MALAYSIAREAL ESTATE GUIDE

2019-2020

OUR MISSION

OUR VISIONTo carry out our Mission for 108 years, from the year HHQ was established in 2000 to 2108

REAL ESTATE & PROJECT DEVELOPMENT DEPARTMENT

WHAT WE DO:

• GeneralConveyancing• ProjectDevelopment• Conversion,AmalgamationandSubdivisionofLands• Leases&Tenancies• MalayReserveLands• RealEstateTax• StrataManagement• ForeignOwnershipandOccupation• LandAcquisition• UrbanandTownshipDevelopment

OUR TEAM

Partners Chong Lee Hui Leon Gan Han ChenLL.M LL.B (Hons) CLP LL.B (Hons)

Chuah Jun Wen Lim Yoke WahLL.B (Hons) LL.B (Hons)

Lim Jus Tine LL.B (Hons)

Senior AssociatesCandy Soh Yuen Yee Low Khye YenLL.B (Hons) LL.B (Hons)

Cherry Cheah Shie YeeLL.B (Hons)

AssociatesGoh Li Fei Jacqueline Woon Ooi KuanLL.B (Hons) LL.B (Hons)

Mandi Soh Hui Shee Yanne Teo Siew LuoLL.B (Hons) LL.B (Hons)

Ng Yee Suang Teoh JacklineLL.B (Hons) LL.B (Hons)

HALIM HONG & QUEKADVOCATES & SOLICITORS

Kuala Lumpur OfficeOfficeSuite19-21-1,Level21,WismaUOACentre,19,JalanPinang,50450KualaLumpur.T +603 2710 3818 F +603 2710 3820Ehhqkl@hhq.com.my

Penang OfficeC-11-2,BayAvenue,LorongBayanIndah3,11900BayanLepas,PulauPinang.T+6046406817/18F+6046406819Ehhqpenang@hhq.com.my

1CONTENTS

CONTENTS

01 Property Investment 202 Acquisition of property by “Foreign Interest” 403 Title to Property 604 Sale of Property 10 •Preliminaryagreement 10 •SaleContract 10 •DueDiligence 11 •Sellers’Warranties 12 •Liability 1205 CompletionArrangements 1406 PropertyStampDutyandTaxationIssues 1607 Financial Facility on Property 1808 PropertyLeases 21 •Negotiationandexecutionofleases 21 •Rentpayments 21 •Lengthoftermandsecurityofoccupation 22 •Disposal 22 •Repairandinsurance 23 •Landlord’sremediesandtermination 2409 Planninganddevelopmentcontrols 2710 Malaysia’sNewStrataandHousingLaws 3111 SummaryofTaxesonthesaleofrealestate 3412 Strata Management 36

* This Malaysia Real Estate Guide 2019/2020 is based on law stated as at 1 January 2019

2 PROPERTY INVESTMENT

1.1 How do investors typically invest in properties in Malaysia?

Thecommonstructuresforpropertyinvestmentinclude:a) Directownershipbyindividualorcompany.b) Specialpurposevehiclecompaniesorincorporatedjointventure.c) Contractualorunincorporatedjointventure.d) Holdingof sharesof companies (orapublic listed company) involved inproperty

development.

Theadvantagesofdirectownershiporsettingupaspecialpurposevehicleorenteringintoajointventureforpropertyinvestment:• Itiseasy,fastandinexpensivetosetupacompanyorbuyashelfcompany.• Directcontrolovertheproperty,whichprovidesflexibilitytoitsowner(s).• Ownerenjoyscapitalappreciation.• Hedgesagainstinflation.• Transparencyintaxorchargesimposedbyrelevantauthorities.

Thedisadvantagesinthesestructuresinclude:• Disposalofthepropertyorthesharesofthecompanycanattractrealpropertygains

tax.• Lackofexpertiseininvestingordevelopingtheproperty.• Noskillsorresourcesinmanagingandmaintainingtheproperty.

Theadvantageofholdingsharesofcompaniesinvolvedinpropertydevelopmentisstampdutyonsharepurchaseislow(0.3%ofthepurchasevalue).Thedisadvantageisthatamoreextensiveduediligenceenquiryisrequiredbeforepurchasingtheshares.

Thereare18PropertyInvestmentTrusts(REITs)inMalaysia,whichisnotacommonstructureforpropertyinvestment.

AdvantagesofREITsare:• ThecomputationoftaxfortheincomefromREITsisfairlystraightforward.• Theyareveryliquidastheyaretradedonthestockexchangeandsoareausefultool

fordevelopingadiversifiedinvestmentportfolio.

1 PROPERTYINVESTMENT

3PROPERTY INVESTMENT

ThemaindisadvantageofREITsisthattheyarehighlysensitivetointerestratechanges.With increases in interestrate, investorsaredrawnawayfromREITs tootherhighyieldassets.

1.2 How do investors finance their investment in property in Malaysia?

Forpropertydevelopers,companiesandinstitutionalinvestors,themainsourcesoffinanceareeitherbankborrowingorinternallygeneratedfunds.Withindividuals,thesourceoffinanceismainlyfrombankborrowings.

1.3 Are there any property investment legislation to encourage overseas investment?

There is no property investment legislation that encourages overseas investment in Malaysianproperties.However,thegovernmentwelcomesoverseasinvestorstoundertakeindustrial park development as the master developer via a government-to-governmentinitiativesuchasMalaysia-ChinaKuantanIndustrialPark.

Another government initiative that encourages overseas investment into our propertymarketistheMalaysiaMySecondHome(MM2H)ProgrammethatallowsforeignerstostayinMalaysiaonasocialvisitpasswithamultipleentryvisafortenyears(dependingonthevalidityoftheapplicants’passport),whichisrenewable.Therequirementtoplacemoniesinaninterest-bearingfixeddepositaccountwithalocalbankcanberemovedafterayearfromthepurchaseoftheproperty(withaminimumsumofmoniestobemaintainedinthefixeddepositaccount).

4 ACQUISITION OF PROPERTY BY “FOREIGN INTEREST”

2 ACQUISITION OF PROPERTY BY “FOREIGN INTEREST”

2.1 What are the restrictions on foreign ownership or occupation of property?

RestrictiononforeignownershiporoccupationofpropertyisgovernedbytheNationalLandCode1965(NLC)aswellasguidelinesissuedbytheEconomicPlanningUnitofthePrimeMinister’sDepartment(EPU)andstateauthorities.

Aforeignpurchasermustobtainpriorapprovalfromthestateauthoritywheneveralandissoldtoforeigninterest(section433B,NLC).Anysalethatcontravenesthissectionisinvalid.Aforeigninterestthatpurportedlyholdspowerofattorneytodealwiththepropertyisalsoinvalidandisnotcapableofbeingregistered.

Guidelines by EPU

Occasionally,theEPUissuesguidelinesinrelationtoacquisitionofpropertyby“foreigninterest”whomaybe:• AnindividualthatisnotaMalaysiancitizen.• AnindividualthatisapermanentresidentofMalaysia.• Foreigncompanyorinstitution.• Local company or local institution where non-citizen holds more than 50% of the

votingrights.

Theseguidelinesareadoptedbyeachstateauthoritybutwithvariations.Eachstategovernmenthassetaminimumpurchasepriceofpropertythatcanbeboughtbyaforeigninterest:

State Minimum Purchase Price

WilayahPersekutuan (KL,PutrajayaandLabuan)NegeriSembilanPahangPerakTerengganuKelantanSabah

•RM1,000,000

5ACQUISITION OF PROPERTY BY “FOREIGN INTEREST”

Pulau Pinang •RM2,000,000(landedpropertyontheisland);•RM1,000,000(landedpropertyonmainland);•RM1,000,000(stratapropertyexcludinglanded

strata);•RM500,000(forMM2Hholder;max2residential

property).

Selangor •RM2,000,000(propertyinZone1&Zone2);•RM1,000,000(propertyinZone3).

Malacca •RM1,000,000(landedproperty);•RM500,000(stratapropertyexcludinglanded

strata).

Johor •RM2,000,000(landedpropertywithininternationalzones);

•RM1,000,000(stratapropertyincludinglandedstrataandlandedpropertywithinnon-internationalzone);

•NominimumpricethresholdforMediniIskandarregionasitisdesignatedasaspecialeconomiczone.ForeignpropertypurchasesareexemptedfromrealpropertygaintaxuntilDecember2025;

•RM500,000forstratapropertywithinForestCity.

