What Happens If You Win a Lelong House But Can’t Pay?

Buying a lelong house or property lelong in Malaysia can be an attractive way to own a property at a discounted price. Many buyers are drawn to lelong properties because of their affordability, especially in prime locations. However, what happens if you win the lelong auction and later realise that you can’t afford to pay?

In Malaysia, participating in a property lelong is not just about placing the highest bid. It’s a serious legal commitment. Failing to follow through after winning can result in financial losses, legal action, and a damaged credit standing.

This article explains in detail what happens if you win a lelong house but can’t pay, based on Malaysian law and actual auction procedures.

What is a Lelong House?

A lelong house is a property that’s being auctioned off, usually because the previous owner defaulted on their home loan. These auctions are initiated by banks or the courts and conducted through appointed auctioneers, either physically or online (e.g., via platforms like e-Lelong or third-party property platforms).

Buyers can bid for these properties at a lower price than market value. However, buying a property lelong is not like buying a regular home. There’s no negotiation. Once you win the bid, you're legally bound to complete the purchase under strict conditions.

You can find lelong properties listed in the auction section of Property Genie, which regularly features updated listings for residential and commercial auction units across Malaysia. These listings typically include reserve prices, auction dates, title info, and legal documents for buyer reference.

After Winning a Property Lelong: What’s Required?

If you win a property lelong auction in Malaysia, you are immediately required to:

• Pay a 10% deposit of the final bid price on the spot.
• Settle the remaining 90% within 90 or 120 days, depending on the Conditions of Sale (COS).

The 10% deposit is usually paid via bank draft, and your winning bid will be documented through a Memorandum of Contract. This serves as the legal agreement, and from this point forward, you are legally bound to complete the purchase of the lelong house.

What Happens If You Can’t Pay the Remaining 90%?

1. You Will Lose Your 10% Deposit

This is the most immediate and guaranteed consequence. If you fail to complete the purchase, the 10% deposit you paid when you won the lelong auction will be forfeited.

There are no refunds even if your bank loan is rejected, you face job loss, or any other personal reason. This is clearly stated in every Proclamation of Sale (POS) and Conditions of Sale (COS).

2. The Property Will Be Re-Auctioned

Once you default, the property will be relisted for lelong and opened to other bidders. You will no longer have any legal rights over that unit, and you cannot reclaim the property even if your financing comes through later.

3. You May Be Sued for Losses

If the lelong house is resold at a lower price than what you initially bid, the seller (usually a bank) has the right to sue you for the shortfall.

Example:

• You won a property lelong for RM400,000.
• You failed to pay.
• The property was later sold for RM350,000.
• The bank can claim RM50,000 from you, plus interest, legal fees, and administrative costs.

This claim is enforceable under Malaysian contract law, and you may be taken to court if you fail to settle the amount.

Common Reason Buyers Fail to Pay: Loan Rejection

Many people jump into a lelong house auction without confirming their loan eligibility. After winning the bid, they apply for financing only to be rejected by the bank due to bad credit, unstable income, or incomplete documents.

Unfortunately, in a lelong transaction, this is not a valid excuse to cancel the deal.

The responsibility to arrange financing lies entirely with the buyer. Auction properties are sold on an “as is where is” basis, with no grace period or refund policy if your loan is rejected.

Tip: Always get loan pre-approval or at least a preliminary letter from the bank before participating in any property lelong. This ensures you are financially ready before committing.

Can You Request More Time to Pay?

In rare cases, the bank or auctioning institution may allow an extension of the payment deadline, usually with added interest or penalty. But this is:

• Subject to the bank’s discretion,
• Usually only granted if you show proof of loan processing (e.g., approval letter, pending disbursement),
• Not guaranteed and must be requested in writing.

You should never assume an extension will be granted. If the bank says no, you must settle the payment within the original timeline.

Can You Assign the Lelong Property to Someone Else?

No, you usually cannot. Most property lelong terms prohibit buyers from assigning the purchase rights to another person unless express permission is granted by the seller.

In court auctions or e-lelong systems, assignment is not allowed. You must complete the purchase under your name as stated during registration. Trying to assign it without permission can be seen as a breach of auction rules.

Can You Be Blacklisted for Failing to Pay a Lelong House?

While there is no official “blacklist” for auction defaulters, your record may be noted by banks, auctioneers, and real estate professionals. If the seller takes legal action and wins a judgment against you, it may be reflected in CTOS or CCRIS, affecting your future ability to get credit or loans.

If a court issues a judgment against you for unpaid losses, your financial reputation will be damaged, and recovery may include salary garnishment or bankruptcy proceedings in extreme cases.

Legal Basis for Enforcement

Here are the key legal references involved in enforcing penalties on lelong auction defaulters:

• National Land Code 1965: Governs land titles and transactions.
• Rules of Court 2012: Applicable for judicial auctions and court-ordered repossessions.
• Conditions of Sale (COS): Legally binding agreement you consented to when bidding.
• Contracts Act 1950: Enforces the validity of contracts in Malaysia, including auction agreements.

These laws make it clear: winning a property lelong is not just a casual transaction. It’s a full-fledged legal contract, and defaulting carries enforceable consequences.

How to Avoid Getting Into This Situation

To protect yourself from legal and financial harm, follow these steps before participating in any property lelong in Malaysia:

1. Get Pre-Approved for a Loan

Speak with your banker or mortgage advisor and secure at least a loan pre-qualification or indicative offer letter. This helps you understand your borrowing limits before bidding.

2. Study the Proclamation of Sale (POS)

The POS contains vital information, such as:

• Reserve price
• Title status (freehold or leasehold)
• Encumbrances or caveats
• Special conditions (e.g., vacant possession, restriction in interest)
• Review it carefully and get legal advice if needed.

3. View the Property (If Possible)

While many lelong houses are sold “as is,” you should still attempt to inspect the property externally or request an internal viewing (if vacant). Some properties may come with legal occupants or existing tenants.

4. Read the Conditions of Sale (COS)

Understand all obligations, including timelines, penalties, and forfeiture clauses. You must be fully aware of what happens if you default.

Lelong Properties Are Not For the Unprepared

Buying a lelong house in Malaysia can be rewarding if done right. But it can also become a legal and financial nightmare if you’re not ready to fulfil your payment obligations.

If you win a property lelong but can’t pay:

• You will forfeit your deposit.
• You may be sued for losses.
• You may damage your credit profile and legal standing.

Before you bid, do your homework. Get loan approval, study the property, and understand the legal documents. Don’t treat lelong auctions like a gamble — treat them like any serious property investment.

Other Article:

• Top 14 Mistakes to Avoid for First-Time Auction Property Buyers in Malaysia
• How to Win Big at Property Auctions in Malaysia
• Step-by-Step Guide to Purchasing Properties Through Auctions in Malaysia