Buying or selling land in Sarawak

Sarawak has its own land legislation: Land Code (Cap. 81.). So for most transactions, you have to be familiar with its terminology, rules, forms, consents and procedures.

REGISTRY	Land & Survey Department of the district where the land is
TYPICAL TIMELINE	3 to 6 months, if nothing gets stuck

Negotiate the transaction, not just the price

The price is only one element of a successful land transaction. The real value of a deal is understanding the land title, classifications, permitted use, any development restrictions, and other regulatory requirements. A lower price does not mean a better investment if the land cannot be used for the intended purposes and the documents lack built-in protections.

Whether you’re a buyer or a seller, you should insist to have your lawyers prepare the first draft of the transaction documents. These are never neutral. They arrive with every open question which wasn't discussed during the negotiations answered in someone’s favour:

• How long the time for completion is, whether there is any extension?

• Whether the sale is conditional, what happens to any moneys paid before the condition was satisfied? Is the deposit forfeited or returned?

• Who applies for any consent, permission to deal or the amendment of title conditions?

• Is the deposit forfeited if the transaction does not go through? Is the forfeiture mutual?

• Whose lawyer holds the deposit or payment sum as a stakeholder?

• Who pays for what legal fees or costs; who pays for stamp duty?

• Other issues which are unique to each transaction.

Working off someone else's draft puts you (and your lawyers) in the weaker position. The first sale and purchase agreement draft is usually only the start. But every change you want becomes a request. Requests accumulate, the other side starts counting them, and eventually one gets traded against the price. If your lawyers draft it, they spend goodwill objecting to your terms instead of you objecting to theirs. The balance of power changes.

Controlling the draft also means deciding the timetable. The drafting firm decides when documents circulate, when the consent application goes in, and how hard anyone chases it. Where a permission to deal can take months to obtain, that is not a small advantage.

Almost every Kuching sale that falls apart, falls apart over something already printed on the title. Before you talk numbers, look for four things:

• What class of land it is

  This decides who may lawfully buy and therefore the realistic price. The Sarawak Land Code sorts Sarawak land into:

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  • Mixed Zone;

  • Native Area;

  • Native Customary;

  • Interior Area; and

  • Reserved Land.

• How many years are left

  Most Kuching titles are State leases of 60 or 99 years, not ownership forever. A short unexpired term is not fatal, but banks lend less against it, so your pool of buyers shrinks. Renewal is possible, at a premium to the State. The document should decide whether the seller applies before the sale, or the buyer has to do it after.

• Whether you need permission

  Many titles are subject to certain conditions so you cannot transfer, charge or sublease without the written permission of the Land & Survey Department. That application, a permission to deal, takes weeks and sometimes months.

• Whose name is on it

  Not who paid, not who lives there bit whose name is registered. If it is still your late father’s, you are not the owner in law and cannot sell until the estate is sorted. If the land was paid by someone else than is listed on the title or people live there who are not the owner, this can complicate the picture and must be built into the contract.

Who is even allowed to buy it

This is the question with no exact equivalent in Kuala Lumpur. Anyone who was not born in Sarawak is treated as a foreign buyer in Sarawak. A person who is Native of West Malaysia is not a native of Sarawak. A sale to the wrong buyer is very risky and most likely it is void.

The sale, step by step

Sarawak uses the Torrens system, which means one thing above all: you still own the property until the transfer is registered. Signing, taking the money, handing over the keys, do not change ownership. However, this may affect the beneficial ownership.

Five issues that can catch both sides out

What a careful buyer’s lawyer will probe, and what turns a signed sale into a dispute.

1. One lawyer acting for both sides

A widespread practice is for a single lawyer to represent both sides. It works well until it doesn’t. People use the same lawyers for extended periods and build strong working relationships. A party recommends them because they will look after their interests well.

Lawyers are always required to look after the best interests of their clients. How can they properly do this when the interests of a buyer and seller are usually in direct opposition? More money or better terms for one, means less money and worse terms for the other. If there is a dispute such as a missed deadline, a forfeited deposit, a consent refused how will the mutual solicitor resolve the dispute? This will be a tense situation.

In the worst case, the firm must drop you both and you start again with new solicitors at the worst possible moment. The person who drafted the clause is the same person assuring you it is fair. In the worst case, they will have side conversations that are not disclosed and favour one party to the detriment of the other. None of this is good news.

