Wednesday, June 5, 2013

Can the developer confiscate your booking fee?

Can the developer confiscate your booking fee?

found my dream house. The developer's office said the project was selling like hot cakes. Sales were on a first come first serve basis' and I must pay a deposit otherwise she would have to give it to someone else. Or was it a booking fee she called it?

I begged her to give me one week. Three days, she said. How very sweet and understanding of her. Bank loan? No problem... 85% loan margin? No problem, she assured me. If I could not get a housing loan I could always cancel and get my money back. I left the developer's office feeling on top of the world. I had secured my dream house by paying the deposit. My dream turned into a nightmare when I could not get a bank loan. I had no choice but to forgo the house.

As if letting go of my dream was not bad enough, the developer now refuses to give me back my deposit. The lady said her hands were tight because it's a management decision. It was not stated in the option letter' or booking form' that my purchase was subject to the loan approval. On reading the terms and conditions in the option letter/booking form, I now realised that all terms were inclined in favour of the developer.

What do I do? I just want my money back. I don't mind if they keep a small sum for cost of paper work and for administrative purposes.

The above scenario is not at all uncommon.

Many house buyers are unaware of lending guidelines requiring loans to be tagged to net income as opposed to gross income. Many find that they are unable to obtain the financing they want and have to withdraw from an intended purchase before the sale and purchase agreement is even signed. The developer then refuses to refund the deposit or booking fee or whatever other payment which may have already been paid.

The unfortunate part about this whole thing is that house buyers do not have the luxury of a learning curve in which they can acquire the necessary skills to avoid getting themselves into trouble. Very often by the time they realised that they have made a mistake, it is already too late and the result can be traumatic and financially crippling.

This very noble and seemingly simple undertaking of buying a house, in a lot of cases, have gone terribly wrong.

Can developers collect booking fee or deposit?

The sale and purchase agreement (Schedule G, H, I or J) as prescribed by the Housing Development (Control and Licensing) Regulations, 1989 (the Housing Regulations) provides very clearly how the purchase price is to be paid. The first 10% is payable immediately upon the signing of the sale and purchase agreement (SPA), not before.

No collection of any payment is allowed before the SPA is signed. Deposit, booking fee, advance payment, administration charges are just some of terms used by some devious developers in their vain attempts to circumvent or contract out of the Housing Regulations and to confuse, mislead and convince nave house buyers especially the first-timers.

Collection of any payment by a housing developer before the signing of the SPA is an offence. This is very clear under the Housing Regulations and it does not matter what the developer calls it.

The Housing Regulation 11(2) stated: “No housing developer shall collect any payment by whatever name called except as prescribed by the contract of sale”. (In this context' contract of sale means the SPA)
Commission of such an offence under the Housing Regulations means that the developer in question can be prosecuted, fined and/or even imprisoned under Regulations 13. Even those persons who knowingly and willfully aids, abets, counsel, procures or commands the commission of such an offence shall be liable to be punished.

Prosecution, however, is in the hands of the public prosecutor whose action or non-action the house buyers are not able to dictate. House buyers and indeed the general public are of course at liberty to lodge a complaint against any developer in breach of any housing laws. Such complaints can be lodged with the Enforcement Division of the Ministry of Housing and Local Government:

The law as regards non-payment before the signing of the SPA is very clear and house buyers are strongly urged to understand the law and not be misled by some cunning, unscrupulous developers or their smooth talking sales representatives who either do not know the law or simply do not care about the law.

Profit orientated developers care about nothing but profit. The more they sell the more they gain. They engage marketing commission agents and sales representatives whose only mission is to sell. In their quest to sell their products, some unprincipled commission agents (secondary markets included), who are untruthful will not hesitate to mislead, conveniently telling “white lies” and make empty promises to make a quick buck. Some are so well trained in the art of selling they can probably sell sand to the man in the desert.

Ever wondered why the sales office told you there are only five units left but three months later there are more than 10 units still available? Did the developer's office tell you the unit you want is already booked but called you two days later to congratulate you because the same unit has just become available? Ever gone to a developer's office in the hope of getting the “Early Bird Discount” advertised the day before only to find that the project was launched more than a year ago?

