Property Development Glossary
B
Bank Valuation
Banks conduct property valuations known as Bank Valuations to assess a property's value, which is a crucial factor in determining the terms of a home loan.
Built-up area
The total area of a property that includes all enclosed spaces, such as rooms, hallways, and staircases.
Bumi lot
Bumi lot is a property or piece of land that is set aside specifically for sale or lease to Bumiputeras. This means that non-Bumiputeras may not be eligible to purchase or lease the property unless it is released to the open market after a specified period of time.
C
Capital Appreciation
Capital appreciation is the term used to describe an increase in the value of a property due to favorable changes in the market conditions. In simpler terms, it refers to the profit earned from selling a capital asset at a higher price than its original purchase price.
CCRIS Report
A Central Credit Reference Information System (CCRIS) report is a report that evaluates a prospective borrower's creditworthiness and is produced by the Credit Bureau of Bank Negara Malaysia. This report is a crucial factor in determining the approval of home loan applications.
Certificate of Completion and Compliance (CCC)
A Certificate of Completion and Compliance (CCC) is a document that indicates that a building or construction project has been completed according to the approved plans and in compliance with relevant building codes and regulations. The CCC is typically issued by the local government agency responsible for building approvals and inspections.
Conveyancing
The legal process of transferring property ownership from one party to another is known as conveyancing. Essentially, it refers to the process of a property owner selling their property and transferring ownership to the buyer, covering all the legal steps involved in the process.
Covenants
A covenant is a clause or agreement that is documented in a property deed like a Sales and Purchase Agreement (SPA), which obligates the owner to comply with specific terms. These terms can include limitations on the method and timing of selling the property.
CTOS score
A CTOS score is a credit rating undertaken by the CTOS credit rating agency, and is often used by financial institutions to check the credit worthiness of a lender such as an individual applying for a home loan.
D
Debt Service Ratio (DSR)
Banks use a Debt Service Ratio (DSR) to evaluate whether you are capable of making debt payments. This calculation involves comparing your monthly net income with the total amount of fixed debts you currently pay. It helps banks determine the maximum amount of home loan you can afford to repay.
Deed of Assignment (DOA)
The Deed of Assignment (DOA) is a document used to transfer ownership of property between parties. It confirms that the assignor (who currently owns the property) is transferring ownership to the assignee (who is acquiring the property). This legal document of transfer is used in cases where a Memorandum of Transfer (MOT) cannot be used, due to the current status of the property title.
Defect Liability Period
After purchasing a newly developed and eligible property, there is a specific period known as the Defect Liability Period that serves as a warranty for repairs. During this time, which lasts for 24 months for Individual Title properties and 36 months for Strata Title properties, the developer is responsible for fixing any defects caused by poor construction or not meeting the promised standards.
Down Payment
A down payment is a lump sum payment made upfront to a seller during the purchase of a property. The minimum payment is 10% of the total purchase price, although purchasers can pay more than that figure, if agreed. The first part of this may be paid as a 2% earnest deposit (see below!), which contributes to the mandatory 10% minimum down payment.
E
Earnest Deposit
When buying a property, an earnest deposit is a payment made to show the seller that you're serious about the purchase. It is usually a non-refundable amount of 1%-2% of the total purchase price and is submitted along with a Letter of Offer. It is recommended to pay the earnest deposit to a trusted third-party who will hold the funds until the purchase is complete.
F
Fixed-rate home loan
A home loan with an interest rate that is fixed for a certain period, usually between 1 to 10 years, after which it may be adjusted based on market rates.
Floating-rate home loan
A floating rate home loan is a type of loan where the interest rate can change over time, based on market interest rates. Banks usually set a benchmark rate for the loan, which can be revised periodically. The advantage of this loan is that it offers flexibility and lower monthly repayments when interest rates are low. However, there is also a risk of higher repayments when interest rates increase.
Freehold
In Malaysia, freehold is one of the four primary types of land. It refers to land ownership without a limited term and is owned indefinitely by the owner. Although rare, freehold land may be subject to compulsory acquisition by the government.
G
Guarantor
A guarantor is a person or entity that agrees to take responsibility for another person's debt or obligation in the event that the primary borrower cannot fulfill their payment obligations. The guarantor is legally bound to make the payments on behalf of the primary borrower if they default and is often required by lenders to mitigate the risk of default.
