LEGAL
The typical charges that the developer imposes are as follows:
RESIDENTIAL
COMMERCIAL Not regulated. Normally, Developer reluctant to grant consent during construction; charge 1% of the purchase price/ market value whichever higher as admin fee.
Governed under HDA. Prior to April 2007, RM500 for admin fee for consent. Normally, Developer will not grant consent during construction. After April 2007, RM50 as admin fee. payment for the later stages, as indicated in the progressive billing. Even if the developer is willing to accommodate the above, the new buyer will have difficulty in obtaining financing from financial institution simply because the seller is not quite the owner yet. Therefore, the buyer has to fund the purchase price with his own fund, by cash. If liquidity is an issue, this left the new buyer with one possible way, which is to allow novation of the first SPA to replace the first buyer (seller) with the new buyer. However, the difference in pricing will then need to be addressed differently, resulting in further complication of the matter. Apart from the above, the developer will normally charge the investor intends to sell the property prior to issuance of individual/strata title, whether under construction or completed. From the above, it is obvious that selling of property under construction requires much more effort. Understanding and co-operation between the new buyer, the seller and the developer as well as the bankers is important to make sure the
success of the whole transaction. On the other hand, the investors who wish to dispose off their under construction property need to be aware of the Real Property Gains Tax (RPGT). RPGT is the tax levied on gains derived from the disposal of real property. The sooner the property sale takes place, the higher the rate of RPGT. For the investors who tend to dispose off the under construction property should expect a higher rate of RPGT. Therefore, the investors are advised to choose their move wisely before entering into any transaction. In the next issue, I will share with you the implications of residential build on commercial title. Stay tuned.
“Selling your under construction property requires much more effort. Understanding and co-operation between the new buyer, the seller and the developer as well as the bankers is important to make sure the success of the whole transaction. “
The current rates of the RPGT are as follow:-
Period from Acquisition to Disposal
Companies
Malaysians and Permanent Residents
Within 1st to 3rd Year
30%
30%
30%
Within 4th Year Within 5th Year
20% 15%
20% 15%
30% 30%
6th Year and thereafter
5%
0%
5%
Foreigners
Ab out The C ontributor Chris Tan is the Founder and Managing Partner of Chur Associates, Advocates, & Solicitors. He is deeply involved
in the real estate industry, having assisted Dato’ Alan Tong as the World President of FIABCI (International Real Estate Federation) in 2005/2006. Chris is now the Honorary Legal Advisor for FIABCI Asia Pacific Regional Secretariat on regional concerns. Chris was elected to serve FIABCI’s Malaysian Chapter for two terms, from 2006 to 2010, as its National Council Member, and in 2009, he was appointed to the Board of Directors of FIABCI International to preside over the portfolio of Young Members aged 35 and below for the term 2009/ 2010.
70 AUGUST 2014 www.propertyinsight.com.my
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