Auction properties (often called "lelong" properties) can sell below market value, which makes them attractive to buyers. But a lower price can come with hidden costs. Before you bid, there are several things you must check.
Key Takeaways
- Check the owner's unpaid assessment tax, quit rent, maintenance fees and utility bills before you bid.
- Read the auction contract to see whether these arrears can be claimed back from the auctioning bank.
- If the owner's own paperwork is incomplete, you may have to complete it, and developer fees can exceed RM10,000.
- Check that the developer is still operating and the title is in order, as this affects both the transfer and your loan.
- Check your loan eligibility before the auction, or you risk losing your deposit.
Check what the owner still owes
A property usually goes to auction because the owner can no longer pay. Before bidding, check the outstanding amounts on:
- assessment tax (cukai pintu)
- quit rent (cukai tanah)
- maintenance fees owed to the management body
- water, electricity and Indah Water sewerage bills
What if the arrears run into tens of thousands?
That does not automatically make it a bad buy. The key is whether the auction contract says these arrears can be claimed back from the auctioning bank. If it does, that money is covered.
How far did the owner's own paperwork go?
If the original owner never completed their own purchase paperwork, the successful bidder has to complete it for them, or the property cannot be transferred into the bidder's name. Check with the bank and the developer early. Developer fees can sometimes exceed RM10,000, so you need to know the figure in advance to prepare enough funds.
Has the developer gone bust? Is the title still in place?
Where the owner's paperwork is incomplete, also check whether the developer has been wound up and whether the title is still in order. Otherwise the transfer can run into problems, which also directly affects whether the bank will release your loan.
⚠️ Pay close attention to this point.
Check your loan eligibility in advance
The payment period after an auction is limited, and banks generally only let you apply for a loan after you have won the bid. If the loan is not approved in time and you cannot pay the balance, you may lose your entire deposit. Find out how much you can borrow before the auction.
Have a lawyer review the auction contract before you bid
The safest step is to have a lawyer go through the auction contract (the Proclamation of Sale or Memorandum of Sale) before the auction: who bears the arrears, how long you have to pay, and what consents are needed.
Conclusion & Legal Support
If you are considering an auction property, you can contact Jack Law Chambers to arrange a review of the auction contract before you bid. Schedule a 1-on-1 Legal Consultation.
This article gives general information only and is not legal advice. Each auction has its own terms. Please obtain advice on your situation before bidding.
References
Legislation
- Strata Management Act 2013
- National Land Code 1965