What Is a Sale and Purchase Agreement (SPA)?
The Sale and Purchase Agreement (SPA) is the most important legal document in a property transaction. It is the binding contract between buyer and seller that details every aspect of the sale. In Malaysia, the SPA is typically prepared by the seller's lawyer and must be signed by both parties.
Key Components of an SPA
1. Parties to the Agreement
- Full legal names and IC/passport numbers of buyer and seller
- Addresses for correspondence
- If buying through a company, the company registration details
2. Property Description
- Full address and lot number
- Title reference (grant/geran, HS(D), strata title)
- Built-up area and land area
- Type of property (freehold or leasehold, with remaining lease years)
3. Purchase Price and Payment Schedule
The payment is typically structured as follows:
| Payment Stage | Percentage | Example (RM 500,000) |
|---|---|---|
| Earnest deposit (already paid) | 2-3% | RM 10,000 - RM 15,000 |
| Balance deposit (within 14 days of SPA signing) | 7-8% | RM 35,000 - RM 40,000 |
| Balance purchase price (via loan or cash) | 90% | RM 450,000 |
The total deposit (earnest + balance) is always 10% of the purchase price. The remaining 90% is typically paid through bank financing within 3 months (+ 1 month extension).
4. Completion Period
The SPA specifies how long the buyer has to complete the purchase. Standard timeline:
- 3 months from date of SPA signing (commonly called "3+1")
- +1 month extension with interest penalty (usually 8-10% p.a. on the outstanding balance)
If the buyer fails to complete within 3+1 months, the seller may terminate the agreement and forfeit the deposit.
5. Representations and Warranties
The seller warrants that:
- They are the rightful owner with authority to sell
- The property is free from encumbrances (or discloses existing ones)
- No undisclosed defects or pending legal actions
- All outgoings (maintenance, quit rent, assessment) are paid up to date
6. Vacant Possession
The SPA should specify when the seller hands over the property with vacant possession. This means the property is empty, clean, and free of occupants.
Stamp Duty on the SPA
The SPA must be stamped with LHDN within 30 days of signing. Stamp duty on the SPA is based on the purchase price:
| Purchase Price Tier | Stamp Duty Rate |
|---|---|
| First RM 100,000 | 1% |
| RM 100,001 - RM 500,000 | 2% |
| RM 500,001 - RM 1,000,000 | 3% |
| Above RM 1,000,000 | 4% |
Example: For a RM 500,000 property:
First RM 100,000 x 1% = RM 1,000
Next RM 400,000 x 2% = RM 8,000
Total stamp duty = RM 9,000
Legal Fees
Lawyer fees for the SPA follow a scale set by the Solicitors' Remuneration Order:
- First RM 500,000: 1% (minimum RM 500)
- Next RM 500,000: 0.8%
- Next RM 2,000,000: 0.7%
- Above RM 7,500,000: Negotiable
For a RM 500,000 property, legal fees are approximately RM 5,000 plus disbursements.
Read Before You Sign
Never sign an SPA without having your own lawyer review it. The seller's lawyer protects the seller's interests. Your lawyer protects yours. This is not the place to cut corners.