Guidelines
Legal Issues
The following article is intended to give a general overview of some common
legal issues regarding the purchase of property.
We strongly recommend you obtain the services of a good lawyer when you buy property.
Property comes under the control of the various State Governments,
so rules can vary depending on which part of Malaysia you buy in.
Although the Federal Government passes national regulations,
the States have the option of implementing these or not when it comes to property matters.
One example is the rule regarding the minimum price at which foreigners can buy as this article explains.
Title
There are two categories of title in Malaysia available for non-Malaysians. Freehold (which gives the owner full,
permanent ownership of the property) and leasehold
(which allows the owner to stay in possession for a limited period).
Most leaseholds titles are originally for 99 years and can be extended on paying a further sum.
A house receives a "title" once completed and an apartment or condominium is given a "strata title".
In the case of new apartment buildings, the strata title may not be issued for some time after the building is completed.
What Property Can Foreigners Buy?
Foreigners are allowed to buy as many housing units as they wish provided they meet certain conditions:
Effective January 2010, the federal Government announced that foreigners could only buy residential property valued above Rm500,000. However, although most States adopted this new regulation, a few did not. It is often hard to find out what the current rules are in any of the States because they rarely appear in any written documents available to the public or their websites.
At the time of writing this, we found that in Sarawak the limit is RM350,000, while in Selangor, KL, Melaka and Pahang it is RM5o0,000. Sometimes, Malaysia My Second Home (MM2H) visa holders enjoy a lower limit: in Penang it is RM250,000 for MM2Hers while for foreigners it is RM500,000, and in Perak MM2Hers have a minimum price of RM350,000 while foreigners have RM500,000.
Foreign interests are not allowed to buy land or properties located on land which has been designated "Malay Reserve Land". In order to acquire ownership of Malay reserve land, it would be necessary for that land to be re-titled. This would require buying land elsewhere in the State which is not Malay Reserve and getting approval to exchange it with the land you want to convert to buy. This can be quite a complex procedure and some foreigners who have been assured this is "not a problem" have found themselves disappointed. Try not to part with any money until you are sure it is possible.
Foreign interests cannot buy land which is deemed agricultural land unless it is over 5 acres and is being used for commercial purposes. It should be noted that Malaysian law allows homes to be built on agricultural land designated "orchard land" providing not more than one building is constructed on each acre of land. These one acre lots can be rented by foreigners, but not purchased. In some cases, this land can reclassified but again be cautious and seek some evidence that it can be done.
Many new property developments have a Bumiputera (Malays and indigenous tribes) quota which means that the developer has to ensure that only Bumiputeras are allowed to buy a certain percentage of the properties. If, after a certain period of time,the developer cannot find the required number of Bumiputera buyers, they can request approval to have the unsold units made available to anyone.
Sale & Purchase agreement
The purchase agreement for a property is called the "Sale & Purchase Agreement" (SPA or S&P). These are fairly standard, but it is best to have a lawyer representing your interests before signing any agreements.
A memorandum of transfer also has to be signed to transfer the title from the seller to the purchaser. In the case of a new development where the developer does not yet have full title, the seller will state in the SPA that this will be given as soon as they have proper title.
Special Note for Malaysia My Second Home visa holders: If you are planning to move here under the Malaysia My Second Home programme, you will be eligible to make a lower Fixed Deposit if you have already (before applying for the MM2H visa)purchased a property in Malaysia over RM1 million and did not have any outstanding loan on it. If you make a purchase after getting the visa, then you can have your Fixed Deposit reduced after 12 months on showing evidence that you have bought and paid for a house in Malaysia. In this latter case, the value of the property is not a factor relevant and you can have a loan on the property as long as the cash amount you have paid exceeds the amount you wish to withdraw from your FD.
Approvals
For most housing properties, foreigners are no longer required to obtain Foreign Investment Committee (FIC) approval. Foreign purchasers are still required to obtain approval from the State Authorities who will consider factors such as the location of the property, the type of property and in new developments the percentage of total units sold owned by foreigners. State consent can often take six months and in some cases longer.