Filing a claim for refund
Free gifts, rebates, and waivers of this or that are also fairly commonly seen and are often stated to be for a limited time only. House buyers hurry to meet the deadline. Three months later the same advertisement appears, again for a limited time only or perhaps extended due to popular demand. Gimmicks of “Free legal fees” offer but you must use the developer's panel lawyers are commonly marketed.

The list of marketing ploys used by developers and their marketing alliance goes on and unscrupulous developers and real estate agents are not likely to stop trying to exploit vulnerable house buyers any time soon. House buyers must therefore be very wary and not be easily swayed by promises made by the developer's office.

House buyers who are already caught in tussles with housing developers over refund of booking fee or deposit are at liberty to file their claims at the Tribunal for Homebuyer Claims (the Housing Tribunal). The Housing Tribunal was set up as an alternative forum for house buyers to save them the costs and hassle of fighting with housing developers in the civil courts.

The filing fee is only RM10; no lawyers are required and hearings are normally fixed within a month. The Housing Tribunal is empowered to hear disputes between house buyers and licensed housing developers even though the SPA is yet to be signed but the claims must be filed within the time frames provided under section 16N of the Housing Development (Control & Licensing) Act 1966 (the HDA). Check out the TTPR

Can the developer forfeit such payment?
Where booking fee or deposit or any other payment is collected by the developer before the SPA is signed, the house buyer would normally have been asked to sign a document indicating the house/apartment/condominium he/she is interested and agreeing to sign the SPA within a certain time frame, say 7 or 10 days or upon notice from the developer. This document may be in the form of an option letter, letter of offer, sales proforma, booking form or another document by whatever name the developer chooses to call it, all in an attempt to disguise a collection prohibited by law.

The amount varies and in some cases it is as much as 2% of the purchase price RM10,000 for a RM500,000 house. When the house buyer decides to withdraw from the intended purchase, the developer refuses to refund the deposit, or was it booking fee, or was it ...?

Chang Kim Loong is the honorary secretary-general of the National House Buyers Association:, a non-profit, non-governmental organisation manned by volunteers. He is also a NGO councillor at the Subang Jaya Municipality Council.

Points to consider when buying a house to avoid future complications

Points to consider when buying a house to avoid future complications

CAN you afford a house now?

Assuming you can afford a house, how much can you afford to pay? These are important questions that many people do not research. This oversight can lead many people to bad debt and even bankruptcy.
Your monthly expenditures will be more than just the housing loan. There will also be insurance, electricity, water, telephone bills, contributions to maintenance fund, medical bills, groceries, unexpected household/auto repairs, lunch money and many other obligations.

They must all be accounted for in your budget spreadsheet. For many of us the purchase of a house or property is the largest financial commitment we will ever make. This makes arranging the most suitable housing loan just as important.

Make sure you know the costs of entering into the loan for the purchase of the property. They include conveyancing, application fees, valuation and legal fees, mortgage insurance (if necessary) and sometimes, extra life insurance premiums.

Some lenders will tell you the advantages of whatever housing loans they are trying to squeeze you into, but rarely will they tell you the disadvantages.

According to an article in a business magazine, the banking system is flush with RM180bil liquidity. This explains the increasingly aggressive sales promotions undertaken by financial institutions for the housing industry.

Always look at the total deal, not some dangling carrots in front of you. Compare the entire housing loan cost of different lenders to determine which is best for you.

I would like to discuss some of the lenders' offers that may not be as attractive as they appear. I will start with the special low interest offered for the first year. Such an offer is usually given during a sale campaign and it usually carries a fixed calendar period with a run-out date. Thus, even if a house buyer commenced his application process immediately upon the launch of the campaign, by the time the loan is approved and disbursement commences, the period remaining to enjoy this special low interest rate will certainly be less than one year.

If he were to start the application process a few months after the campaign, it is likely that he will enjoy the special low rate for only a very short period.

Due to our unique system of progressive payments to the developers, the mean average of the amount disbursed by the banks during the “first year low interest offer,” is really lower than the loan amount. Thus, any saving on interests is really much less than it seems. And these have all been figured out already by those marketing experts in the banks.

