For the benefit everyone here, this is how I see it. Check it out with your lawyers, read the S&P, go to REDHA website for details, etc.
Long winded, I hope it benefit everyone here. I am not a lawyer, just from my experience.
There is NO clause in Sales And Purchase Agreement that Purchaser can terminate the S & P. Once signed, it is binding already.
It cannot be revoked.
Purchaser can’t even sell it as the property is not handed over. Technically it is not even registered in his name. No transfer allowed as long as caveats are in place. The master title belong to the developer. Registration only happen when the entire project is completed and names submitted for strata title processing.
The only way to get out is to allow the Purchase to default and determine the Agreement which allow the terms and conditions to take its course.
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This is part of a standard Sales and Purchase Agreement governed by Ministry of Housing, Malaysia.
Default by Purchaser and determination of Agreement
(We assume the property is RM1,000,000)
10. (1) If the Purchaser:- (a) subject to subclause (3) below fails to pay any instalments 7 payable under subclause 4(1) in accordance with Third Schedule hereto or any part thereof and any interest payable under Clause 9 for any period in excess of twenty-eight (28) days after its due date;
or (b) commits any breach of or fails to perform or observe any material terms or conditions or covenants contained in this Agreement;
or (c) before payment in full of the purchase price of the said Parcel, commits an act of bankruptcy or enters into any composition or arrangement with his creditors or, being a company, enters into liquidation whether compulsory or voluntary, the Vendor may, subject to subclause (2) hereof, annul the sale of the said Parcel and forthwith terminate this Agreement and in such an event:-
(i) the Vendor shall be entitled to deal with or otherwise dispose of the said Parcel in such manner as the Vendor shall see fit as if this Agreement had not been entered into;
Essentially this is means the Developer can fix any price they want. In a depressing market, the new value of the property would be very much lower than the original price. They would ascertain the new value first then, they will apply the penalty discount structure.
Assuming original price is RM1,000,000, new value is RM 700,000. Penalty discount structure is 20%. The new discounted value is RM560,000. Purchaser to pay differential sum of RM440,000.
(ii) the instalments previously paid by the Purchaser to the Vendor, excluding any interest paid, shall be dealt with and disposed of as follows:-
(a) firstly, all interest calculated in accordance with clause 9 hereof owing and unpaid shall be paid to the Vendor;
(b) secondly, an amount to be forfeited by the Vendor as follows:
(i) where up to fifty per centum (50%) of the purchase price has been paid, an amount equal to ten per centum (10%) of the purchase price;
(Purchaser to pay RM 100,000.)
(ii) where more than fifty per centum (50%) of the purchase price has been paid, an amount equal to twenty per centum (20%) of the purchase price;
(Purchaser to pay RM200,000)
(c) lastly, the residue thereof shall be refunded to the Purchaser;
(It can be negative or positive)
(iii) neither party hereto shall have any further claim against the other for costs, damages, compensation or otherwise hereunder; and
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If the financing is done through banks, the banks would seize the property and attempt to recover their loans.
The property do not belong to the purchaser anymore. It belong to the bank. Purchaser lose everything.
The remedial services would include forced sale of the property if it can be sold. If the project cannot be sold cos it is uncompleted, the borrower would be liable personally. If it can be sold, it would be done through auction and bank will recover the differential sum between auction price and loan drawn down from the borrower. Bankruptcy proceedings would commence.
The minute you default, the bank would seize the property first, then only they demand payments from you. Final auction price is anybody guess. Normally the price would be about 40% lower than the original price.
And the borrower would have to pay the difference to the bank yet do not own anything.
Important note: The loan is between the purchaser and bank. It has nothing to do with the developer or the property. The property is just the collateral and the means to facilitate the loan.
And we have not started on the legal fees, etc etc. The developer / banks can even claim DIBS fees or discounts from the purchaser.
For sake of discussion, assuming that the purchaser has lots of cash to burn and willing to pay the estimated 50% loss which is would probably not happen but let’s say it did happen. What are the implications of getting a new buyer. Everything can be sold. It is just the price and risks
1. There’s no title deed. Sale can be made via a Deed of Assignment backed by the original S&P of the first buyer and the developer and Power of Attorney given by the first purchaser. This is what we call side line private arrangements. You would need the approval of the developer to do this. Usually developers do not like this arrangements as S&P are stamped and documented. There’s no room for reassignment.
2. And assuming that a new buyer came along and willing to take over the loan repayments. Old buyer signed off all his rights to this new buyer. What happen if new buyer did not pay the loans. Result is original purchaser is liable cos the loan is registered in his name. More so, his name would appear in the national registry of total loan exposure resulting him not able to apply for other loans. Worse, he would be sued by the bank as the loan as he is the original borrower. He is as good as the guarantor for the loan.
Whether to bite the bullet or not, it is entirely up to the purchaser.
Obviously some will say I am wrong, maybe I am, maybe I am not. Go check with the lawyers.