SarawakPerlis

•RM500,000

2.2 What are the restrictions on foreign guarantees or security for ownership or occupation and on lending for the purchase of property?

Thereisnorestrictiononforeignsecurityforownershiporoccupationandonlendingforthepurchaseofpropertyexceptthatapprovalfromthestateauthoritymustbeobtainedbeforethechargeispresentedandregisteredattherelevantlandoffice.

6 TITLE TO PROPERTY

3 TITLE TO PROPERTY

3.1 What is a “property”?

Property(realproperty)usuallyrefers to immovablepropertiessuchas land,buildingsandeverythingthatispartofthelandandaffixedtoit.Thereisgenerallynodistinctionbetweenlandandbuildings.

3.2 Do buildings on a land have separate titles or are they registered together in the same title?

Thetitledeed(alsoknownastheissuedocumentoftitle)describesparticularsandareasofaparcelof land,butnot thebuildingserectedon the land.Therefore, forall lotsorparcelsofland,thebuilt-upareaandthelandareaisdifferent.However,thereisnosuchdistinctionforaparcelofpropertyinasubdividedbuilding.

3.3 How is title to property evidenced?

LandlawadoptsTorrenstitle,whichisasystemoftitlesandinterestbyregistration.

Avalidregistrationiswhentheregistraroftherelevantlandofficemakesanactualentry“underhishandandseal”ofamemorialontheRegisterDocumentofTitle.TheregistraralsomakesacopyofthememorialofregistrationontheIssueDocumentofTitle,whichisreturnedtothepersonorbodycorporateentitledtoit.

7TITLE TO PROPERTY

3.4 Who is the authority responsible for managing registration of title?

TheLandandMinesOffices(PejabatTanah&Galian,PTG)ineachstatehastheauthoritytoregisterandmanagethelanddealingswithintheirrespectivestates.

Land & Mines Offices in Malaysia Websites

PTGWilayahPersekutuan www.ptgwp.gov.my/

PTGPerlis ptg.ptgps.gov.my/

PTGKedah www.ptgkedah.gov.my/

PTGPulauPinang http://ptg.penang.gov.my/

PTGKelantan www.ptg.kelantan.gov.my/

PTGTerengganu ptgweb.terengganu.gov.my/

PTGPahang http://ptg.pahang.gov.my/

PTGPerak http://ptg.perak.gov.my/

PTGSelangor http://ptg.selangor.gov.my/

PTGMalacca http://ptg.melaka.gov.my/

PTGJohore http://ptj.johor.gov.my/

PTGSabah www.jtu.sabah.gov.my/

PTGSarawak www.landsurvey.sarawak.gov.my/

3.5 Has electronic access and electronic conveyancing been introduced?

TheMalaysianTorrenssystemprovidesfortheComputerisedLandRegistrationSystemandtheElectronicLandAdministrationSysteminlandregistries,butelectronicconveyancingonpropertyinterestortitleonlineisstillnotinplace.

8 TITLE TO PROPERTY

3.6 What information and documents are required in the registration of a title?

For registration of title or interest in the property at a relevant land office, the maininformationanddocumentsrequiredarethe:i. Prescribed form under the National Land Code 1965 completed with details of

proprietor(lesseeorchargee),purchaser(lessororchargor)andtheproperty.ii. Originalissuedocumentoftitle.iii. Certifiedcopiesofthepurchaser’sandseller’sidentitycard(NRIC)orpassport.iv. Certifiedcopiesofthecurrentyearquitrentreceiptandassessmentreceipt;v. OriginalletterofapprovalforState’sconsenttotransfer(charge),ifthereisrestriction

ininterestendorsedonthetitle;vi. Original letter of approval for foreigner acquisition under Section 433B, National

LandCode1965(NLC).

Forabodycorporate,thefollowingdocumentsarerequired:• Certified copies of the company’s Memorandum & Articles of Association or

Constitution.• Companies Commission of Malaysia (CCM) company’s search report on the

company.• CertifiedcopiesoftheCompany’sresolution(disposaland/oracquisition).• ReturnofallotmentofsharesunderSection78ofCompaniesAct,2016orsuchother

documentshavingsameeffectundertheCompaniesAct,2016.• RegisterofdirectorsunderSections57and58ofCompaniesAct,2016orsuchother

documentshavingsameeffectundertheCompaniesAct,2016.

3.7 Are confidential information or documents made public?

Landlawusesthe“curtain”and“mirror”principlesmeaningthatthosedealingwiththeregisteredownerofthepropertydonothavetoascertainthevalidityoftheinformationrelatingto thepropertyas indicatedontheregisteredtitle. Informationsubmittedto thelandofficebecomesapublicdocumentandisopenforpublicsearchestothosewhoknowtheparticularsoftheproperty.

9TITLE TO PROPERTY

3.8 What happens when there are errors in relation to title registration?

Every memorial of registration is conclusive evidence of registration. Section 380 oftheNationalLandCode1965(NLC)providesfor therectificationoferrors in theissuedocumentoftitleforerrorsmadebytheregistrarofthelandoffice.Everyregistrarmustmaintainacorrectionnote-bookdetailingthecorrectionsthathavebeenmade.

Iftheregistrarrefusestoallowcorrectionstotheregisteredtitle,theaffectedpartiescanappealtocourt(sections417and418,NLC)torectifyanerrormade.

3.9 Is there such a thing as title insurance?

Currently,atitleinsurancesystemhasnotbeenimplementedandthereisnosuchprovisionundertheNLC.However,intheStateofSarawak,anyonewhohassufferedlossrelatingtoindefeasibilityoftitlecanbringanactionagainstthestategovernmentforrecoveryofdamagesandthestategovernmentcanthenrecoverthesumfromthoseresponsibleforthefraud[section197,SarawakLandCode(Cap81)].

3.10 How is property legally held in Malaysia?

Apersonholdspropertybyregisteringhistitleorinterestintheissuedocumentoftitletotheproperty.Generally,therearetwocategoriesoflandtenure:• Leasehold(landheldforatermnotexceeding99years).• Freehold(landheldinperpetuityforanindefiniteperiod).

Othertypesofintereststhatmayexistoverlandinclude:• Registeredlease.• Charge.• Easement.• Statutorylien.• Tenancyexemptedfromregistration.

10 SALE OF PROPERTY

4 SALE OF PROPERTY

PRELIMINARY AGREEMENTS

4.1 What are the types of documents which are typically signed prior to the sale of estate property?

A typeofpreliminaryagreement that is commonlyused isanoffer topurchase that isusuallypreparedbyapropertyagent.Anoffertopurchaseissignedbytheprospectivepurchaserandacceptedbytheseller.Theoffertopurchaseisabindingagreementonceithasbeenacceptedbytheseller.

Anoffertopurchasenormallysetsoutthebasicunderstandingbetweenthepartiesandsomesalienttermsofthesaleofthepropertysuchas:• Detailsoftheparties,propertyandthepurchaseprice.• Modeandmannerforpaymentofearnestdeposit(2%ofthepurchasepriceorsuch

othersumasagreedbetweentheparties),balancedeposit(8%ofthepurchasepriceorsuchothersumasagreedbytheparties)andbalanceofthepurchaseprice.

• Timeframetosigntheformalcontract.• Expressprovisionsforremediesintheeventoffailuretosigntheformalcontract.

SALE CONTRACT

4.2 What are the main provisions of a typical property sale contract?

Themainprovisionsofatypicalpropertysalecontractare:• Partiestothecontract.• Detaileddescriptionoftheproperty.• Condition precedent to fulfil to complete the transaction such as obtaining state

authorityapproval.• Purchasepriceoftheproperty.• Modeandmannerofthepaymentofpurchaseprice.• Completionperiodofthetransaction.

11SALE OF PROPERTY

• Warrantiesprovidedbyparties.• Remediesavailableforpartiesforbreachofcontract.• Mannerofdeliveryofvacantpossession.

4.3 What are the main provisions in a typical property share purchase agreement?

Themainpropertyprovisionsofatypicalsharepurchaseagreementare:• Conditionprecedentsuchasobtainingapprovalfromtherelevantauthorityorconsent

fromtheexistingchargeeoftheproperty.• Due diligence enquiry on the targeted company and the property owned by the

targetedcompany.• Warrantiesprovidedbythesellerandthetargetedcompanyontheproperty.• Realpropertygainstaxifthetargetedcompanyisapropertycompany.

