,000

Amount = RM 1000 + RM 8000 + RM 15 000 + RM 20 000

The new Stamp Duty Malaysia 2019 exemption for the first time house buyer will be
the same as the previous year ( Stamp Duty 2018 ) where for first time home buyers
that purchasing residential properties priced up to RM 500,000.00 stamp duty
exempted up to RM 300,000.00 on sale and purchase agreements as well as loan
agreements for a period of 2 years until December 2020. The date is from 1st January
to 31st December.

Amendment under Finance Act 2018, payment for stamp duty on Form 14A has been
revised as follows:
First RM 300,000- full exemption is given

CALCULATION:

Exemption : 1% x 100 000 = RM 1000

2% X 200 000 = RM 4000

= RM 5000
The property is RM 500K

1% X 100 000 = RM 1000

2% x 400 000 = RM 8000

Total is RM 9000

Hence, the amount of stamp duty after rebate is RM 9 000 - RM 5 000

= RM 4 000
In order to get the rebate, a statutory declaration must be attached when submitting for
adjudication of Form 14A
EXEMPTIONS
DATE OF INDIVIDUAL AND INDIVIDUAL AND COMPANY
DISPOSAL PERMANENT NON-CITIZEN
RESIDENT

Disposal within 2 30 30 30
years of acquisition

Disposal within 3rd 30 30 30

years of acquisition

Disposal within 4th 20 30 30

years of acquisition

Disposal within 5th 15 30 30

years of acquisition

Disposal within 6th NIL 5 5

years of acquisition
1st Exemption

Section 8 of RPGT Act 1976:

Subject to Schedule 3, a gain shall be exempt from the tax if it accrues to an individual
who is a citizen or an individual who is not a citizen but is a permanent resident in
respect of the disposal by him of his private residence.
Schedule 3 of RPGT Act 1976

(1) Subject to this paragraph, an individual is entitled to the exemption under section 8 in respect of
the disposal of one private residence only: Provided that (a) he elects that such exemption shall apply
to that private residence;

(b) on such election being made, there shall be no further exemption in respect of the disposal of any
of his other private residences; and

(c) the election so made shall be in writing addressed to the Director General and shall be irrevocable.

(2) No election under subparagraph (1) shall be made where an exemption has been granted to an
individual under any repealed provisions of this Act or the repealed Land Speculation Tax Act 1974
[Act 126] in respect of the disposal of his private residence
2nd exemption

Section 9 read with schedule 4 of RPGT Act 1976:

Transfer as a gift of Individual is given a

husband and wife, parent rebate/exemption
and child, grandparent and equivalent to rm 10,000.00 or
grandchild but excluding 10% of gross chargeable
transfer between sibilings gain, whichever is greater.
3rd exemption

RPGT(Exemption)(No 2) Order 2009 [ P.U (A) 496 ]

An individual and a Malaysia citizen disposes his property after 5

years from the date of acquisition of all chargeable assets.
FORMULA FOR CALCULATION OF RPGT

● GROSS CHARGEABLE GAINS= (DISPOSABLE PRICE - INCIDENTAL

COSTS) - (ACQUISITION PRICE + INCIDENTAL COSTS)- C
● NETT CHARGEABLE GAINS= GROSS CHARGEABLE GAINS - [10% OF
GCG OR RM 10,000.00 WHICHEVER IS GREAT.
● RPGT NETT CHARGEABLE GAINS X RATE OF TAX (THE YEAR OF
DISPOSAL)
Example:
Aina purchased a single storey link on 1 December 2011 for a sum of rm 500,000.00 from
Hazel after she responded to her advertisement in The Star. She has to pay RM 15,400.00
for the legal fees and stamp duty on transfer. She also paid RM 500 for the advertisement to
find seller in The Star. Aina purchased living room set for a sum of RM 135,000.00 and
built kitchen cabinet for RM 22,000.00. She paid premium insurance for 2014 amounting
RM 8,000.00. On 1 January 2014 she etered into a sale and purchase agreement for the sale
of the said link house to Meera for a sum of RM 1,900,000.00. She paid RM 900 for the
advertisement to sell her house in the News Straits Times.

Calculate the real property gain tax payable by Aina.

GCG = [DP - IC] - [ (AP + IC) ] - Compensation paid from insurance]

DP - IC
DP = RM 1, 900 000
Less
Incidental Cost for DP :
A. Living room Set
RM 135K
B. Kitchen Cabinet
RM 22K
C. Insurance Premium RM 8K
D. Advertisement
RM 900

Total IC for DP = RM 165,900

DP - IC = RM 1 900 000 - RM 165 900
= RM 1 734 100
AP + IC
Incidental Cost for AP :
1. Stamp Duty & Legal Fees for purchased property RM 15 900
2. Advertisement to find seller
RM 500

Total IC for AP = RM 15 900.00

AP + IC = RM 500 000 + RM 15 900

= RM 515, 900

CGC = [DP-IC] - [AP+ IC]

= [RM 1 900 000 - RM 165 900] - [RM500000 + RM 15 900]
=
=RM 1 218 200

NGC = CGC - [10 % OF CGC OR RM 10 000 whichever is greater]

= RM 1 218 200 - RM 121 820
= RM 1 096 380
RPGT = NGC X Rate of Tax
= RM 1 096 380 X 30%
= RM 328 914.00