A more sincere approach would be to offer the special low interest rate to apply during the progressive payment period and to continue to run for one year after the date when the loan is fully disbursed. Only then can such offers bear some element of sincerity. I believe that anything short of that makes the offer a sales marketing gimmick.

There are other clauses that put house buyers in a disadvantaged situation. Some lenders include clauses in the loan agreements that give them the absolute rights to alter both the Base Lending Rates and/or the margin of interests.

Doesn't this in effect nullify their typical attractive offer of “BLR plus X% for following years?”
One cannot make a special low interest offer in the sales campaign and then contractually (through the loan agreement) creates a clause to allow that special offer interest rate to be invalidated. Make sure you know all the costs of early discharge of the loan.

One other clause to look out for is the redemption of the loan. A house buyer may wish to sell the house and wished to fully-settle the loan.

This is where the conditions for full-settlement differ from one financial institution to another. Think long term.
When one takes a loan, one spends a much longer period servicing the loan beyond the first year or even the second and the third year. So do not be taken in by the very attractive offers during the honeymoon year/s of the tenure of your loan. Remember, the remaining of the 25 years is more important. Do not go for short-term gains only to lose out heavily on the long remaining years.

I would advise house buyers to look beyond the first year of so-called low interest when shopping for housing loans. With the stiff competition among the various lenders today, one should seriously shop around and scrutinise each and every offer before commencing the application process. Talk to your bankers, lawyer friends or seek advice from the National House Buyers Association.

One really has to scrutinise the fine print before making a decision as to which financial institution to go to for a loan. It is about time to standardisde the terms and conditions in the loan agreement so that there will be orderliness in the banking industry.

No more “embedded” clauses within the voluminous stakes of papers one has to initial giving the impression that one has truly read and understood them. It is obviously impossible to read and understand those 40 over pages of legal language that comes with appendixes.

Chang Kim Loong is the honorary secretary-general of The National House Buyers Association, a non-profit, non-governmental, non-political organisation manned by volunteers. For more information, check or e-mail

Be forewarned: Do not sign your rights away

Be forewarned: Do not sign your rights away

“THE developer says I must sign the letter to collect the keys.”

How often do we hear that from house buyers? Too often. How often do house buyers know what to do when faced with such dilemma when taking vacant possession? Not often enough. Do you know the entire content of the letter that you are asked to sign? Not really. Are the content too confusing and legalistic? Ehh Conclusion: Guess there is too much pride to admit that they are ignorant. The worst affected ones are the nave and unwary first-time house buyers.

When completion of a house is delayed, the developer must pay compensation or liquidated damages, commonly referred to as LAD (liquidated ascertained damages) to the house buyer. This LAD is calculated at 10% per annum on the purchase price for the period of delay in handing over the house.

Developers (unscrupulous ones) are known to have resorted to various ways and means to avoid paying LAD and these include misleading house buyers into signing waiver letters before handing over the keys to the house buyers. Some even resort to refusing to hand over the house keys unless the house buyers sign such waiver letters. What are house buyers to do?

First of all, house buyers must know their rights, benefits and entitlement. Secondly, they must not sign their rights away.

The developer must hand over the keys to the house buyers when the house is completed and ready for delivery of vacant possession. Buyers will be asked to sign a letter when collecting their keys. What house buyers must know is that this letter for collection of keys should contain nothing more than an acknowledgement by the buyer that he has collected the keys and a confirmation as to how many sets of keys are given. This letter must not contain any terms or conditions that the buyer waives LAD or other rights, benefits and entitlement under the sale and purchase agreement (SPA) or that the buyer will not make any claim whatsoever against the developer.

HD Act and its governing regulations
Under the Housing Development (Control and Licensing) Regulations 1989 (HDR) [which are regulations made under the Housing Development (Control and Licensing) Act 1966 (HDA)], the sale and purchase agreement (SPA) for any housing accommodation sold by a housing developer must be in the format prescribed under the HDR. This SPA, unlike any other contract of sale, contains provisions which cannot be changed at all unless such changes have been sanctioned by the Controller of Housing at the Housing and Local Government Ministry (MOH). In other words, this SPA is a statutory contract and all the provisions in this SPA are statutory requirements which must be strictly complied with.