DUE DILIGENCE

4.4 What is typically done before an acquisition of land?

Forastraightforwardsaleandpurchasetransactionofproperty,thepurchaser’slawyerconductsthefollowingduediligence:• Alandsearchonthepropertyattherelevantlandofficetoverifyownership,special

conditions,detailsofthetitledeedandtheencumbrances(ifany).• SearchesattherelevantlandofficeaswellasatthePercetakanNasionalMalaysia

Berhad(NationalPrintingBerhad)ongazettednotice(s)andseekingconfirmationfromthesellerrelatingtoanyexistingoron-goinglandacquisitionontheproperty.

• Forpropertydevelopment,enquiriesaremadeattherelevantlocalauthorityonthezoningandpermitteduseoftheproperty.

• Engagingaqualifiedvaluertovaluethemarketpriceofthepropertyandavaluationreportisthenproducedforconsiderationbytheprospectivepurchaser.

• Conductingbankruptcyorwinding-upsearchagainsttheseller/proprietor.• Physicalinspectionofthepropertytodeterminethestateofaffairs,whetherthereare

squatters,fittings,fixturesormovablepropertyfoundintheproperty.• Reviewingtenancyorleaseagreement.• Enquiries as to whether there are any litigation proceedings against the seller/

proprietor.• Reviewing management contract (if any), insurance policies and other material

contracts.

12

The title deed, the sale and purchase agreement or any document(s) relied on by the seller/proprietor to claim ownership or interest on the property is reviewed by thepurchaser’slawyer.

SELLERS’ WARRANTIES

4.5 What are the typical warranties given by a seller to a potential purchaser in the sale of property and are there any limitations to it?

Normallythepurchaser’slawyerimposesvariouswarrantiesagainstthesellerandtheseare stated in the sale and purchase agreement. The common warranties are that the seller:i. Isthelegalownerofthepropertyand,therefore,hasthenecessarylegalrighttoenter

intoasaleandpurchaseagreement.ii. Hasnotassignedorchargedthepropertytoanythirdpartywithouttheknowledgeof

thepurchaser.iii. Isanotabankruptandhasnotbeenwoundupandnobankruptcyproceedingor

windingupproceedingagainsttheseller.iv. Haspaidallcurrentquitrent,assessmentsandotheroutgoingsoftheproperty.v. Hasnotreceivedanynoticeadversetothetitleorinterestofthesellerintheproperty.

Thesewarrantiescanbelimitedby:• Disclosureonspecificmattersthataremadeknowntothepurchaser.• Lapseoncompletion.

LIABILITY

4.6 What are the statutory liabilities of a seller to the purchaser in a disposal of property?

A seller is contractually bound by the sale and purchase agreement (SPA) on the fulldisclosureandconfirmationoftheinformationrelatingtothetitledeedandtheproperty.AsellerisalsoboundbythestatutetodeclaringandcomplyingwiththeRealPropertyGainsTaxActtopaytaxonthegainfromthesaleproceedstotherelevantauthority,ifapplicable.

SALE OF PROPERTY

13

AsellermustrefundallmoniespaidbythepurchaserundertheSPAif:• Becauseofmisrepresentationoftheseller,thecourthasdeclaredtheSPAvoid.• Thetitledeedofthepropertycannotberegisteredinfavourofthepurchaserdueto

anyreasonwhatsoeverexceptduetothePurchaser’sowndefault.

4.7 Will a purchaser inherit liability for other matters relating to the property even if such matters took place before the purchaser bought or occupied it?

Normally a purchaser does not inherit any liability for issues relating to the propertyoccurringbeforeheboughtthepropertyexceptinthefollowingsituations:• Hecaninherit liabilityforpre-existinglandacquisitionnoticeorarrangementmade

betweenthesellerandthestategovernment.• Arrears, service charges, sinking fund, maintenance expenditure or other utilities

chargesdueandpayable to thedeveloper, jointmanagementbody,ManagementCorporationorrelevantauthorities.

• Arrearsonquitrent,assessmentreceiptorlandpremiumorchargesimposedontheproperty.

4.8 Will a seller retain any other liability relating to the property after it is being disposed?

Thesellercanretain liabilityrelatingto theproperty ifafterdisposal,eitheroneof thefollowingeventtakesplace:• The transfer of the property and registration in favour of the purchaser cannot be

completedattherelevantlandofficeorthelocalauthority.• Thesellerisfoundtohavecommittedadefaultofthesaleandpurchaseagreement

beforecompletionofthesaleandpurchase.

SALE OF PROPERTY

14 COMPLETION ARRANGEMENTS

5 COMPLETION ARRANGEMENTS

5.1 How is the sale of a property being completed? Is notarisation required?

Typicallycompletionofthesalenormallytakesplaceinalegalfirmbyhandingoverthekeysof theproperty to thepurchaserafter thepurchaserhas fully settled thepurchasepricetotheseller.

Themain legaldocuments for thecompletionof theproperty thatarepresented to therelevantlandofficetoregisterthetitledeedinfavourofthepurchaserare:• Theoriginalissuedocumentoftitletotheproperty.• The valid and registrable memorandum of transfer (Form14A) signed between the

sellerandpurchaserwithstampdutypaid.• Proofofcurrentquitrentandassessmentofthepropertypaid.• Ifthepropertyischarged,theexecutedandstampeddischargeofcharge(Form16N).• Ifthepropertyissubjecttoanyrestrictionininterest,theapprovalsofthestateauthority.• If the property is subject to caveat, the executed withdrawal of private caveat

(Form19G)orcaveator’sconsent.• If either or both of the parties are companies, their resolutions and constitutional

documentsevidencingtheircorporatelegalcapacities.• Registration fees for the memorandum of transfer, charge, discharge of charge,

approvalsofthestateauthorityandwithdrawalofprivatecaveat.

Thetitleistransferredwhentherelevantlandofficeregisteredthepurchaser’snameontotheissuedocumentsoftitleandisdatedbacktothedateofpresentingthetitlefortransferatthelandoffice.

Ifthepropertyisheldundermastertitle(withnosubdividedtitle),thentherelevantlegaldocumentsrequiredforthecompletionofthesalearestamped:• Saleassignmentordeedofassignmentinplaceofissuedocumentoftitleandstamped

memorandumoftransfer.• Deedofreceiptandreassignmentinplaceofdischargeofcharge.

15COMPLETION ARRANGEMENTS

For sale contracts, thereare no formal requirements or standarddocuments unless theproperty falls under the jurisdiction of Housing Development (Control and Licensing)Act1966,whichispropertymeantforhousingaccommodation.Thestatutorysaleandpurchasehousingaccommodationagreementsthatarepreparedforthecommonlyusedsalethenbuildarrangementare:• ScheduleGforsaleandpurchaseagreementsoflandandbuilding.• ScheduleHforsaleandpurchaseagreement(SPA)withbuildingsorlandintended

forsubdivisionintoparcels.

5.2 Who can attest to the signatures of the parties to the documents involved in a sale and purchase transaction?

Theattestationof thememorandumof transfermust follow the formatprescribed in theNationalLandCode.Aparty’ssignaturecanbeattestedonlybytheauthorisedpersonneldescribedinSchedule5oftheNationalLandCode,forexample,lawyers.Ifthecorporatebodyattestinganyexecutionhasa sealofoffice, thecorporatebodyauthenticates itssignaturewiththecompanyseal.

NotarisationisnotrequiredifthesaleandpurchaseagreementandtransferdocumentsareexecutedinMalaysia.

16 PROPERTY STAMP DUTY AND TAXATION ISSUES

6 PROPERTY STAMP DUTY AND TAXATION ISSUES

6.1 Is stamp duty/transfer tax (or equivalent) payable on the purchase of property? Who bears the responsibility to pay? What are the rates and are there any exemptions? Does it apply to the transfer of shares in a company holding property and at what are the rates?

Stamp duty

AnytransferofpropertyinMalaysiaattractsadvaloremstampdutythatiscalculatedonthepurchaseconsiderationortheproperty’smarketvalue,whicheverishigher.

Thestampdutyispayablebythepurchaser,beingthetransfereeoftheproperty.

Theformulaforthecalculationofstampdutyisasfollows:• 1%onthefirstRM100,000.• 2%onRM100,001toRM500,000.• 3%onRM500,001toRM1,000,000.• 4%onRM1,000,001andabove.

Thereare situationswhere certain exemptions, rebatesordeductionsaregivenon thestampdutypayablesuchas:• Transferbywayofloveandaffectionfortransactionbetweenthepartiesapprovedby

theauthority.• FirsttimepurchaserofresidentialpropertybelowthevalueofRM300,000 (from1January2019to31December2020)• TransferbywayofCourtOrder.

