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A Sales and Purchase Agreement or more commonly known as an SPA, is a legal contract that binds the buyer and seller to certain terms and conditions.
This contract is agreed upon by both parties when they decide to sell or buy the property and is signed in the presence of the lawyer.
The SPA is a crucial document that clearly states the details of the transactions and the core outlines of each parties’ rights and obligations.
This can come very handy if the buyer or the seller tries to stray away from their commitment anytime in the future.
However, SPAs do not come in a ‘one size fits all’ template. It differs depending on the type of assets. When it comes to properties, there are two types of SPAs:
- Schedule G – Landed Individual Title
This template is for those buying landed property.
- Schedule H – Strata Title
This template is for those buying strata properties such as an apartment or a condominium.
For more details on SPA templates, you can refer to the Housing Development (Control and Licensing) Regulations 1989 website.
Here’s what the SPA usually includes:
1. Transaction details
This part includes what the party is selling and the intention for the sale in a direct language so that both parties clearly understand it.
Say, if you are selling a property, you must clearly state what part of the property you are selling.
If you are still using any part of the property, that must be left out of the transaction as anything detailed in the contract will be owned by the buyer upon sale.
2. Terms of SPA
This is a key part of the contract where the terms of handing over the asset must be clearly stated.
If you are selling your property, you have to mention the manner of payment as follows:
- The price of the asset and when it should be paid in full.
- The deposit amount.
- Whether the payments should be conducted in instalment or full.
- The currency at which the payment will be received.
3. Defect liability period
This part is particularly relevant if you are buying a brand-new house from the developer. This is basically a warranty period.
During this time, if you discover any defects in the property, then the developers will be responsible to fix them.
4. House plan
If you are buying a house, it is crucial to go over each detail of the SPA with a fine-tooth comb, especially when it comes to the house plan.
If the developer is not fully honest, they may give you an impression of a unit which may be different than the one you would actually own.
So, this part states the accurate details of your unit, the measurement, facilities, design and the materials included in building the house.
Scrutinise each detail to ensure that you are getting what you are promised before you sign the agreement.
5. Vacant possession
This last bit mainly consists of when exactly you will receive the keys to the property and the terms and conditions if the handover is delayed or postponed.
Any other conditions that the buyer or seller would like to add to safeguard their responsibilities and obligations.
As a whole, the SPA can be your safeguard to fall back on if there are any breaches in the contract.
For instance, if a buyer does not hand over a property in time, they are obliged to pay the penalty stated in the SPA.
Therefore, it is your duty as a buyer or seller to see every loophole that can become a problem in the future and include it in the contract to make a concrete legal agreement.
This article was written by Fahri Ahmed of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.