"I got keys early before completion of SPA. Can I start renovation?"

A purchaser signs an SPA for a subsale house.

The bank loan has been approved, but the balance purchase price has not been released. The property is still registered in the seller’s name and remains charged to the seller’s bank.

The purchaser’s tenancy is ending, and the renovation contractor is available immediately.

The seller agrees to hand over the keys early.

“You can move in first. Completion should happen next month.”

The arrangement appears convenient for everyone.

Then the bank requires an additional document. Completion is delayed. During renovation, a pipe bursts and damages the neighbour’s property.

Who is responsible?

Receiving the keys before completion can create practical and legal risks for both parties. Physical possession is not the same as legal completion of the sale.

1. What does “completion” normally mean?

In a subsale transaction, completion commonly involves payment of the balance purchase price in accordance with the SPA.

The transaction may also require:-

• redemption of the seller’s existing financing;

• discharge of the seller’s charge;

• State Authority consent;

• developer or proprietor confirmation;

• execution and registration of the transfer;

• registration of the purchaser’s bank charge; and

• settlement or apportionment of agreed outgoings.

The precise sequence depends on the title and financing structure.

Even if the purchaser has signed the transfer and obtained loan approval, ownership has not necessarily been registered and the seller may not yet have received the full purchase price.

Handing over a set of keys does not complete those steps.

2. What happens if the sale cannot be completed?

Most parties expect completion to occur.

Nevertheless, transactions can be delayed or fail because of:-

• failure to obtain financing;

• inability to redeem the seller’s loan;

• refusal or delay in obtaining consent;

• a newly discovered caveat or title issue;

• bankruptcy, winding-up or death affecting a party;

• breach of the SPA;

• damage to the property; or

• failure to register the relevant documents.

If the purchaser has already moved in or substantially renovated the property, unwinding the transaction becomes more difficult.

Questions may arise over:-

• whether the purchaser must vacate immediately;

• who owns installed fixtures;

• whether renovation expenditure is recoverable;

• who must restore the property;

• whether occupation rent is payable;

• who bears utility and maintenance charges; and

• whether the deposit can be refunded or forfeited.

These consequences should be addressed before early possession is allowed.

3. Early possession should not rest on a verbal understanding

If the parties agree to early access, the arrangement should be documented separately or clearly addressed in the SPA.

The document may need to specify:-

• the date access begins;

• whether access is for inspection, renovation or occupation;

• whether the arrangement is a temporary licence;

• whether rent or a licence fee is payable;

• the works that may be carried out;

• who bears utilities and outgoings;

• insurance requirements;

• responsibility for contractors and visitors;

• liability for damage or injury;

• whether structural work is prohibited;

• what happens if the SPA is terminated;

• the period allowed for the purchaser to vacate; and

• the condition in which the property must be returned.

Calling the arrangement “early key collection” does not eliminate the need to define the parties’ rights.

4. The seller may still be bound by a bank charge

If the property is charged, the seller remains subject to the terms of the existing financing and security documents until redemption and discharge are completed.

Allowing major works or occupation without the bank’s consent may create issues under those documents.

The purchaser’s bank may also impose conditions before releasing the loan. A material alteration to the property before valuation or disbursement may affect the financing process.

The parties should not assume that consent between buyer and seller binds either bank.

5. Who carries the risk of damage?

The SPA should be reviewed to determine when the risk in the property passes from the seller to the purchaser.

Early possession may blur the practical position.

For example:-

• a contractor may damage wiring or plumbing;

• renovation works may cause a fire;

• materials may be stolen;

• a worker may suffer an injury;

• water leakage may affect an adjoining unit; or

• unauthorised work may lead to enforcement action.

The existing insurance policy may not cover renovation, commercial contractors or occupation by someone other than the insured owner.

Both parties should understand the scope of insurance before work begins. Appropriate contractor and public-liability coverage may also be required.

An indemnity in an early-possession agreement may allocate responsibility between the parties, but it does not prevent a third party from bringing a claim against anyone legally responsible.

6. Management approval may still be necessary

For strata property, the purchaser may require approval from the developer, joint management body or management corporation before renovation.

Requirements may include:-

• a renovation deposit;

• approved working hours;

• contractor registration;

• protection of lifts and common property;

• restrictions on hacking or structural work;

• disposal of construction waste;

• plans for plumbing or electrical changes; and

• confirmation of the responsible parcel owner.

Because the seller may still be the registered proprietor, the management body may require the seller’s authorisation or participation.

An agreement between the buyer and seller does not override the strata by-laws or management requirements.

7. Early access is not permission to carry out unapproved works

The purchaser must still determine whether the renovation requires:-

• planning permission;

• building-plan approval;

• management approval;

• approval from a local authority; or

• consent from another relevant authority.

This is particularly important for extensions, structural alterations, removal of walls, changes to the façade and conversion of the property’s use.

If unauthorised work begins before completion, the seller may face notices or penalties as the current registered proprietor.

The purchaser may then inherit the cost of rectification if the transaction completes.

8. Should the purchaser pay renovation contractors before completion?

The purchaser should consider the financial exposure carefully.

Custom cabinetry, flooring and built-in fixtures may have little removal value if the transaction fails. A purchaser who spends RM100,000 before becoming the registered owner is effectively investing in property still legally held by another person.

If early work is unavoidable, the purchaser may limit the initial scope to reversible or preparatory work.

Major structural or permanent work is generally more difficult to justify before the transaction and financing are secure.

Contractors should also be informed that access may be terminated if the sale does not complete.

9. Early possession creates risks for the seller too

The seller may lose practical control of the property before receiving the balance purchase price.

If the transaction fails, the seller may face:-

• a purchaser who refuses to vacate;

• damage or incomplete renovation;

• unpaid utilities or maintenance charges;

• complaints from neighbours or management;

• enforcement action over unauthorised works;

• third-party injury claims; and

• difficulty showing or reselling the property.

The seller should not release keys merely because the purchaser promises to “take full responsibility”.

Responsibility should be documented, supported by appropriate insurance and accompanied by a workable termination process.

10. What about furniture and fixtures?

The parties should prepare an inventory if the property contains furniture, appliances or other items.

The inventory should record:-

• which items are included in the sale;

• their condition when early possession begins;

• which items remain the seller’s property;

• whether anything may be removed;

• responsibility for loss or damage; and

• how newly installed fixtures will be treated if the SPA terminates.

Dated photographs can reduce later disagreement.

Without an inventory, the parties may dispute whether an item was included in the purchase, removed by the seller or damaged during renovation.

11. Developer purchases require a different analysis

A purchaser buying directly from a developer should not treat informal access to inspect or measure the unit as formal delivery of vacant possession.

Formal vacant possession is governed by the applicable SPA and may require specified certifications, notices and other conditions.

Similarly, being allowed to place furniture in the unit does not necessarily establish the legal date of vacant possession.

The documentation and purpose of the access should be clear.

12. When may early possession be workable?

Early possession is not impossible.

It may be manageable where:-

• completion is substantially secured;

• the outstanding steps and risks have been identified;

• both parties provide informed written consent;

• the banks and management body have no objection where required;

• permitted works are clearly limited;

• insurance arrangements are adequate; and

• the consequences of delay or termination are documented.

Convenience should be weighed against the difficulty of reversing occupation and renovation if completion does not occur as expected.

The safest assumption is simple: until the transaction is completed, the keys do not tell the whole legal story.