Real property gains tax (“RPGT”)

Thesellerpaysrealpropertygainstax(RPGT)onanygainofthesaletransactionwithin60daysfromthedateofdisposal.Witheffectfrom1January2019,therevisedRPGTratesforthedisposalofpropertyandsharesinpropertycompaniesareasfollows:• Disposalwithin3yearsfromtheacquisitiondate:30%forcompaniesandindividuals.• Disposal within the 4th year from the acquisition date: 20% for companies and

individualsthatarecitizensorpermanentresidentsand30%fornon-citizens.

17PROPERTY STAMP DUTY AND TAXATION ISSUES

• Disposalinthe5thyearfromtheacquisitiondate:15%forcompaniesandindividualsthatarecitizensorpermanentresidentsand30%fornon-citizens.

• Disposalsafter the5thyear from theacquisitiondate:10% forcompanies,5% forindividualsthatarecitizensorpermanentresidentsand10%fornon-citizens.

Transfer of shares

Withthetransferofsharesinacompanyholdingproperty,thestampdutyis0.3%ofthepriceorvalueonthedateoftransfer,whicheverisgreater.NoRPGTisimposedunlessthere isa transferof shareofa realpropertycompany.A realpropertycompany isacompanyholdingrealpropertyorsharesinanotherrealpropertycompanywithvaluenotlessthan75%ofthevalueofthecompany’stotaltangibleassets.

Section15and15Aof theStampAct1949exempts stampdutyon shares transferofintergroupcompanies,subjecttoconditionsbeingmet.

6.2 Is there any method commonly used to mitigate property tax liability on acquisitions of large property portfolios? What is the general approach of the tax authorities in Malaysia towards such schemes?

Commonwaystomitigatepropertytaxliabilityinclude:• Acquiringsharesofacompanyholdingpropertyastherateofstampdutyappliedis

relativelylower.• Thesellercandeductsomeexpensesorchargesincurredduringtheacquisitionand

disposalofthepropertywhencomputingtherealpropertygainstax.Thesedeductibleexpensesare legal fees incurredduring theacquisitionanddisposal, renovation tomaintainthevalueofthepropertyandcommissionpayabletopropertyagentinthedisposaloftheproperty.

6.3 What are the municipal taxes paid on the occupation of business premises? Are there any exemptions?

Ownersofpropertymustpayquitrentannuallytotherelevantlandofficeandassessmenttwiceannuallytotherelevantlocalcouncil.

There isnoexemptionon theapplicationof these taxeson theoccupationofbusinesspremises.

18 FINANCIAL FACILITY ON PROPERTY

7 FINANCIAL FACILITYON PROPERTY

7.1 What are the typical security packages required by lenders in relation to property financing? How are the most common forms of security interest relating to property created and perfected (that is, made valid and enforceable)?

Thecommonsecuritydocumentssecuringthelender’sinterestare:• Facilitiesagreement,chargeovertheproperty(withindividualtitledeed)ordeedof

assignment(withoutindividualtitledeed).• Powerofattorney.• Debentureincorporatingfixedandfloatingchargeoverallassetsoftheborrower.

AllthesecuritydocumentsmustbestampedbytheStampingOfficewithin30daysfromthedateofthesecuritydocuments.

Forpropertywithindividualtitledeed,thechargesignedbythelenderandtheborrowermustberegisteredwiththerelevantlandofficetogetherwiththeoriginaltitledeed.

Forpropertywithoutanindividualtitledeed,otherthanstampingofthesecuritydocuments,thepowerofattorneymadeinfavourofthelendermustberegisteredattheHighCourt.

Iftheborrowerisacompany,thechargemustberegisteredwiththeCompaniesCommissionofMalaysiawithin30daysfromthedateofcreationofcharge,failingwhichit isvoidagainstallcreditorsandanyfutureliquidator.

19FINANCIAL FACILITY ON PROPERTY

7.2 What are the other typical measures do financiers take to protect themselves against default by a borrower?

Otherthanthesecuritydocumentsmentionedin7.1,thelendercan,afterconsideringtheborrower’sfinancialcredibility,requiretheborrowerto:• Obtainaguarantee(individualorcorporateguarantee).• Assigntherentalproceedstothelenderbyexecutingadeedofassignmentofrental

ofproceeds.• Pledgeasumofmoneyforafixedtermwiththelenderasadditionalsecurity.

Whenlendersandinvestorsholdorinvestinloanswherepropertyisusedascollateral,theyareatriskifthecollateralpropertyiscontaminated.

7.3 What are the main remedies for financiers in relation to the secured property if the borrower defaults on the loan? What is the effect of the borrower’s insolvency on the financier’s remedies?

Auction

Thefinanciercanauctionthesecuredpropertybypublicorprivateauction.WhilepublicauctionmustgothroughthecourtoflawbyfilingthenecessarycausepapersandobtaininganorderforsalefromtheCourt,privateauctionscanbeconductedbyafinancierwheresecurityisbywayofadeedofassignment.

Insolvency and winding-up proceedings

Financier,inthissituation,isknownassecuredlenderscanalsopetitionforinsolvencyorwinding-upproceedingsagainsttheborrowertorecoverthedebtsbutrecoverydependsontheassetavailablefordistributiontoallothercreditors,ifany.

Effect of Borrower’s Insolvency

Intheeventoftheborrower’sinsolvency,thesecuredlendercanstillproceedtoenforceitsrightagainsttheproperty.However,ifsaleofthepropertyisnotsufficienttomeettheoutstanding loanpayable to thesecured lender, the lendermayhave tocompetewithothercreditorsforthebalanceduesumintheborrower’sinsolvencyproceedings.

20

7.4 What are the key additional issues for Financier in relation to construction and development projects?

Beforeapprovingaloan,thefinancier’sriskdepartmentcanvisitthesiteoftheconstructionandthedevelopmentprojects.Thefinanciercanalsoinspecttheapproveddevelopmentorderandbuildingplanapprovalofthedevelopmentproject.

7.5 Are other property finance techniques commonly used in Malaysia, such as property securitisation and sale and leasebacks?

Commonlyusedpropertyfinancetechniquesinclude:• Whereacertaindeveloperhasusedthemethodofsaleandleaseback(guaranteed

rentalreturn)schemetopromotetheirsales.Normallytheschemehasaperiodicallimit.

• Thereusedtobea“DeveloperInterestBearingScheme”(DIBS)forzerointerestduringtheconstruction stagebut theCentralBankofMalaysiahasprohibitedMalaysianbanksfromparticipatinginthisscheme.

FINANCIAL FACILITY ON PROPERTY

21PROPERTY LEASES

8 PROPERTYLEASES

NEGOTIATION AND EXECUTION OF LEASES

8.1 Which legislation applies to the contractual lease?

Contractual leaseprovisionsare freelynegotiableby thecontractingparties subject totheprohibitionorlimitationimposedbytheNationalLandCode(Act56of1965)oranyotherwrittenlawforthetimebeinginforceandanyrestrictionininterestofthepropertyinquestion.

8.2 What are the formalities and legal requirements to execute a lease by certain parties or as a deed?

AregisteredleasemustbegrantedviaForm15AoftheNationalLandCode1965(NLC).However,anagreementforaleasefallingshortofregistrationasprovidedbytheNLCisalsorecognisedandisenforceableinequity.

AleasegrantedunderForm15Aisexecutedbytheproprietorof thepropertyandthelessee.Wherethepropertyissubjectedtoacharge,thechargee’sconsentbyanindicationinForm15Aisrequired.

Theformalitiesremain(bywayofForm15A)anddifferonlyinthemethodofexecutionbytherelevantpartiesunderitsgoverninglaw(forexample,CompaniesAct1965).

RENT PAYMENTS

8.3 How are rent levels usually reviewed? Is a rent security deposit required under the lease agreement?

Revisionofrentlevelsisdependentontheleaseagreementandcanbefreelynegotiated.Usuallytherentalisfixedforatermwithanoptiontermtoreviewonexpiryoftheterm.

22 PROPERTY LEASES

AstampdutyscalebasedonrentalrateprescribedundertheStampAct1949ispayableontheleaseitself.

Requirement and management of rent security deposit are dependent on the leaseagreement and can be freely negotiated. However, industry standards usually dictatewhatisrequiredfromthelessee(forexample,threemonths’rentalsecuritydepositforathreeyeartenancy).