H
Home Loan
A home loan, also known as a mortgage, is a type of loan provided by a financial institution to an individual or entity for the purpose of purchasing or refinancing a home or property. The home loan is secured by the property, and the borrower makes regular payments of principal and interest to repay the loan over a set period of time.
I
Individual Title
Individual title in Malaysia refers to the document that confers individual ownership of a property, such as a house or apartment. The individual title is issued by the land office and serves as proof of ownership and the right to use and transfer the property.
J
Joint Ownership
Joint ownership is a form of property ownership where two or more individuals have legal ownership of a property together. This ameans that each owner has an equal share in the property and can use or sell it as they wish, subject to the agreement of the other owners. Joint ownership can be common for married couples, family members, or business partners who want to own a property together
L
Land Title
Land Title is a crucial legal document that confirms the ownership of a specific land area or parcel. It is a general term that encompasses different types of land titles, including Individual Title and Strata Title. The Land Office of the relevant state authority keeps a copy of all land titles.
Leasehold
Leasehold refers to a type of land tenure where an individual or entity holds the right to use and occupy a property for a specific period of time, usually ranging from 30 to 99 years. The land is owned by the government, and the leasehold title is issued by the relevant state authority.
Letter of Offer
Letter of Offer is a written document that serves as a formal indication of a buyer's intention to buy a property from the owner or developer. Along with the letter, usually an earnest deposit of 1%-2% of the total purchase price is submitted.
Loan Agreement
A loan agreement is a written contract between a lender and borrower that sets out the terms of a loan. It specifies details like the loan amount, interest rate, repayment plan, and any extra charges. The agreement is binding and establishes the rights and responsibilities of both parties.
Loan Tenure
The length of time for which a home loan is taken, during which the borrower makes monthly repayments to the bank or financial institution.
Loan-to-Value (LTV)
Loan-to-Value (LTV) ratio compares the amount of money borrowed for a loan to the value of the property being purchased. It helps lenders evaluate the level of risk associated with a loan. A higher LTV ratio means greater risk for the lender.
M
Master Title
The Master Title is a title given to a property developer during the construction and development phase of a property. It confirms the developer's ownership of the entire land that is being developed and enables them to sell individual parcels of the land as Strata or Individual Titles.
Memorandum of Transfer (MOT)
The Memorandum of Transfer is a legal document that confirms the transfer of ownership of a property and serves as the final step in the transfer process.
Mortgage Level Term Assurance (MLTA)
MLTA is a type of insurance policy that provides coverage for the outstanding mortgage balance in the event of the policyholder's death. The policy ensures that the mortgage will be fully paid off in the event of the policyholder's death, protecting their family or beneficiaries from financial burdens.
Mortgage Reducing Term Assurance (MRTA)
MRTA is a type of insurance policy that is designed to cover the outstanding mortgage balance and decrease over time as the mortgage is paid off. The coverage amount decreases in line with the outstanding mortgage balance, and in the event of the policyholder's death, the policy will pay off the remaining balance of the mortgage.
Q
Quit Rent
This is a tax imposed on land ownership in Malaysia, and is payable to the local authority on an annual basis.
S
Sales & Purchase Agreement (SPA)
Sales and Purchase Agreement is a legally binding contract that outlines the terms and conditions of a property sale between a buyer and a seller. The SPA includes details such as the property price, payment terms, and other important information related to the property transaction.
Solicitor’s Remuneration Order
A solicitor's Remuneration Order refers to a legal rule that governs the amount of fees that can be charged by solicitors for their services in property transactions, such as buying or selling a property. This rule sets out the maximum and minimum fees that solicitors can charge, as well as the rates that they can charge for these services.
Standard Base Rate (SBR)
SBR is the benchmark interest rate used by banks to determine the interest rates they charge for loans and other credit facilities. It's set by the central bank of Malaysia, Bank Negara Malaysia, and serves as a reference point for banks to calculate their lending rates. The SBR is reviewed periodically by the central bank to ensure that it remains aligned with prevailing economic conditions and market trends.
Stamp Duty
Stamp duty is a fee charged for the official endorsement, or "stamping," of legal documents to prove their authenticity. It is a compulsory requirement for property transfer documents and loan agreements. The stamps themselves are issued by the Inland Revenue Board of Malaysia (LHDN).
V
Vacant Possesion
The Notice of Vacant Possession is a document that confirms the transfer of ownership of a property from a developer to a purchaser. This document is issued after the Certificate of Completion and Compliance has been granted, which indicates that the property is fully constructed and available for use, and it also marks the beginning of the defect liability period.
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