by Dato' Chris Chin
The phrase "free legal fees" as advertised by developers is no longer alien to us. In fact, we would think that when we purchase any property direct from the developer, many of us will ask if there is any " free legal fees ". What does the phrase " free legal fees " connotes? Does it mean that we do not need to pay a single cent for legal fees? At least the literal interpretation of the phrase " free legal fees " suggests so. Click below to read more.
“ Free legal fees ” would signify that the developer will pay for the legal fees on the Sales & Purchase Agreement (SPA/S&P). Many experienced purchasers would know that in fact when developers promise " free legal fees ", the purchasers themselves have to fork up money for disbursements such as stamp duties, searches fees, transportation charges, registration fees, printing charges, etc.
Who does the developer pay the legal fees to? DEVELOPER'S solicitors. Not purchaser's solicitors. Developer would often 'restrict' purchaser to developer's panel lawyers to attend the Sales & Purchase Agreement (SPA) and the same panel lawyers would handle the loan documentation. That panel lawyer is NOT your lawyer, but Developer's lawyer, as such, it is the obligation of developer's lawyer to ensure that the right and interest of the developer is protected throughout the process.
Now that lawyer is acting for developer. Who is the lawyer acting for purchaser? There would be none because the lawyer who is representing the developer, would not be able to wear two hats and represent the purchaser as according to Section 84 of the Legal Profession Act 1976, 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. On top of that, under the Sale and Purchase Agreement, namely Schedule G and Schedule H, the developer and purchaser must bear its own solicitor's costs. At this point, it is obvious that there would be no legal representation for the purchaser, as such there is no legal fees for developer to pay on behalf of purchaser.
Is "free legal fees" really free?
What are the legal fees that a purchaser would have to bear when purchasing a house from a developer? The legal fees that purchaser would usually pay is the legal fees chargeable for loan documentation because most often than not, "free legal fees" does not include loan documentation. This left many purchasers in a very confusing state. How much does exactly a purchaser needs to pay under this circumstance. Under the Solicitors' Remuneration Order 2005, it is mandatory for every solicitors to give the prescribed discount to Purchasers for buying any housing from Developer. This is only applicable to any transaction which is governed by the Housing Development (Control and Licensing) Act 1966. Each purchaser is entitled to the statutory discount as at the following scale:-
Purchase Price/Adjudicated Value Discount Rate
RM 45,000 and below RM 250.00
RM 45,001 - RM100,000 25%
RM100,001 - RM500,000 30%
RM500,001 and above 35%
Let's face it, unless you were to use your own lawyer, otherwise there is no such thing as free legal fees. However you can still enjoy the discount on legal fees for purchase under Housing Development (Control and Licensing) Act 1966, from the lawyers, not developers, unless the developers would absorb that fees as well!