Property hunting is back-breaking enough without the jargons and paperwork but learning about the quintessence of real estate is essential. How else will you seal the deal for your new abode? One of the most important documents you’ll encounter is the Sales and Purchase Agreement (SPA). Besides the piles on piles of legalities, the SPA plays an integral role in your home-buying journey.
If you’re a rookie in this whole department, allow us to ease you into it kindly!
What is a Sales and Purchase Agreement?
An SPA is a binding legal contract between the buyer and seller that obligates a transaction. It finalises the terms and conditions of the sale and protects both the developer’s and homebuyer’s interests. Without question, these details must be mutually agreed upon by both parties.
Before the ball gets rolling, the buyer and seller negotiate the conditions for the transaction, recording any completed deposits, when the final sale is, etc. However, if you receive a house through inheritance or auction, you can skip the SPA.
Once you’ve signed the SPA, you’re closing the deal. Both parties will have to honour the terms on paper as the negotiation is irreversible.
What goes into a SPA?
It’s worth noting that no Sales and Purchase Agreement is one-size-fits-all. We recommend appointing a lawyer to assist in the drafting process. Some key points to include in your document include:
- Purchase price
- Conditions and precedents
- Payment terms (Schedule, Manner of Payment, Interest on Late Payment, etc.)
- Loan details
- Default by Purchases and Determination of Agreement
- Defect Liability Period
- Document of Title and Transfer of Title
- Delivery of Vacant Possession and Manner of Delivery
Furthermore, your SPA should also contain the course of action for when either party fails to meet these requirements. For instance, if a buyer receives the keys to the property past the deadline.
Different types of SPAs
The Sales and Purchase Agreement for residential properties are split into two types: Individual and Strata titled properties. Check out the difference between these two land titles in this article!
You can find SPA templates for each under the Housing Development (Control and Licensing) Regulations 1989.
- Schedule G — Landed Individual Title
This is for landed individual properties such as semi-detached and terrace houses.
- Schedule H — Strata Title
This is for Strata properties such as condominiums, apartments and flats.
Because Strata titles involved shared facilities like swimming pools, parking and so on, you will need a more detailed SPA.
Can I cancel a SPA?
Yes, you can if it comes down to it. Unfortunately, there will be consequences—and a pricey one at that. One clause typically found in every standard SPA is the penalty of 10% of the purchase price for those who cancel.
It may seem minuscule, but it has a pretty hefty attachment! Let’s say your to-be-abandoned property is valued at RM500,000; that means RM50,000 goes into the seller’s wallet. It would be close to impossible for the seller to ditch the deal if it was the other way around.
Buying a house is no flimsy joke, so it’s best that you educate yourself on all the necessities!
Download Rumah-i’s new Digital Tenancy App for quick and secured property searches, domestic cleaning or moving, or list your space for free!
