Factory Due Diligence Checklist Malaysia: What to Check Before You Buy

Key Takeaways

• Factory due diligence in Malaysia is five checks done before you pay the deposit: the land title, the building approvals, the bills and taxes, the building's fitness for your operation, and the seller.
• Start with an official land search. It shows the registered owner, the land use category, the express condition, any restriction in interest, and charges or caveats on the title.
• Ask for the Certificate of Completion and Compliance (Form F) or the older Certificate of Fitness for Occupation, plus the approved building plans. Extensions that are not on the plans are a common problem.
• In Selangor, a factory on land not approved for industry is an unauthorised factory (KTK). The state programme runs to 31 December 2027, and an owner who receives Notice 7A has 12 months to apply to change the land condition.
• Check quit rent, assessment tax and utility arrears, run a bankruptcy or winding-up search on the seller, and make sure your lawyer retains the RPGT amount (3% to 7%) and remits it to LHDN within 60 days.

This guide explains each check, which document proves it, where to get it, and the red flags that should make you stop or renegotiate. It is general information, not legal or tax advice: your lawyer and tax adviser should confirm each point for your deal.

What is factory due diligence, and who does each part?

Due diligence is the set of checks a buyer runs to make sure the factory is what the seller says it is, that it can legally be used for your business, and that no hidden debt or dispute comes with it. For a house, most of this is handled by the lawyer and the bank. For a factory or warehouse it goes further, because the land condition, the building approvals, the power supply and the fire certificate decide whether you can actually run a business there.

The work is usually split like this:

Who	What they check
Your lawyer	Land search, encumbrances, restriction in interest, seller identity and authority, bankruptcy or winding-up search, RPGT retention, SPA conditions
You, with an engineer or contractor	Building condition, power supply, floor loading, ceiling height, drainage and flood history, fire safety systems
Your agent	Collects documents from the seller early: title copy, CCC or CFO, approved plans, TNB bills, assessment and quit rent receipts, tenancy agreements
Your bank	Valuation, and whether it will lend on the title and the approvals

The best time to start is before you pay the earnest deposit. Once you have signed an offer, you have less room to walk away or renegotiate.

Step 1: What should the land search show?

Your lawyer will buy an official land search (carian rasmi) from the land office or the state's e-Tanah system. In Selangor, the title records are held by the land office of each district and the state land office (PTG Selangor). Read the search line by line.

Owner, charges and caveats

• Registered owner: the name must match the seller exactly. If the seller is a company, the company name and registration number must match.
• Charge: most titles are charged to a bank. That is normal; the seller's bank will issue a redemption statement and the charge is discharged at completion.
• Caveats and prohibitory orders: a private caveat or a court's prohibitory order means someone else claims an interest. Do not proceed until your lawyer confirms how it will be removed.

Land use category, express condition and restriction in interest

The title states what the land may be used for. A factory needs a title whose category and express condition allow industry. The National Land Code deals with express conditions and restrictions in interest in sections 116, 117 and 120, and using land for anything other than its express condition needs state approval, as the Local Government Department FAQ notes.

A restriction in interest often says the land cannot be transferred or charged without state consent. That adds a step and time to the purchase, so your SPA must make state consent a condition.

Tenure

Check whether the title is freehold or leasehold and, if leasehold, the expiry date. A short remaining lease limits how long a bank will lend and how easy it will be to sell later.

Step 2: Is the building legal? CCC, CFO, plans and KTK

CCC (Form F) or CFO

Since the CCC system started in 2007, only the Principal Submitting Person (an architect, professional engineer or registered building draughtsman) can issue a Certificate of Completion and Compliance, not the local council. Form F is the CCC and Form F1 is a partial CCC for a phased development. The CCC is supported by 21 Form Gs, eight of which need confirmation from technical agencies, including Bomba (G8, G9), DOSH (G11), the water authority (G13), sewerage (G14, G15) and TNB (G16), according to the KPKT Local Government Department. Older buildings have a Certificate of Fitness for Occupation (CFO) issued by the council. Read more in our guide to what a CCC is and why it matters.