LENGTH OF TERM AND SECURITY OF OCCUPATION

8.4 Is there a typical length of lease term and which provision governs it? Do tenants have rights to renew the lease at the end of the contractual lease term?

TheNationalLandCode1965defines:• “Tenancies”fortermsnotexceedingthreeyears.• “Leases”fortermsexceedingthreeyearsbutarelimiteduptoamaximumtermof99

yearsforthewholeofthelandandforamaximumof30yearsifinrelationtoapartoftheland.

Thereisnoautomaticsecurityofoccupationbutpartiescannegotiateandagreetoanexercisableoptionforrenewalofaleaseortenancypriortotheexpiryofitsterm.

DISPOSAL

8.5 Are there restrictions or provisions typically apply to the disposal of the lease by the tenant? Can the tenant assign or sublet the lease without the landlord’s consent? Can the tenants share their premises with companies in the same group? What is the effect of a legal reorganisation or transfer/sale of the tenant on the lease and on a guarantee of the lease?

Restriction to disposal of lease by the lessee

Therearenostatutoryrestrictionsgoverningthedisposalofaleasebylessee(thatis,atenantforanydurationoftenancyexceedingthreeyears).Therightstoassignmentorsub-leasingoftheleasewiththelessor’sconsentaredependentontheparties’agreement.

23PROPERTY LEASES

Sharing of premises

The terms for the sharing of premises with companies under the same group can benegotiatedbythepartiesoftheleaseandaresubjecttothelessor’sconsent.

Effect of legal reorganisation on the lease

Alegalreorganisationortransferorsaleofthelesseeontheleasenormallydoesnotaffecttheleaseunlesstheleaseagreementprovidesotherwise.Aguaranteeoftheleasedoesnotterminateautomaticallyaswellbuttheterminationandre-issuanceoftheguaranteecanbenegotiatedbytherelevantpartiesbeforethereorganisationortransferorsale.

8.6 Does a landlord retain any obligation under the lease after the lease is assigned?

Aslongasthelandlordconsentstotheassignment,thelandlordcontinuestobeliabletotheassigneeforthelandlord’scovenantsandobligationsprovidedintheprincipaltenancyagreement,whichincludepaymentofquitrentandmaintenanceoftheleasedpremises.

REPAIR AND INSURANCE

8.7 Who usually takes responsibility to keep the leased premises in good repair? Are there provisions for the ownership of lease improvements?

Thereare impliedprovisionsunder theNational LandCode1965 thatareapplicablewhereexpressprovisionsareabsent(forexample,animpliedprovisionforthelesseetoberesponsibletokeepthepropertyingoodrepair.)

However,thepartiesoftheleasecannegotiatethetermsoftheleaseinrespectoftheirobligations.

Theobligationtoinsureusuallyfallsonthelessorbutthelesseeisusuallyresponsibleforkeepingtheleasedpremisesingoodrepair.

Theprovisionsforownershipofleaseimprovementsarenormallycommercialtermsthatcanbeagreedonbetweenparties

24

LANDLORD’S REMEDIES AND TERMINATION

8.8 What remedies may a landlord take for a breach of the lease by the tenant? On what grounds can the landlord usually terminate the lease and what procedures apply? What are the consequences of the tenant’s insolvency under general contract terms and insolvency legislation?

Theremediesavailabletoalandlordorlessorintheeventofabreachbythetenantorlesseeareasfollows:• ExerciseoftheforfeiturerightundertheNationalLandCode1965bygivingnoticeto

remedythebreach.• Terminationoftheleaseonnoticeandthelandlordorlessorcanapplytocancelthe

registrationoftheregisteredleasewiththerelevantlandoffice.• Notice to quit or vacate the property. Court eviction order must be obtained to

reclaimpossessionintheeventofrefusaltovacateasnoself-helpispermittedunderthelaw.

• Afiledistressapplicationincourttorecoveroutstandingrentals.• Claimdoublerental(ifthetenantorlesseecontinuesoccupyingintheleasedpremise).• Claimlatepaymentinterestonthelatepaymentofrental(normally8%perannumif

agreementprovidesthisrate).• Claim for rent for the whole unexpired term of the lease in the event of early or

prematureterminationoflease(iftheagreementprovidessuchremedy).• Forfeitthesecuritydeposit.

Thecommongroundsforterminationbylandlordorlessorareasfollows:• Non-paymentofrent.• Latepaymentofrent.• Breachofessentialtermsofthelease,whichisanimproperuseofleasearea.• Ordermadeorresolutionpassedforthewindingupofthetenantorlessee(exceptfor

thepurposeofreconstructionoramalgamationwiththewrittenconsentofthelandlordorlessor).

• Tenantorlesseegoesintoliquidationorreceivership.• Tenantorlesseerescindstheleasebyconduct.• Onexpiryandnorenewalmade.

Reasonable notice specifying the breach and to remedy the breach must be given,particularlyforregisteredlease.Unlawfulterminationbythelandlordorlessorissubjecttothecourt’sadjudicationbytheaggrievedparty.

PROPERTY LEASES

25

Theeffectofatenant’sorlessee’sinsolvencygenerallyis:• Terminationofleasebythelandlordorlessor.• Forfeiture of the security deposit that is generally used as security for the due

observanceandperformancebythetenantorlesseeofthetenant’scovenantsandconditionsinthetenancyagreement.

• Theleaseortenancybecomesvoidable.• Anyoutstandingmonetaryclaimsagainstthetenantorlesseehavetobelodgedwith

theInsolvencyDepartmentbywayofproofofdebt.

8.9 Can the tenant withhold rent payments in certain circumstances that there is serious damage to the leased premises? In what circumstances, the tenant can terminate the lease and are there restrictions on it?

Normally,thereisaforcemajeureprovisioninatenancyagreementtostipulatesuspensionof rental for serious damage to the leased premises that make the premises not fit forhabitualuseorforpurposeofthepremises’use.Forexample,wheretheleasedpremiseissubstantiallydestroyedby:• Fire.• Lightning.• Riot.• Civilcommotion.• Tempest.• Otherinevitableorunforeseencause.

Thesuspensionofrentalpaymentisofafairandjustproportionandthereforeaccordingto thenatureandextentof thedamagesustaineduntil the leasedpremiseshavebeenagainconsideredfitforoccupationanduse.

Thetenancynormallyfurtherprovidesthatthelandlordmustrectifythepremises,failingwhichthetenantcanopttoterminatetheagreement.Wherethelandlorddecidesnottorebuildandreinstatetheleasedpremises,thentherentreservedceasesandthetenancydetermines from the happening of the destruction or damage. The tenant peaceablyandquietlyleaves,surrendersandgivesuptothelandlordpossessionofsomuchoftheleasedpremisesasnothavebeendestroyedandsubjecttoanyproperdeductionsandthelandlordrefundstothetenantallmonies,ifany,duetothetenant.

PROPERTY LEASES

26

Apartfromtheabovescenario,thetenantcanalsoterminatethetenancyorleaseinthefollowingcircumstances that normally isprovided forunder theexpressed termsof theagreement:• Bygivingprioradvancenotice(ifnotafixedtermtenancyorlease).• If the landlord has any bankruptcy, winding up or equivalent proceedings takenagainstit,oriftherebeappointedareceiverormanageroranyotherkindofadministratorappointedovertheleasedpremises.

PROPERTY LEASES

27PLANNING AND DEVELOPMENT CONTROLS

9 PLANNING AND DEVELOPMENT CONTROLS

9.1 When can a local or state authority purchase business premises compulsorily? Is the purchase price based on market value?

CompulsorylandacquisitionisgovernedbytheLandAcquisitionAct1960.Thestateauthoritycanacquireanylandthatisneeded:• Foranypublicpurpose.• ByanypersonorcorporationforanypurposethatintheopinionoftheStateAuthority

isbeneficialtotheeconomicdevelopmentofMalaysiaoranypartofitortothepublicgenerallyoranyclassofthepublic.

• For the purpose of mining or for residential, agricultural, commercial, industrial orrecreationalpurposesoranycombinationofthepurpose.

