THE purpose of this article is to provide some pointers and guidelines to a purchaser who wishes to appoint his own solicitor when buying a housing accommodation from a housing developer.
Housing developer may no longer advertise free legal fees.
It is common for a purchaser to be attracted to an advertisement by a housing developer offering free legal fees when buying a home in its housing development.
However, since July 1, 2015, any advertisement made by any licensed housing developer shall not contain an offer for free legal fees.
Among other descriptions which shall not be contained in any advertisement by a housing developer are:
- Projected monetary return gains and rental income
- Claim of panoramic view
- Travelling time from housing projects to popular destinations, or
- Any particulars to which a housing developer cannot genuinely lay proper claim
Any person who contravenes this Regulation 8(1A) of the Housing Development (Control and Licensing) Regulations, 1989 shall be guilty of an offence, and shall on conviction, be liable to a fine not exceeding RM50,000 or to a term of imprisonment not exceeding five years or to both.
Likewise, any person who knowingly and wilfully aids, abets, counsels, procures or commands the commission of this offence shall face similar penalties upon conviction.
Purchaser has the right to appoint solicitor
It is not compulsory for a purchaser to engage his own solicitor when buying a housing accommodation from a developer.
However, a purchaser has the right to do so.
If a purchaser chooses to engage his own solicitor, his solicitor shall be entitled to be furnished by the housing developer with a complete set of the contract of sale (original and duplicate copies), and all annexures, free of charge, subject to the undertaking of the purchaser’s solicitor to return the documents intact in the event the contract is not executed by the purchaser within 14 days from the date of receipt of such documents
It is required to insert in the contract of sale:
- The name and address of the purchaser’s solicitors, if any
- The name and address the developer’s solicitors, if any; and
- The name and address of the solicitors appointed by the developer to hold 5% of the purchase price as stakeholders during the defects liability period
A purchaser may not engage a solicitor if the solicitor or his firm has been appointed or empanelled as a member of the housing developer’s panel of lawyers, as such a solicitor or his firm shall be deemed to be acting for the housing developer and he shall not act for any purchaser in the same phase of housing development.
Where a solicitor acts for a purchaser in the purchase of a housing accommodation from a housing developer, the solicitor shall not receive his remuneration from the housing developer and each party shall pay for the fees of his own solicitor.
As the transaction is governed by the Housing Development (Control and Licensing) Act 1966, the purchaser will only have to pay his solicitor a fee of RM300 (if the purchase price is RM50,000 or below), 75% of the applicable scale fee (if the purchase price is in excess of RM50,000 but not more than RM250,000), 70% of the applicable scale fee (if the purchase price is in excess of RM250,000 but not more than RM500,000), or 65% of the applicable scale fee (if the purchase price is in excess of RM500,000).
A brief summary of the applicable scale fee for a purchase price of up to RM5,000,000 is as follows:
- For the first RM500,000 – 1% (subject to a minimum fee of RM500)
- For the next RM500,000 – 0.8%
- For the next RM2,000,000 – 0.7%
- For the next RM2,000,000 – 0.6%
If purchaser chooses not to engage a solicitor
If a purchaser chooses not to engage his own solicitor when buying a housing accommodation from a housing developer, he may attend at the office of any solicitor appointed by the housing developer to sign the contract of sale or to complete the transaction, provided that the purchaser fully understands that such a solicitor will not be acting for him.
In such cases, the solicitor’s fees will be paid by the housing developer, giving rise to the idea of “free legal fees”. The solicitor acting for the housing developer is required to obtain a certificate signed by the purchaser stating that the purchaser does not wish to engage a solicitor to scrutinise the contract of sale for him. The certificate by the purchaser shall not be valid unless it is signed by the purchaser in the presence of a Commissioner for Oaths.
The Commissioner for Oaths shall not be the solicitor attesting the purchaser’s signature or a solicitor practising in partnership with the attesting solicitor or an employee of the attesting solicitor’s firm. In addition to obtaining the certificate from the purchaser, the solicitor acting for the housing developer shall inform the purchaser in writing that he is not acting for the purchaser.
The writer, a lawyer practising at Andrew Wong & Co is a member of the Conveyancing Practice Committee, Bar Council, Malaysia. This column is brought to you by the Malaysian Bar Council for your information only. It does not constitute legal advice.