Approved plans versus what is on site

Ask for the approved building plans and walk the site with them. Mezzanine offices, extra roofs over the yard, guardhouses and canteens are often added later without approval. Unapproved works may have to be regularised or removed, so price that in or ask the seller to handle it before completion.

Unauthorised factory (KTK) in Selangor

A factory built on agricultural land, or without planning permission, is a kilang tanpa kebenaran (KTK). Selangor's KTK compliance and enforcement programme runs from 1 September 2024 to 31 December 2027. The state serves Notice 7A under the National Land Code, after which the landowner has 12 months to apply to change the land category and express condition to industry; if they do not, the district land office proceeds with forfeiture (DUN Selangor). The problem stays with the land, so a buyer inherits it. Never buy a factory on an agricultural title without knowing its conversion status.

Step 3: Are the quit rent, assessment tax and bills paid?

Quit rent (cukai tanah)

Quit rent is payable once a year from 1 January to 31 May. If it is not paid, arrears charges are added and the land office issues a demand notice (Borang 6A); if that is not settled within three months, the state can forfeit the land under section 100 of the National Land Code (Petaling District Land Office). After the SPA is signed, the same page notes that paying quit rent becomes the buyer's responsibility. How to check it online: Semakan cukai tanah Selangor.

For a strata factory with its own strata title, the owner pays parcel rent (cukai petak) instead of quit rent; where the strata title has not been issued, the master title's quit rent is still collected through the JMB or MC (Petaling District Land Office). Ask the management for a letter confirming there are no service charge or sinking fund arrears.

Assessment tax (cukai pintu)

Councils levy assessment tax on every holding, including industrial buildings and vacant land, under section 127 of the Local Government Act 1976. In Petaling Jaya, it is due before 28 February and before 31 August each year (MBPJ). Get the latest receipts for both halves of the year.

Utilities

Ask for the last few TNB and water bills. Unpaid utilities are usually settled at completion, but a disconnected supply can take time to restore, which matters if you plan to move in quickly.

Step 4: Can the building run your operation?

A legal building is not always a suitable one. Check these against your own process before you commit.

Power supply

Read the TNB bill and the main switchboard rating, and compare it with your machine load. Our factory power calculator converts machine kW into amps. If you need much more power than the building has, an upgrade or a substation may be required, which costs money and time.

Fire certificate

Under section 28 of the Fire Services Act 1988, every designated premises needs a fire certificate, renewable annually. Ask whether the building is designated, and if so, for the current certificate. Check that sprinklers, hose reels and alarms are working, not just installed.

Structure, floor and site

• Floor loading and slab condition if you plan racking or heavy machines.
• Clear ceiling height under the trusses, not at the ridge.
• Roof leaks, cracks and settlement, especially on soft ground near the coast.
• Trailer access, turning space and drainage. In Klang, check flood history: our partner's guide to flood checks in Kapar, Meru and Klang explains how.

Under section 85A of the Street, Drainage and Building Act 1974, councils can require owners to carry out periodic structural inspections once 10 years have passed since the CCC was issued (KPKT). For an older factory, ask whether any such notice has been received.

Step 5: Who is the seller, and what must the SPA cover?

Bankruptcy and winding-up search

Anyone can search the bankruptcy status of an individual or the winding-up status of a company on the e-Insolvensi portal of the Malaysian Department of Insolvency, and the printed result is an official document (MdI). Your lawyer will normally do this for both the seller and, where relevant, the directors.

Company sellers

If a company is selling, your lawyer will want its board resolution approving the sale and will check that the person signing has authority. Many factories are held by companies, so this step is common.

RPGT retention

When the price is paid in cash, the buyer must retain part of the price and remit it to LHDN within 60 days after the date of disposal. The rate is 3%, 5% or 7% depending on the seller's category, and failing to pay on time adds 10% of the unpaid amount (LHDN). Since 1 January 2025 the buyer's return (CKHT 2A) must be filed online through e-CKHT. Your lawyer normally handles this, but the obligation is the buyer's.