One of the provisions of the SPA gives the house buyer a right to be paid LAD immediately by the developer in the event of delay in the completion of the housing accommodation. It is found in Clause 22(2) of Schedule G and the corresponding Clause 25(2) of Schedule H - Sale & Purchase Agreement.
Can this statutory right be waived by the house buyer? According to the Federal Court, the answer lies in the overall purpose of the legislations and whether this purpose would be defeated by permitting waiver and contracting out.

There is no shortage of cases whereby the Courts of Law have decided that the housing legislations are a social legislation, the main purpose of which is to protect the interest of house buyers. And, according to the Federal Court, the protection given to house buyers under the HDA and HDR is not just a private right but a matter of public interest. Such court decisions have even received affirmation and endorsement by Parliament in 2007 when it amended the long title to the HDA to read as “An Act to provide for ... the protection of the interest of purchasers... ”

If statutory rights given to house buyers could be waived by them individually, surely the good and commendable intention of parliament to provide the much-needed protection for house buyers (and indeed the whole purpose of the housing legislations) would be defeated and eroded.

The conclusion is therefore clear and simple. Waiver letters are not worth the paper they are written on. They cannot be held against the house buyers and must be declared null and void. Developers must be made to stop trying to wriggle their way out of paying LAD. They must accept that the only way they can escape liability to pay LAD is for them to secure a certificate from the Controller of Housing extending the delivery date.

Word of caution
House buyers are strongly cautioned not to sign waiver letters to avoid possible undesired delay(s) or outcome in their claims and unnecessary legal battles with unscrupulous developers who will raise whatever issues possible to avoid or simply delay the legitimate claims from the house buyers.

“But what can I do if the letter contains a waiver? I don't have a choice. I want my keys and the developer says I must sign then only can give me the keys.”

Sign “Under Protest” is one way. The house buyer can write a note on the letter that he does not agree to waive LAD, or that he does not agree to waive his rights, or that it is “Without Prejudice” to his/ her rights under the SPA. Alternatively, he can delete the offending words or sentences.

If the developer refuses to give the keys unless the house buyer signs without adding or deleting anything from the letter, the house buyer are constrained to sign and collect the keys but should immediately after that write to the developer to state that he was not given a choice but was “arm-twisted” and that he does not agree to waive LAD or other rights. A complaint should be immediately lodged with the Enforcement Division of the Housing Ministry ( ) and a claim can be filed at the Housing Tribunal, both of which should be done expeditiously.

Tribunal for Home Buyer Claims: Portal TTPR)
The Tribunal for Home Buyer Claims, commonly known as the Housing Tribunal, is empowered to deal with house buyers' claims against developers and can give awards up to RM50,000. Its awards can be enforced against developers just like a judgment from a Court of Law. In addition, non-compliance of its awards is an offence and the defiant developer can be prosecuted.

Even though its head office is in Putrajaya, the Housing Tribunal has branches in Johor Baru, Seberang Prai as well as Kuala Terengganu. It conducts court hearings, not just in Putrajaya and its branches, but also many other localities for the convenience of house buyers. The filing fee is RM10 and no lawyers are required. It has been set up for the benefit of house buyers. It is cheap, fast and easy, so make use of it.
Even though I take the view that a waiver of rights and benefits under the SPA by any house buyer is void and cannot be enforced, house buyers are strongly advised to avoid signing any such waiver letter to avoid undesired outcome to their claims.

House buyers are cautioned to exercise prudence when dealing with such shrewd and unscrupulous housing developers who have no principles. Avoid buying property from those developers who have such unprincipled track record.

Chang Kim Loong is the honorary secretary-general of the National House Buyers Association (, a non-profit, non-governmental organisation manned by volunteers. He is also a councillor at the Municipal Council of Subang Jaya.