The difference in price between instructing an independent lawyer, who clears conflicts of interests, and one who is “mutual” is not significant enough to be worth the risk of losing out on value in such a major deal. Anyone should think twice before agreeing.

2. Two prices: the side oral agreement

Someone will propose recording a lower price and settling the difference in cash, to reduce stamp duty or avoid capital gains tax. Or the reverse, the price is inflated so the buyer’s loan covers everything. Both are false declarations, and both unravel with potentially severe consequences.

• Stamp duty is assessed on the consideration or the market value, whichever is higher, and the transfer goes out for valuation. If the figure is understated, it usually gets assessed up anyway. Misrepresenting the consideration is an offence under the Stamp Act 1949 and can carry penalties if discovered by LHDN.
  

• Understating the consideration in the gains tax return is a false return, penalised at a multiple of the tax by LHDN if investigated.
  

• Inflating the price to draw a larger loan is a misrepresentation to the bank, which can recall the facility. Both the buyer and the seller can be made parties to a claim by the bank if the borrower defaults if they knew about the misrepresentation.
  

• It may be hard (or impossible) to enforce the side agreement. If the agreement is oral, you need to demonstrate in court that it even existed. The presumption is that parties agreed to everything in writing, and the SPA usually has a clause to say that the document is the entire agreement between the parties. But even when the agreement is sufficiently evidenced, no court will help you collect under a bargain made to defeat the revenue, so if the cash half never arrives you have no remedy;
  

• If CKHT form misrepresents the acquisition price, the buyer incurs a larger taxable gain when they sell. This is relevant if the buyer re-sells in under 6 years or the buyer is a company that does not benefit from a 0% rate at any time.

3. Whether the seller is really the seller

In some cases, the name on the register is only the starting point. Where the owner has passed on, an executor or administrator needs the transmission registered first. A company needs a board resolution, and a counterparty must check that the company is neither struck off nor in liquidation. An undischarged bankrupt cannot deal at all. Where there are co-owners, everyone signs or nobody sells. A beneficiary who is left out lodges a caveat, and the sale stops. These are all important due diligence steps.

Then the harder question: is the registered owner holding for somebody else? Nominee arrangements are common and potentially risky. For example, a native holding Native Area Land for the non-native who paid for it is most likely unlawful, and the buyer may inherit the issue. These transactions must be conditional land conversion because a non-native can never “acquire any rights or privileges” over Native Area Land.

4. What was built versus what was approved

Owners often push the boundaries of what can lawfully be built without permission. Enclosed car porches, roofed-over back yards, a floor put to a use the approved plan never showed. The council can require it undone, the valuer may discount it, insurers may decline it and the liability travels with the property. Boundaries drift too: only a survey shows whether that fence is on your land. Always ask for the approved plans.

Compliance with the approved plan is an implied condition of the title itself. A breach doesn't just invite a demolition order, but it entitles the government to declare the land forfeited and re-enter it. Although this is very rare, it is provided for by the Land Code and should not be fully discounted. The liability flows with the property to you.

5. Where the deposit is sitting

All the moneys you pay should be clearly documented. Whilst it is common, it is not a good idea to pay the deposit to the agent or the seller directly because if the deal falls through, you need to sue them to get it back. The purchase price should be paid into a law firm client account who should hold it as a neutral third party under terms that say when it gets released and to whom. Normally, this is detailed in the sale and purchase agreement, but good practice is to make sure the offer letter already agrees on this.

This does not mean that money held by a lawyer is automatically safe. Unfortunately, unethical lawyers have run off with client funds so always check that the firm keeps client funds in a separate account from its own and that it has a professional indemnity insurance to cover the amounts you have paid. The best practice is an escrow agreement in writing signed by both parties and the lawyer that sets out what happens if the deal collapses. Also agree that any interest earned on your deposit is paid to you. The 10% deposit is the agreed penalty if either side pulls out. It protects both parties.

Disclaimer

This article was generated with AI assistance and reviewed by a lawyer before publication. However, it's provided for general information only and isn't legal or professional advice. Of course, any errors should be attributed to the AI not the human reviewer. Please verify anything important independently and consult us where it matters.