TEO JENG YUProperty Transactions: Common Pitfalls in Sale and Purchase Agreements
A property sale and purchase agreement looks routine at signing. It is only once completion is delayed, a defect is discovered, or a financing condition falls through that the terms glossed over at signing turn out to be the ones that determine who bears the loss.
For Developers
Sales of residential property are largely governed by statutorily prescribed sale and purchase agreements, which leave limited room to negotiate the core terms. Within that framework, disputes still commonly arise over liquidated damages for late delivery of vacant possession, the scope and standard of the defects liability period, and the process for handover and release of retention sums.
Developers should also be alert to how variations to the approved building plans, or delays caused by authority approvals, are documented — since purchasers are not always sympathetic to delays outside the developer's direct control if the contractual position was not made clear at the outset.
For Purchasers and Investors
Due diligence should extend well beyond the four corners of the agreement. Title searches should confirm there are no undisclosed caveats, charges or restrictions in interest; the vendor's authority to sell (particularly for a company or an estate) should be verified; and outstanding assessment, quit rent, or maintenance charges attached to the property should be identified before completion.
Where a purchase is conditional on financing, the interplay between the loan agreement's conditions and the sale and purchase agreement's completion timeline is a frequent source of dispute — a purchaser who cannot complete on time because financing is delayed may still be exposed to the agreement's default provisions unless this risk was addressed when the agreement was negotiated.
For Financial Institutions
Lenders financing a property purchase have a related but distinct set of concerns, particularly the priority and enforceability of their security once the transaction completes, and how a dispute between vendor and purchaser (for example, over defects or delayed completion) might affect the value or marketability of the secured property.
Where a development project itself is being financed, the interaction between drawdown conditions, the developer's obligations to purchasers, and the lender's security position should be reviewed as an integrated picture, not three separate documents.
- Confirm title, caveats and encumbrances before signing, not only before completion
- Verify the vendor's authority to sell where the vendor is a company, estate or trustee
- Clarify how financing delays interact with the agreement's completion and default provisions
- For developers, document authority-related delays and variations as they occur
Our property practice advises developers, purchasers, investors and financial institutions on sale and purchase transactions, financing-related documentation, and disputes that arise once a transaction has completed.
Most property disputes trace back to a term that was not fully thought through at signing — a careful review before you sign is consistently the most cost-effective step available.
This article provides general information about Malaysian law as a matter of public interest. It does not constitute legal advice and should not be relied on as a substitute for advice from qualified counsel on the specific facts of a matter. Laws and their interpretation change, and this article may not reflect the most current position.
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