House-buyers beware of DIBS

OF late, there have been a few housing developers who proudly advertise that the sales of their product are offered are with “interests payment borne by developers”. Such schemes are known as DIBS, that is developers' interest-bearing scheme.

A particular one even boldly states that house-buyers make no payment until due vacant possession of the said houses.

It entices potential house-buyers that all they need is to pay the requisite downpayment of 10% upon signing the sales and purchase agreement (SPA) and the balance thereof will be financed by their panel banks/financial institutions.

Some even have the audacity to equate the same with the 10:90 concept of built-then-sell (BTS). One even goes as far as to advertise the mode of payment as 5:95 model. The connotations in all these advertisements are that buyers do not make any progressive payments until the houses are completed and ready for vacant possession.

All these advertised “schemes” of payments are nothing more than loan packages. Although the advertisement states “no payment until vacant possession”, in reality the buyers' loans are “locked-in” with panel banks/financial institutions and hence, buyers' housing loans are used to pay the developers as they construct the houses.

It is based exactly on the current sell-then-build (STB) or progressive payment formula. This formula has got so many house-buyers into trouble when the houses they buy are abandoned by the developers.
The only difference in the advertised system is that the interests towards the progressive payments are shouldered, absorbed and borne by the developers. Buyers still have to secure their end-financing housing loans as soon as they sign the SPA. Buyers are still responsible to the banks and financial institutions for the loans whether the houses are delivered or not.

BTS 10:90 model
This is far different from the real BTS 10:90 concept put in place and encouraged by the Government, whereby the buyers truly do not make any payment except for the deposit of 10% until vacant possession because the end-financing loans do not kick in until the houses are completed with all the certifications obtained and keys with vacant possession are available.

It is a far safer mode of buying houses and this is precisely why the Government is encouraging it and furthermore offering incentives to developers who opt to adopt this mode of selling their products. But it fell short of compelling the industry to adopt this BTS 10:90 concept currently. However, the Housing and Local Government Minister has reiterated that the BTS 10:90 will be made mandatory by 2015.

Vital differences
The vital difference between the advertised DIBS abbreviation and the government-encouraged BTS 10:90 is that, in the advertised DIBS or 10:90 or 5:95 model, should the developer abandon the project (for whatever reason), buyers are left with a partially disbursed housing loan to settle.

The amount varies in accordance with the amount of disbursements made.

The primary borrower is still the buyers and that it is the sole responsibility of the borrowers/buyers to continue with the proper conduct of his loan from the financiers.

Banks have not been known to be sympathetic to victims of abandoned projects.

The loans still have to be settled house or no house! This is the predicament presently faced by tens of thousands of nave and innocent buyers when the houses that they had bought were abandoned by their developers.

Don't think for a minute that the financier will write off the loan payable by the borrower/buyer.

Thus, the various advertisements for DIBS abbreviation or 10:90 or 5:95 or 0:100 connotations are merely marketing tools and are not the same as the BTS 10:90 concept that is put in place under the Housing Development (Control and Licensing) Act and Regulations.

These advertisements are open to misunderstanding and confusion. In this period of soft market in the housing industry, it is natural that more and more innovative sales strategy will come in.

We are not in opposition to that, but we are of the stand that advertisements should not have any element of misrepresentation or misconception and should not give rise to misunderstanding and confusion.

Housing Ministry to be vigilant
The Housing Ministry's Licensing Department should also take a close look at the contents of such advertisements before granting them sales and advertisement permits.

To allow such advertisements is injustice to nave and innocent first-time house-buyers.

Has the ministry erred in allowing those advertisements or did it not manage to spot the difference?

I would like to categorically state that I'm by no means implying that the advertised project is likely to be abandoned. This article is aimed only to inform potential buyers on the differences between the advertised DIBS or 10:90 or 5:95 or 0:100 mode of purchase vis-vis the government-encouraged BTS 10:90 concept.
Be an informed buyer and empower yourself with information to make a wise decision.

How to spot the difference
On the side of caution, the buyer needs to check if he has bought into a STB 10:90 loan package “scheme” or a BTS 10:90 concept. The differences between the two models are already explained in the article. An easy way to know what the buyer has bought is to refer to the SPA. If the contract is a Schedule H or Schedule G, the scheme is a sell-then-build. If the contract is a Schedule I or Schedule J, the scheme is a BTS 10:90 variant.

