Chang: Free legal fees - fact or myth

KUALA LUMPUR: Property development is a competitive industry, according to Datuk Chang Kim Loong, the National House Buyers Association's (HBA) honorary secretary-general.


He said real estate developers have been promoting their properties and giving away freebies to draw in customers, even if the cost of their properties is still somewhat expensive.


Freebies include club membership, an automated gate, air conditioning, a kitchen cabinet, and legal fees.


Chang pointed out that the list is not exhaustive and that legal fees need to be objectively examined among the freebies provided to buyers.


Typically, the free legal charge offer would be described as "free legal fees" or "legal fees borne by the developer" or something similar in sales brochures and advertisements.


"What are free legal fees? Is it a freebie in the truest sense of the word? The question is, are buyers really enjoying a waiver of such legal fees?


"Generally, free legal fees would mean that the developer would pay for the legal fees on the sale and purchase (SPA) agreement. However, the offer of free legal fees may not cover disbursements such as stamp duties, search fees, registration fees, printing charges, or purchase of documents costs, and the purchaser will have to pay for them.


"In other words, the offer of free legal fees, 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 when a purchaser buys property from a developer who offers free legal fees?" What happens actually is quite different," he explained.


According to Robert Tan, one of HBA's legal advisors, an erroneous understanding of "free legal fees" exists in the housing development industry, much to the dismay of purchasers having disputes with developers concerning the purchase of the property. 


By providing "free legal fees," the developer would suggest to the buyer that the buyer handle the SPA agreement and any associated transactions with a law firm on the developer's panel. 

As a result, the loan paperwork will fall under the purview of the same law firm as a packaged arrangement.


"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 that the solicitor of the law firm attending to the SPA 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 that the purchaser duly signs the agreement and, thus, is bound by it. 


"From a legal point of view, the solicitor acting in such a manner would actually be acting for the developer. The solicitor is therefore the developer's solicitor, and being the developer's solicitor, 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," said Tan.


He claimed that, as a result, the buyer does not have a lawyer reviewing and defending their rights and interests under the contract.


Tan said the purchaser is without legal representation, and since the purchaser has no solicitor acting for the purchaser in the agreement, there are no legal fees for the purchaser to pay.


"Unfortunately, many purchasers realise late in the day that the solicitor attending to the SPA agreement is actually the developer's solicitor, and the purchaser had no legal representation in the first place and legal fees to pay.


"The purchaser normally realises this fact when a dispute arises with the developer 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," he said.


"In summary, are free legal fees a fact or a myth? There is nothing free about it as far as the buyer is concerned. It can only be considered free if the buyer receives legal representation and does not have to pay for it," Tan said.

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