Understanding the Malaysia property market: The different ways individuals can own and dispose properties in Malaysia，CoAssets – Mon, Apr 6, 2015

By Elizabeth Siew (Guest Contributor)

In the past few years, more and more Singaporeans have invested in Malaysia. The appeal of Malaysia properties is that, unlike Singapore properties, there are flexible ownership arrangements. The normal perception and methodology of property investment is acquiring a property through the process of conveyance and transfer of ownership of a real estate from the registered owner to the buyer.

Typically the process encompasses the entering into a sale and purchase agreement (SPA) and transfer instrument between the property owner with the buyer. In the case of a property with individual or strata title, the parties will execute a Memorandum of Transfer where the title deed will be conveyed or transferred to the buyer. In the case of a property under master title (where individual or strata title is yet to be issued), the conveyance of title, rights and benefits is carried out through a deed of assignment, where all the owner’s rights, title, benefits, interest, obligations and liabilities are assigned absolutely to the buyer.

Acquisition of Properties through Conventional Means

1. Buy from developer: This is generally known as primary market purchase. It refers to purchasing of residential or non-residential properties directly from a developer or builder. The property could be under construction or duly completed.

2 . Buy from individual owner: This is generally known as secondary market purchase or sub-sale. You may buy from an existing owner of a property, enter into sale and purchase agreement and instrument of transfer. Upon completion of the sale and purchase transaction, ownership of the property will be conveyed or transferred to the buyer.

Whilst acquiring property through the above means of conveyance is a definite way of one obtaining title, rights and benefits attached to a property, there are other means of acquiring rights and benefits OR control to a property, which are out of the norm.

Acquisition of Properties through Unconventional yet Legal Means

1. Buy from individual owner IN THE FUTURE: Again this is a purchase of property from the existing owner ie. a secondary market purchaser or sub-sale. The only difference is TIMING of conveyance. Both parties may agree to a sale and purchase to happen sometime in the future. The sale and purchase agreement may be signed in escrow by the parties, deposit with a Solicitors, with specific instruction to date and stamp the said agreement on a specific date in the future. Upon the dating and stamping of the sale and purchase agreement on the specific future date, the sale and purchase transaction shall take effect. In the meantime, the buyer may have arrangement with the owner for early vacant possession, temporary license to occupy the property on a month-to-month tenancy and even the right to sub-let.

2. Take over the Company that owns the property: This happens to some commercial properties transaction. A particular property is bought and held under a company. It could be a limited liability company, partnership, limited liability partnership or corporation. The purchase is done via acquisition of 100% paid up shares in the company. There are 2 setbacks in this type of acquisition: - (i) bank will not finance purchase of shares, as opposed to purchase of property; and (ii) the risk of acquiring an existing company is one may inherit the debt and liabilities of the company.

3. Buy REITS: This is an indirect investment in prime properties, especially prime retail and commercial malls, which otherwise will be beyond reach of a normal man on the street due to the high cost of entry. The benefit of investing in REITs is low starting capital and regular earning of dividend.

4. Buy property developers’ shares: Another indirect investment in property is by investing in the stock of property developers that is listed on the stock exchange. The setback is the lack of direct control over the management of the property and the company. The performance of the stock does not reply on the performance of the property but rather the management of the company. One may end up hoping and wishing for a dividend that never materializes. Due diligence and study of past performance of the company is important.

5. Buy at Auction: There are 2 types of auctions in Malaysia - public and private. Foreigners are not permitted to purchase properties via public auction in Malaysia. However, one can participate in private auction held by auctioneer for property owners who put up their property for sale through the process. These are not property under default of mortgages.

6. Buying Power of Attorney (PA): An irrevocable full PA granted by the owner to the purchaser for good consideration, provide the purchaser with full power and authority to deal with the property, sell, dispose, transfer, lease, receive proceed of sale, to sue, receive insurance money and recover debt owing and all matters relating to the property.