> Chang Kim Loong is the honorary secretary-general of The National House Buyers Association, a non-profit, non-governmental, non-political organisation manned by volunteers. For more information, click or e-mail

Tuesday, June 4, 2013

Free legal fees – fact or myth

Free legal fees – fact or myth

An erroneous understanding of the matter exists in the housing development industry, much to the dismay of purchasers having disputes with developers.

FREEBIES have been advertised and offered to woo purchasers to buy developers' property because choices are now in abundance though pricing is on the exorbitant side.

Some of the freebies include air-conditioners, kitchen cabinet, automatic gate, club membership and legal fees. The list is not exhaustive as property development is a competitive game.

However, among the freebies offered to purchasers, legal fees require objective analysis. The freebie on legal fees normally appears in sale brochures and advertisements as “free legal fees” or “legal fees borne by developer” or words to that effect.

Now, what is “free legal fees”? Is it a freebie in the truest sense of the word?

Meaning of free legal fees
Generally, “free legal fees” would mean that the developer will pay for the legal fees on the S&P (sale and purchase) agreement. However, the offer of free legal fees may not cover disbursements such as stamp duties, searches fees, registration fees, printing charges, purchase of documents costs, etc. The purchaser will have to pay for them.

In other words, the offer of “free legal fees” would in its plain and obvious meaning suggests that the legal fees the purchaser would have to pay to the solicitor would instead be paid by the developer. It would, therefore, be understood that if the purchaser had appointed a solicitor, the developer would pay for the solicitor's fees.

However, is this what happens actually when a purchaser buys property from a developer who offers “free legal fees”?

What happens actually is quite different. An erroneous understanding of “free legal fees” exists in the housing development industry, much to the dismay of purchasers having disputes with developers.

Developer's solicitor
In offering “free legal fees”, the developer would recommend to the purchaser a law firm on the developer's panel to attend to the S&P agreement and its related transaction. Correspondingly, the same law firm will be tasked with the loan documentation as a packaged deal. If the purchaser chooses that law firm, the developer will supposedly absorb the legal fees. Quite obviously, the developer takes the view that such arrangements represent a cost-saving to the purchaser as well as facilitate and expedite dealings.

Now the irony is the solicitor of the law firm attending to the sale and purchase agreement would not normally scrutinise the agreement for the purchaser to understand in layman language, but would say that it is a standard agreement'. Instead, the solicitor would ensure that the developer's rights and interests in the agreement are intact and the purchaser duly signs the agreement and thus, is bound by it.

From a legal point, the solicitor acting in such a manner would actually be acting for the developer. The solicitor is therefore the developer's solicitor, and this being the case, the developer would have to pay the solicitor's fees. Therefore, there is nothing free about it as far as the purchaser is concerned. It can only be considered free if the buyer receives independent legal representation and does not have to pay for it.

Hence, there is no solicitor acting for the purchaser to scrutinise and protect the purchaser's rights and interests in the agreement. The purchaser is without legal representation. Since the purchaser has no solicitor acting for the purchaser in the agreement, there is no legal fees for the purchaser to pay.

Unfortunately, many purchasers realise this rather late in the day.

The purchaser normally realises this fact when a dispute arises and the purchaser asks the solicitor for help and is informed that the solicitor who attended to the sale and purchase agreement is actually the developer's solicitor.

Purchaser's solicitor
What would happen if the purchaser appoints another solicitor who is not on the developer's panel of solicitors to attend to the sale and purchase agreement? How would the offer of “free legal fees” be affected?
In principle, the solicitor so appointed will scrutinise the sale and purchase agreement for the purchaser. The solicitor will act for the purchaser and consequently there are legal fees for the purchaser to pay the solicitor.
In this situation, the developer and purchaser will each have their respective solicitors. Each party will have solicitor's fees to pay.