Thecompensationpriceawardedisbasedonmarketvalueasperthegazettedateoftheacquisition.Indeterminingthemarketprice,factorstobeconsideredarelisteddowninSchedule1oftheLandAcquisitionAct1960suchasthe:• Currenttransactedvalue.• Location.• Typeofownership.• Landsize.• Typeofusage• Theeffectofanyexpressorimpliedconditionoftitlerestrictingtheuseofland• Effectofanyprohibition,restrictionorrequirement imposedunderAntiquitiesAct in

relationtoanymonumentorhistoricalsite.• Thereasonablecosttotheproprietorofusingorpurchasinganotherland

Theprincipleofcompensationisthatthesumawardedshould(asfaraspracticable)placetheclaimantinthesamefinancialpositionashewouldhavebeeninhadtherebeennoacquisitionoftheland.

28 PLANNING AND DEVELOPMENT CONTROLS

9.2 Who are the authorities that regulate planning control and which legislation apply?

Threedifferentdepartmentsregulateplanningcontrol:• In Peninsular Malaysia, the Town and Country Planning Department of Peninsular

MalaysiaenforcetheTownandCountryPlanningAct1976(Act172).• InSabah,theSabahDepartmentofTownandCountryPlanningenforcestheTown

andPlanningOrdinance,1950(SabahCap.141).• In Sarawak, the Sarawak Town and Country Planning Department enforces the

SarawakTownandCountryPlanningOrdinance1952(SarawakCap.87).

Inadditiontotheseplanninglegislations,theotherlegislationsthatareinvolvedandreliedoninthisplanningcontrolaretheLocalGovernmentAct1976(Act171)(LGA)andtheStreet,DrainageandBuildingAct1974.

9.3 Are there specific protections for special categories of buildings such as historic buildings?

Historical Buildings are well protected under the law. Under the National HeritageAct2005(Act645) (NHA),whichcame into forceon1March2006, theMinister isresponsibleforissuingpoliciesorprovisionsonconservationandpreservationofheritagesites. A Commissioner of Heritage is appointed by the Minister and the Commissionercandesignateanysitethathasnaturalheritageorculturalheritagesignificancetobeaheritagesite.NHAalsoempowerstheNationalHeritageCouncilthatisestablishedunderthestatutetoadvisetheMinisterandCommissioneronanymattersrelatingtothisheritageissue.

ApartfromNHA,theLGA(particularlysections101and102)alsoprovidethatthelocalauthoritiescanfromtimetotimemakeby-lawsonthemaintenanceandmanagementofhistoricalbuildingsandsites.

9.4 What are the planning consents required for building works and the use of a building?

TheTownandCountryPlanningAct1976(TCPA)stipulatesthatnodevelopmentcantakeplaceinalocalareawithoutplanningapprovalobtainedfromthelocalauthority,andtoundertakebuildingworksandtheuseofabuilding,thewholeprocessbeginsbyobtainingadevelopmentorder(DO).

29PLANNING AND DEVELOPMENT CONTROLS

TheDOisonlyissuedwhenclearanceisensuredonthefollowingaspects:• Adevelopmentproposalsubmittedtothelocalauthoritymustcontainalayoutplan

containingparticularsofanybuildingtobebuilt.• Approval from thePublicWorksDepartment toensure that thebuildingworks has

adequateaccesstoavoidtrafficcongestion.• ApprovalfromtheDrainageandIrrigationDepartmenttoensureadequateprovision

fordrainage.• ApprovalfromtheDepartmentofEnvironmenttoensurethatthedevelopmentdoesnot

encroachintowatercatchmentareas,andthatifdevelopmentonhillslopes,adequatemeasuresbetakentopreventlandslides.

• Thedevelopmentareamustbeprovidedwithlightingandwatersupplyandtheutilitiesentitiesmustbeinvolved.

• Adequatefirepreventionmeasuresaretakenforthebuildingitself.

FollowingtheissuanceofaDO,thedevelopercanthenproceedtoobtainapprovalsforthebuildingplans.

Consideringthehugenumberofgovernmentagenciesinvolvedintheapprovalprocess,thelocalauthorities(LAs)havereducedtheburdenofapplicantsfrommakingnumerousapplicationstoseparategovernmentagencies.AllLAsnowhavesetupOneStopCentres(OSC),whereapplicationsforDOandBuildingPlanscanbedoneonlinetotherelevantLA.Onreceiptofthesubmissions,thevariousgovernmentagenciesforwhichapprovalsaresoughtmeetattheLAtovettheapplicationsandaKeyPerformanceIndexhasbeensetwithtargetedtimeframesforeachapplicationtobeconsideredandapproved.

The time taken for a DO to be approved depends on whether the site at which thedevelopment is tobecarriedouthasagazettedlocalplan.Wherethereisagazettedlocalplan,thetimelinefixedforapprovalbytheLAis57days.Whenthesiteconcernedislocatedinanareawherethelocalplanhasnotbeengazetted,theapprovaltakes108days.TheLAshavefixedthetimeperiodforbuildingplanstobeapprovedwithin37days.

On1June2015,theamendedStrataTitleAct2013andtheStrataManagementAct2013cameintoforce.Oneoftheessentialfeaturesofthesenewstratalawsistheapplicationofstratatitleofthesubdividedbuildingandsubdividedlandaremadeoncompletionofthesuperstructurestageofthebuildingconstruction(thatis,theboundaryoftheparcels,accessoryparcelsandcommonpropertiesarereadyformeasurement).Theaimofthesenewlawsistoensurethatthestratatitlesareissuedondeliveryofvacantpossessionoftheproperty.

30 PLANNING AND DEVELOPMENT CONTROLS

Thesenewstratalawsrequirethedevelopertodothefollowingbeforesellingtheproperty:• Obtainingtheformulaoftheshareunitcertificatesfromtherelevantlandoffice.• Filingthescheduleofparcelsthatdescribedetailsoftheparcelsoraccessoryparcels.• Whenselling,todisplaythescheduleofparcelsatthesaleofficeorsalegallery.

9.5 What are the main authorisation and consultation procedures involved in planning consents?

Foranypropertydevelopment,planningconsentsarerequiredatthreelevels:• Approvalfordevelopmentattheselectedlocation(planningpermission).• Approvalforthebuildingstobeconstructed(buildingplans).• Infrastructureofthedevelopmentandstructuralintegrityofthebuildings(engineering

plansapproval).

AlltheseapprovalsaregivenbytheLocalAuthoritythatcoordinatesinputsfromalltheapproving agencies through the One Stop Centre. These three planning consents areregulatedbytheTownandCountryPlanningAct1976(Act172)andtheStreetDrainageBuildingAct1974(Act133).

9.6 How long does an initial decision take after receipt of the application?

Therearevariouskindsofapplications thatmustbe submitted to localauthority’sOneStopCentre(OSC)forapprovalandaKPItimelinehasbeensettheirapproval.Thetimeperiodsforsomeapprovalsareenlistedin9.4.

Third party rights and appeals

Proposeddevelopmentsthatdonotconformtotheplanningrequirementsasstipulatedinthegazettedlocalplansaresubjecttotheobjectionandhearingprocessbyneighbouringlandswithinadistanceof200metres from theboundaryof the landof theproposeddevelopment.

Neighbouringlandsmuststatetheirgroundsofobjectionwithin21daysof thedateofservice by the local authority and the authority within 30 days after the expiry of theobjectionperiodpreparesforthehearings.Appealsagainstaplanningdecisioncanbetabled to the Appeal Board established in each state (Section 36, Town and CountryPlanningAct1976).

31MALAYSIA’S NEW STRATA AND HOUSING LAW

10 MALAYSIA’S NEW STRATA AND HOUSING LAW

10.1 What are the main changes introduced in the new legislations and how have these impacted developers?

With theamendmentof theHousingDevelopment (Control&Licensing)Act2012(ActA1415), theStrataTitles (Amendment)Act2013 (ActA1450)and the introductionofStrataManagementAct2013(Act757)whichhasbeenenforced in JuneandJulyof2015,strictertimelimitshavebeenimposedondeveloperstoensurethatstratatitlescanbeobtainedbypurchasersalmostimmediatelyaftervacantpossession.

10.2 Under the new legislation please briefly enumerate the steps involved before strata title is issued.

(a) AfterhavingobtainedtheDevelopmentOrderwithconditionsimposedbytheLocalAuthority,theDeveloperunders.8AoftheStrataTitleAct(STA)needstowithinthreemonthsofattainingtheSuperStructurestageofthedevelopment,submitaProposedStrataPlantotheDirectorofSurvey.

(b) The Director of Survey shall, within a month of receipt of the application, issue aCertificateofProposedStrataPlantotheapplicantifheissatisfiedthattheplansareinorder.Atthesametime,theDirectorshallalsoissueacopyofsuchcertificatetotheLandAdministratorandnotifytheLandAdministratoroftheamountoffeestobecollectedinrespectoftheplanscausedtobepreparedintheeventoftheapprovaloftheapplication.