SPA conditions to ask for

• State consent to transfer, where the title has a restriction in interest.
• Vacant possession, or a clear handover of any existing tenancy.
• Seller to settle quit rent, assessment and utilities up to completion.
• Seller to regularise or remove unapproved structures, or a price adjustment.
• Your loan approval, if you are borrowing.

Stamp duty and legal fees for the transfer can be estimated with the legal fees and stamp duty calculator. For the full buying process, see how to buy a factory in Malaysia.

Factory due diligence checklist: documents and red flags

Check	Document	Red flag
Owner	Official land search	Name differs from seller; private caveat; prohibitory order
Land use	Category and express condition on title	Agriculture category with a factory on it
Transfer	Restriction in interest	State consent needed but not in the SPA
Tenure	Title	Short remaining lease
Building	CCC (Form F) or CFO, approved plans	No certificate; extensions not on plans
KTK	Land category, Notice 7A	Notice served and no conversion application
Quit rent	e-Tanah receipt	Arrears or Borang 6A
Assessment	Council receipts	Unpaid half-year
Fire	Fire certificate (designated premises)	Lapsed or never issued
Power	TNB bill, switchboard	Supply far below your load
Seller	Insolvency search, board resolution	Bankruptcy or winding-up record
Tax	RPGT retention	No retention planned by your lawyer

Before you agree a price, compare it with registered deals on FactoryHub's industrial transaction data, where every sale price per sq ft is per sq ft of land.

Common due diligence mistakes on factories

• Paying the booking deposit before seeing the title search and the CCC.
• Assuming that an operating factory must have approvals. A factory can operate and still be a KTK.
• Checking the building but not the seller, or not knowing that a company is the owner.
• Ignoring additions such as a second floor office or yard roof that are not on the approved plans.
• Forgetting the RPGT retention, which carries a 10% increase if paid late.

Frequently Asked Questions

What should be included in a factory due diligence checklist in Malaysia?

At minimum: an official land search, the land use category and express condition, any restriction in interest, tenure, the CCC or CFO with approved plans, quit rent and assessment receipts, the fire certificate if the building is designated, the power supply, a bankruptcy or winding-up search on the seller, and the RPGT retention. The table in this guide lists the document and red flag for each.

When should I do due diligence when buying a factory?

Before you pay the earnest deposit or sign the offer. Ask the seller's side for the title copy, CCC or CFO, plans and recent bills at the first viewing, so your lawyer and engineer can check them before you commit.

How do I check if a factory has a CCC?

Ask the seller for a copy of Form F (or the CFO for older buildings) and the approved building plans. The CCC is issued by the architect, engineer or registered draughtsman who submitted the plans, not by the council, so check the issuer's name and the plan reference match the building you are buying.

What happens if I buy a factory on agricultural land in Selangor?

It is treated as an unauthorised factory (KTK). Under Selangor's programme, which runs to 31 December 2027, the owner who receives Notice 7A has 12 months to apply to convert the land to industrial use, or the land office proceeds with forfeiture. The obligation passes to you as the new owner.

Who pays the RPGT when I buy a factory?

The seller pays the tax, but the buyer must retain 3%, 5% or 7% of the price depending on the seller's category and remit it to LHDN within 60 days of the disposal date. If the buyer fails to do so, a 10% increase on the unpaid amount applies.

Do I need due diligence when renting a factory?

Yes, a lighter version. Check that the landlord is the registered owner, that the building has a CCC or CFO and a fire certificate where required, that the land use allows your activity, and that the power supply fits your machines.

FactoryHub is dedicated to helping every client find the right factory or warehouse. For help checking a factory before you buy, contact Peter Tan (REN 12771) at 016-666 6872 or Jason Low (PEA 1478) at 012-288 1834.