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Navigating the property market in Malaysia can be a monumental challenge, especially if you’re a first-time home buyer or even looking for a place to rent. Previously, we shared a step-by-step guide for purchasing a subsale property in our country, as well as the reasons why a lawyer is needed for the process.
In both of our in-depth insights, you may have noticed that purchasing a home is far more complicated than just picking a property, paying the deposit, securing the loan and paying the balance purchase price. Indeed, there are many other fees involved, which are not as publicly known as what we’ve mentioned above.
These additional costs are also present in tenancy agreements when you’re renting or renting out a property in Malaysia. Hence, it’s important to be familiar with the additional costs so that you can prepare the proper budget and avoid getting swindled by irresponsible parties who overcharge more than what you are required to pay.
So, what are these extra costs, and how much exactly do you need to pay? Well, join us as we break them down below.
Legal fees for Property Purchase (general transactions), Developer Sales and Tenancy Agreement
There are two main additional fees when purchasing or renting a property in Malaysia, namely legal fees and Stamp Duty.
Legal fees are what you pay to a lawyer for preparing and handling legal documents. These include the Sales and Purchase Agreement (SPA), Loan Agreement and Tenancy Agreement.
Here’s detailed information on each of these legal fees:
Property Purchase (general transactions)
For subsale or commercial property transactions, the legal fees are set under the Solicitors’ Remuneration Order (SRO) 2023.
A breakdown of the applicable legal fee rates is as below:
Do note that these rates also apply to loan agreements and are calculated based on your loan amount.
Developer Sales
If the transaction is governed by the Housing Development (Control and Licensing) Act 1966, the remuneration of the solicitor who conducted and completed the transaction is as follows:
Tenancy Agreements
When renting or renting out a property, legal fees cover the preparation or review of your tenancy contract. These fees are usually based on your monthly rental amount:
As for who will bear the legal fees for a Tenancy Agreement, there is no fixed law in Malaysia whether it is the responsibility of the tenant or the landlord. Usually, when parties enter into an agreement, they would appoint their own lawyers and pay the respective legal fees to their appointed lawyers.
Do note that all of the above fee calculations are only estimates for the principal documents, namely the SPA, Loan Agreement and Tenancy. Additional legal documents such as Consent to Transfer and Charge, Statutory Declarations, Real Property Gain Tax (RPGT) forms and others may incur separate charges.
Hence, for an accurate and comprehensive quotation tailored to your specific transaction, it is advisable for you to consult a qualified lawyer.
Stamp Duty on Property Purchase and Tenancy Agreements
Another extra cost to consider when purchasing or renting a property in Malaysia is Stamp Duty. A tax imposed by the Government to legally validate property documents such as the Memorandum of Transfer (MOT) or Deed of Assignment (DOA), it is payable whenever ownership of property changes hands or when a Tenancy Agreement is signed.
Here’s detailed information on the Stamp Duty fees:
Stamp Duty on Property Purchase
Stamp Duty is calculated based on the property price or market value — whichever is higher — according to this tiered system below:
Do note that Stamp Duty also applies to loan agreements, but it is capped at a maximum rate of 0.5%.
Stamp Duty on Tenancy Agreements
As for Tenancy Agreements, the rate of Stamp Duty is based on the total annual rent stated in the contract, with the first RM2,400 of the annual rent being exempt from stamp duty. Beyond this, every RM250 (or part thereof) is subject to stamp duty based on the lease duration:
With the legal fees and Stamp Duty rates established, here’s an example breakdown for the applicable fees for a purchase of a property worth RM600,000, with a loan amount of RM540,000 (90%):
Hence, for this theoretical scenario, the total legal fees and Stamp Duty payable would be RM28,600.
Alternatively, you can also calculate the estimated fees using our Legal Fees Calculator here.
Stamp Duty exemptions
Stamp Duty exemptions are special waivers or reductions granted by the Malaysian Government to lessen the financial burden on eligible individuals or transactions. If you are a Malaysian buying your first residential property, you may be eligible for a 100% exemption on stamp duty for both the MOT/DOA and the Loan Agreement.
These exemptions are governed by:
- P.U.(A) 53/2021 - Stamp Duty (Exemption) Order 2021 (Instrument of Transfer)
- P.U.(A) 54/2021 - Stamp Duty (Exemption) (No. 2) Order 2021 (Loan Agreement)
However, these exemptions are not automatic, and you must meet these specific conditions set by the Government:
- The agreements are executed between 1 January 2021 and 31 December 2025
- The property is a residential property (excludes SOHO, SOFO, SOVO, and commercial serviced residences)
- You are a Malaysian citizen buying your first residential property
- You do not own any other residential property, including inherited or gifted properties
Whether you’re in the property market to purchase a house, rent a place to stay or rent out your property, we truly hope that this information will help you better prepare for the transaction. With that in mind, if you want to delve even deeper into conveyancing, check out our other insights on the subject matter here.
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About us
Ahmad Danial Iswatt & Luqman is an esteemed law firm that delivers best-in-class legal solutions to individuals, businesses and legal entities in Malaysia and beyond. We offer ease of mind to our wide range of clients by dismantling complex legal challenges with novel solutions through exceptional legal advisory and representation.
Our distinguished partners of diverse backgrounds and expertise have achieved significantly favourable results in all levels of courts in Malaysia, from high-profile civil and criminal litigation proceedings to complex cases in which the outcomes have become binding precedents for the laws of the country. Backed by a growing team of exceptional lawyers and capable support staff, we aspire to be at the forefront of the legal sphere to satisfy our clients’ dynamic demands and ever-increasing complexity.
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