(c) WithinamonthfromreceiptoftheCertificateofProposedStrataPlan,theDevelopershallapplytotheLandAdministratorforapprovaloftheDirectorofLandsandMinesforStrataTitles.

(d) Uponreceiptoftheapplication,theLandAdministratorshallendorseorcausetobeendorsed,anoteofthemakingthereofontheregisterdocumentoftitle.

(e) The Land Administrator shall if he is satisfied that the application and the other documents presented are in order, transmit them to the Director together with itsrecommendationsforapprovalorrejection.

32 MALAYSIA’S NEW STRATA AND HOUSING LAW

(f) Havingensuredthattheconditionsspecifiedins.10oftheSTA2013aresatisfied, the Director of Lands and Mines shall approve the application for strata title andrequesttheDirectorofSurveytoprepareacertifiedstrataplan.

(g) Upon being informed by Land Administrator that the fees for preparation andregistrationof strata titleshavebeenpaid, theDirector shalldirect theRegistrar toopenabookofthestrataregister.

10.3 What are the requirements to be fulfilled before a Certificate of Proposed Strata Plan can be obtained?

• ApprovedBuildingPlan.• ProposedStrataPlancomprisinglocationplan,storeyplan,storeyplananddelineation

plan.• Architect’s / Engineer’s certificate that building constructed following planning

permission.• CopyofFinalMasterTitle.• CertificateofSuperStructureStage/CCC.

10.4 When a Developer applies for strata title, it will also propose the share units assigned to the parcels based on the principle of equity. The Sijil Formula Unit Syer (SiFUS) will be issued by the Director of Lands and Mines. Before SiFUS is issued, certain prerequisites have to be met. What are these requirements?

• Landmattershavebeensettled.• ReceiptofpaymentforLandPremium,ifany.• LetterofapplicationforQualifiedTitleasendorsedbyLandOfficeifthereisnoFinal

Title.• ReceiptofQuitRentforthecurrentyear.• LetterofappointmentofLicensedLandSurveyor.• ReceiptofSurveyingFeesbyLSBoard.• Shareunitformula.• ScheduleofParcelssignedbyLicensedLandSurveyorandArchitect/Engineer.• ApprovedBuildingPlans.

33MALAYSIA’S NEW STRATA AND HOUSING LAW

10.5 How is the share unit formula determined?

Theformulaonwhichtheshareunit isdeterminedissetoutunder theStateStrataTitleRules.UndertheStrataTitle(FederalTerritoryofKualaLumpur)Rules2015,theformulaforthecalculationofallocatedshareunitsisbasedon:-• Areaofparcel;• Weightagefactors;• Accessoryparcelscontributetoallocatedshareunits.

10.6 What is the formula for calculation of allocated share units?

Allocatedshareunitofparcel=(AxF1xF2)+(BxF3)Shareunitsoflandparcel=(Ax0.8)+(BxF3)Where:(a) Aistheareaoftheparcel;(b) Bistheareaoftheaccessoryparcel;(c) F1istheweightageforthetypeofparcelasspecifiedinScheduleA;(d) F2istheweightagefortheoverallfloorparcelasspecifiedinScheduleB;and(e) F3istheweightagefortheaccessoryparcelasspecifiedinScheduleC.

34 SUMMARY OF TAXES ON THE SALE OF REAL ESTATE

11 SUMMARY OF TAXES ON THE SALE OF REAL ESTATE

Jurisdiction

Is substantial transfer or registration tax

payable on the sale of property? Who

pays and what is the rate?

Is notarisation

required? Who pays

and what is the

typical notary fee

Are there any

exemptions or

methods to mitigate

corporate property

tax liability?

Stamp Office

StampdutyontheForm14A(MOT)istobepaidbythepurchaseratthefollowingrates:

Rate • 1%onthefirstRM100,000;• 2%onRM100,001until

RM500,000;• 3%onRM500,001until

RM1,000,000;• 4%onRM1,000,001andabove

Therearesituationswherebycertainexemptionsorrebateordeductionaregivenonthestampdutypayablesuchas:-• transferbywayofloveand

affection;• firsttimepurchaseronresidential

realestatebelowRM300,000(from1.1.19to31.12.20)

• TransferbywayofCourtOrder.

TheMOTneedstobeattestedbytheauthorisedpersonsstipulatedinSchedule5oftheNationalLandCode1965,suchasalawyerandanotarypublic.

NotarisationisnotrequiredifMOTisexecutedwithinMalaysia.

Thereisalimitedexemptionundersection15and15AoftheStampAct,1949onsharetransfersof intergroup companies,subjecttoconditionsbeingmet.

To mitigate stamp duty,apurchasermayconsideracquiringsharesofacompanyholdingproperty,astherateofstampdutyappliedisrelativelylower.

LandOffice

RegistrationfeesfortheMOTtobepaidbythepurchaser,accordingtoafeescaleforeachstate.

Example

*KualaLumpurRM100foreachtitle,regardlessofthepurchaseprice.

35SUMMARY OF TAXES ON THE SALE OF REAL ESTATE

*SelangorRate (follow Purchase Price)

Purchase Price (MYR)

Rate(MYR)

0-50,000 50

50,001-200,000 200

200,001-500,000 400

500,001-1,000,000 500

1,000,001andabove 1,500

InlandRevenueBoardofMalaysia

RealPropertyGainsTax(RPGT)tobepaidbytheseller.

1.Individuals(Citizens&permanentresidents)Rate Disposalwithin3years-30%Disposalwithin4years-20%Disposalwithin5years-15%Disposalinthe6thandsubsequentyears-5%(0%forthepropertybelowRM200,000)

2.Individuals(Non-citizens)Rate Disposalwithin3years-30%Disposalwithin4years-30%Disposalwithin5years-30%Disposalinthe6thandsubsequentyears-10%

3.CompaniesRate Disposalwithin3years-30%Disposalwithin4years-20%Disposalwithin5years-15%Disposalinthe6thandsubsequentyears-10%

No Thesellerisallowedtodeductsomeexpensesorchargesincurredduringtheacquisitionanddisposaloftherealestatewhencomputingtherealpropertygainstax.

Thesedeductibleexpensesarelegalfeesincurredduringtheacquisitionanddisposaloftherealestate,stampdutyduringacquisitionoftherealestate,costofrenovation,commission for sale andadministrativepayment.

36 STRATA MANAGEMENT

12 STRATA MANAGEMENT

12.1 What is the procedure to form management body under Strata Management Act 2013 (SMA)?

StrataTitleisissuedduring1styearfromVP

date

StrataTitleisissuedand25%aggregateshareunitstransferredduring1styear

fromVPdate

WithStrataTitle

Preliminary Management Period

25%ofaggregateshareunitstransferred

ManagementCorporation

WithoutStrataTitle

NoStrataTitleisissuedduring1styearfromVP

date

Developertocall1stAGMofJMB

SubsidiaryManagementCorporation(optional)

StrataTitleisissuedandBookofStrataRegisteris

opened

HandoverfromJointManagementBodyto

ManagementCorporation

Developer’sManagementPeriod

JointManagementBody

HandoverfromDevelopertoJoint

ManagementBody

25%ofaggregateshareunitstransferred

Developertocall1stAGMofManagementCorporation

DeliveryofVacantPossession(VP)

1month

1month

Max12month

1month

Notimelimit

37STRATA MANAGEMENT

12.1 What are the duties and powers of Joint Management Body?

ThedutiesofJointManagementBodyare:(a) ToinformandregisterwiththeCommissionerofBuildings(COB)ofthenameofthe

JMBafterthefirstannualgeneralmeeting(AGM);(b) Toproperlymaintainandmanagethebuildingorlandintendedforsubdivisioninto

parcelsand thecommonproperty,andkeep it inastateofgoodandserviceablerepair;

(c) Todeterminetheimposedchargesandcontributiontothesinkingfundaccountduringtheannualgeneralmeeting;

(d) To effect insurance according to SMA or to insure against such other risks as theparcelownersmaydirect;

(e) To comply with any notice or order given or made by the local authority or anycompetentpublicauthority;

(f) Toprepareandmaintainaregisterofallparcelownersandmaintainarecordofeachparcelowner’sdetails;

(g) ToensurethattheaccountsrequiredtobemaintainedbytheJMBareauditedandtoprovideauditedfinancialstatementsfortheinformationtotheparcelowners;

(h) Toenforceadditionalby-laws;(i) Todosuchotherthingsasmaybeexpedientornecessaryforthepropermaintenance

andmanagementofthebuildingsorlandsintendedforsubdivisionintoparcelsandthecommonproperty.