7. Buying a Trust: A deed of trust is an agreement / equitable instrument where the legal title of a property is vested in the trustee for and on behalf of the beneficial owner. The trustee may be engaged by the actual owner to purchase the property and be the borrower for financing of purchase of the property.

8. Buying Option: An option granted by the owner of a property to the option holder gives the holder the right but not the obligation to purchase the property some time in the future. Once option is exercised, the owner is obliged to dispose and transfer the property to the option holder. During the option period, the option holder may negotiate for right to temporary occupy the property or right to lease out the property to third party at a certain rent.

9. Lease options: Lease option is where an option is granted, at the consideration of an option sum, by the owner of a property to a prospective buyer (holder) to purchase the property sometime in the future. Meanwhile the holder takes the property on a monthly rent, until such time the holder exercises the option to purchase.

10. Buying lease rights: A lessee or lease holder of a property may sell the right over the lease to third party, normally with the consent of the owner or lessor. The prospective investor may by virtue of a deed of novation or assignment, assume the right as lessee of the property.

Flipping the coin to the side, when an owner to a property intends to sell, dispose or part ownership or legal obligation of their property, there are the process of sale and transfer where ownership will be conveyed to the buyer of his/her property. There are also processes and methodology where one could ‘release’ or ‘offload’ his/her duty and responsibility over a property to a third party without parting ownership.

The unconventional methodology discussed above for acquiring rights and interest to a property could apply to an owner who wishes to ‘offload’ his/her property or legal responsibility and obligations.

Disposing Properties through Unconventional Means

Apart from flexible ownership arrangements, unbeknownst to many Singaporean owners, there are other legal ways for them to dispose their assets apart from simply selling their units. Three of the more regularly used approaches in Malaysia are as follows:

1. Granting a lease: A lease is a tenancy exceeding a term of 3 years. For a property owner who needs to ensure that his/her responsibility of mortgage repayment is fulfilled is by securing a long lease, especially a fixed term lease. He is somewhat guaranteed of the monthly inflow of revenue.

2. Invite a joint investor: to one’s property or disposing to third party a portion of equity in a property, while maintaining himself/herself as the registered owner. The portion owned by the third party can be hold by the existing owner on trust, by virtue of a deed of trust. The risk of investment is hence shared and spread.

3. Granting regular option and put option: to sale and purchase of the property in the future. Whilst the option holder may exercise option to compel the owner to sell in the future, the owner may compel (by way of put option) the option holder to purchase his/her property some time in the future.

Conclusion

In view of the flexible ownership arrangements, perhaps that is why some Singapore developers find ample opportunities in the Malaysia property market. The good news is that some of these regulations are also applicable to regular property owners and they could consider using some of these legal yet unconventional approaches to off load their units.

In conclusion, be it a conventional sale and conveyance or an unconventional disposal methodology, the fundamental issue in guiding one’s decision as to which methodology to adopt in acquiring or disposing an investment property is conducting the necessary due diligence. Proper and thorough due diligence ought to be conducted on the subject matter property, the property owner, the developer of the project, the management of the project, the State’s guidelines, the legality of the structure and scheme of arrangement. It is an investment and it calls for risk analysis and feasibility studies. Ultimately, it lies on the decision maker’s commercial objectives.

Elizabeth Siew (on the right) is a prominent Malaysian lawyer who has written numerous books on the topic and her latest book is titled “Smart Property Investors know the Law”. She has vast experience in conveyancing, commercial and corporate legal practices, particularly with respect to land acquisition and joint project development matters, property development for commercial, residential and industrial projects. Elizabeth will be speaking at the upcoming Malaysia Property Xchange 2015, an expo dedicated to help Singaporeans who currently own properties in Malaysia. Those who wish to reach out to Elizabeth or meet her in person can register at s.coassets.com/VVk

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Source:https://sg.news.yahoo.com/understanding-malaysia-property-market-different-074627021.html