If the developer's offer of “free legal fees” were taken seriously, the developer would have to pay for the purchaser's solicitor's fees. It is arguable that the developer's offer of “free legal fees” is broad enough to cover such a situation. The purchaser would therefore be entitled to claim on the offer and have the developer pay for the purchaser's solicitor's fees.

However, most developers would refuse to pay for the purchaser's solicitor's fees. The reason given normally for the refusal is that the offer of “free legal fees” is subject to the condition that the purchaser chooses the solicitor on the developer's panel of law firm to attend to the S&P agreement.

When this happens, the developer's offer of free legal fees would seem hollow and the developer may possibly be exposed to being sued for misrepresentation and damages.

Legal Profession Act
Section 84 of the Legal Profession Act 1976, stated that a solicitor who acts for the developer in the sale of property under a housing development must not act for the purchaser in the same transaction.
Furthermore, under the sale and purchase agreement, namely Schedule G and Schedule H, the developer and purchaser must pay its own solicitor's costs.

The above laws clearly suggest that the developer's solicitor must not act, or purport to act, for the purchaser. The purchaser has a right to appoint his/her solicitor. Each party bears its own solicitor's costs.
Thus, is the developer's offer of “free legal fees” legal? Readers should ponder on the arguments.

The reality
Meantime, two situations would possibly arise from the developer's offer of “free legal fees”.

First, where the purchaser is unrepresented by a solicitor in the S&P agreement, the offer of “free legal fees” is not really “free” because the purchaser has no solicitor acting on his behalf. There is thus no legal fees to pay.

Second, where the purchaser is represented by a solicitor in the S&P agreement, he has a solicitor acting on his behalf and thus has legal fees to pay. The developer would be bound to honour the offer of “free legal fees” and pay the solicitor's fees or possibly risk being sued for mispresentation and damages.

In reality, most developers fail to honour the offer of “free legal fees” in the second situation. Instead, the purchaser is asked to pay the solicitor's fees and is informed that the offer only applies if the purchaser chooses the solicitor on the developer's panel to attend to the S&P agreement.

In summary, is “free legal fees” fact or myth? I leave that for your pondering and own conclusion.
Hopefully, the next time you buy a property from a developer and read about “free legal fees” or words to that effect, you would remember reading this article and exercise your rights accordingly.

What are the prevalent legal fees in property transaction when you buy from a housing developer? Are legal fees discounted for standardised S&P or housing loans)

In a case where the purchase transaction is governed by the Housing Development (Control and Licensing) Act, 1966 (HDA transaction), or where a loan is obtained to finance a HDA transaction, the following lower scale of fees will apply:
● RM250 if purchase price or the loan sum (as the case may be) is RM45,000 or below;
● 75% of the applicable scale fee specified above, if the purchase price or the loan sum (as the case may be) is above RM45,000 but not more than RM100,000;
● 70% of the applicable scale fee specified above, if the purchase price or the loan sum (as the case may be) is above RM100,000 but not more than RM500,000; and
● 65% of the applicable scale fee specified above, if the purchase price or the loan sum (as the case may be) is in excess of RM500,000.

(See table for a simplified version of formula for the fees scale.)

Why must you use your own lawyer?
The first rule of conveyancing is “buyer and seller must engage own lawyer”. Consult a lawyer right from the start and not after you have paid the deposit. The reason being, under the law you are deemed to have read and understood every document you have signed.

Furthermore, promises made by the seller or someone else about the deal may not be enforceable if the promises are not in writing unless you are able to provide proof of the same.

A lawyer cannot represent both the vendor and purchaser. If you are using the vendor's panel lawyer, often, when disputes happen, the lawyer is unlikely to represent you against their bigger client.

A lawyer in a general practice will be able to complete your purchase; however, lawyers with a focused real estate/conveyancing practice may prove a better choice if you are unsure of what to do, or have complications in your purchase agreement or mortgage. While you may think that you cannot afford the services of your own lawyer, consider whether you can afford not to.

 Chang Kim Loong is the honorary secretary-general of the National House Buyers Association (HBA), a non-profit, non-governmental organisation (NGO) manned by volunteers. He is also a NGO councillor at the Subang Jaya Municipal Council.