ThepowersofJointManagementBodyare:(a) Tocollectthechargesfromparcelownersinproportiontotheallocatedshareunitsof

theirrespectiveparcels;(b) Tocollectthecontributiontothesinkingfundofanamountequivalenttominimum10%

ofthecharges;(c) Toauthorizeexpenditureforthecarryingoutofthemaintenanceandmanagementof

theintendedsubdividedbuildingsorlandsandthecommonproperty;(d) Torecoveranysumdue,maintenancecharges,sinkingfundandotherchargesfrom

theparcelowners;(e) Topurchase,hireoracquiremovableproperty;(f) Toemployorarrangeandsecuretheservicesofanypersonoragenttoundertakethe

maintenanceandmanagementofthecommonpropertyoftheintendedsubdividedbuildingorland;

(g) TodoallthingsreasonablynecessaryfortheperformanceofitsdutiesunderthisActandfortheenforcementoftheby-laws;and

(h) Tomakeadditionalby-laws.

38

12.2 Who is eligible to stand for election of the management body?

Basic Requirements

• ProprietororaCo-proprietorofaparcel(SecondSchedule,Clause2(7)SMA)• Atleast21yearsold(SecondSchedule,Clause2(7)SMA)• Notbeingelectedasamemberforthepastthree(3)consecutiveterms(chairman,

secretaryortreasurershallnotholdofficeformorethantwo(2)consecutiveyears)(SecondSchedule,Clause2(5)andClause2(6)SMA)

• Notincapacityasaproxy(SecondSchedule,Clause2(8)SMA)

StrataUnitOwnerwithone parcel

• Cannominatehimself/herselffortheelection• On the seventh (7th)daybefore thedateof election,all

or any part of the charges, or contribution to the sinkingfund, in respectof thatparcelarenot inarrears (SecondSchedule,Clause2(9)SMA)

StrataUnitOwnerwithmorethanoneparcel

• On the seventh (7th)daybefore thedateof election,allor any part of the charges, or contribution to the sinkingfund, in respectofanyparcelarenot inarrears (SecondSchedule,Clause2(9)SMA)

• Proprietorcannominateamemberoftheimmediatefamilyofhim/her forelection(SecondSchedule,Clause2(7)(c)SMA)

• Thenominationissubjectto:i. That an individual who is a co-proprietor of a parcel

withanotheronemoreco-proprietors, ifanyotherco-proprietorofthatparcelisnotcandidateatthatelection;or

ii. That proprietor together with his nominees or theproprietor’s nominees do not exceed the thresholdnumberof:

a) Thenumberofmanagementcommitteemembersthatisproportionaltothatproprietor’sshareunits;or

b) Forty-ninepercent(49%)ofthenumberofmanagementcommitteemembers;whichevernumberislower

(SecondSchedule,Clause2(10)&Clause2(11)SMA)

STRATA MANAGEMENT

39

Proprietorisacompany,society,statutorybodyorother body (non-naturalproprietor)

• On the seventh (7th)daybefore thedateof election,allor any part of the charges, or contribution to the sinkingfund, in respectof thatparcelarenot inarrears (SecondSchedule,Clause2(9)SMA)

• May nominate an individual as representative to benominated for election (Second Schedule, Clause 2(7)SMA)

• Thenomination is subject to: A non-natural proprietor’s nominees do not exceed thethresholdnumberof:

i. Thenumberofmanagementcommitteemembersthatisproportionaltothatproprietor’sshareunits;or

ii. Forty-ninepercent(49%)ofthenumberofmanagementcommitteemembers;whichevernumberislower

(Second Schedule, Clause 2(10)(b) & Clause 2(11)SMA)

AbsentStrataUnitOwner

• Shall appointaproxyandgivehiswritten consent tobenominatedandelectedasamemberof themanagementcommittee(SecondSchedule,Clause2(13)SMA)

12.3 What are the voting rights of proprietor or co-proprietors?

Proprietor of a parcel • Eachproprietorwhoisnotaco-proprietorshallhave:i. onevoteonashowofhands;andii. numberofvotescorrespondingwiththenumberofshare

unitsorprovisionalshareunitsattachedtohisparcelorprovisionalblock(SecondSchedule,Clause21,SMA)

• On the seventh (7th)daybefore thedateof election,allor any part of the charges, or contribution to the sinkingfund, in respectof thatparcelarenot inarrears (SecondSchedule,Clause21SMA)

Co-proprietorofaparcel

• Co-proprietorsmayvotebymeansofa jointlyappointedproxyorbyappointinganyoneofthemoranyotherperson.

• Intheabsenceofaproxy,co-proprietorsshallnotbeentitledto vote on a show of hands, except where unanimousresolution requires, provided that any one co-proprietormaydemandapoll.

STRATA MANAGEMENT

40

12.4 What are the types of resolution in SMA?

Resolutions are needed to attend to specific matters relating to the maintenance andmanagementofthestrataproperty.

4typesofresolutioninSMA:i. Specialresolution;ii. Comprehensiveresolution;iii. Unanimousresolution;iv. Simplemajorityresolution.

Types of

ResolutionSpecial resolution

Comprehensive

resolution

Unanimous

resolution

Simple majority

resolution

Whocanpropose?

Anyparcelownerormanagementbody

Management Corporation

Anyparcelowneror management body

Anyparcelowneror management body

Purpose • AJointManagementBody,ManagementCorporationorSubsidiaryManagementCorporationmayinsureagainstsuchotherrisksastheparcelownersorproprietorsmaydirect;

• Tomakeadditionalby-laws,ortomakeamendmentstosuchadditionalby-laws,forregulatingthecontrol,management,administration,useandenjoymentofthebuildingorlandintendedforsubdivision/subdividedintoparcelsandthecommon property includingsafetyandsecuritymeasure,parking,floorcoveringsetc;

• Asubsidiarymanagementcorporationmaymakeadditionalby-lawsoramendmentstosuchby-lawsrelatingtotheexclusivebenefitofalltheparcelsinthesubsidiarymanagementcorporation.

• TheManagement Corporationmaydesignatelimitedcommonpropertyandcreate one or moresubsidiarymanagement corporations onlyforthepurpose of representingthedifferentinterestsofproprietors.

• AManagementCorporationmay by a unanimous resolution:

a. Acquirelandoutsidethelottobeusedforthepurposesconnectedwithsubdividedbuildingorland;or

b. Grantoraccepttheburdenofan easement imposedonthelotforthebenefitofsomeotherland;or

c. Acceptthebenefitofaneasement imposedinfavourofthelotonsomeotherland.

• Anyquestionsariseinthemeetingwhichthetypeofresolution is not specified.

STRATA MANAGEMENT

41

Time frame to give notice of resolution

Atleast21daysbeforegeneral meeting

Atleast30daysbefore general meeting

Atleast21daysofnoticebeforethegeneral meeting

Atleast14daysofnoticebeforethegeneral meeting

Howtoconduct?

• Tobepassedatadulyconvenedgeneralmeeting:

i. Byamajorityconsistingofnotlessthanthree-quartersofvalidvotesbyashowofhands;or

ii. Ifapoll,byamajorityofconsistingnotlessthanthree-quartersofvalidvotescastonthepoll

• Tobeconsideredatadulyconvenedgeneralmeeting.

• Themeetingperiodis60daysafterthegeneral meeting

• Attheendofthe60daysafterthegeneralmeeting,onapoll,thetotaloftheshareunitsoftheparcelsforwhichvalidvotesarecountedfortheresolutionis2/3oftheaggregateshareunitsoftheparcelsofalltheproprietorswhoconstitutedthemanagementbody.

• Tobepassedatadulyconvenedgeneralmeeting,

i. Carriedbyeveryvalidvotecastatthegeneral meeting byashowofhands;or

ii. Ifapollisdemandedandtaken,byeveryvotecastonthepoll

• Tobepassedatadulyconvenedgeneralmeeting:

i. Byamajorityconsisting of not lessthanhalfofvalidvotesbyashowofhands;or

ii. Ifapoll,byamajorityofconsisting not lessthanhalfofvalidvotescastonthepoll

STRATA MANAGEMENT