The legal choice
NST-PROP By Nicholas Mun
Buyers have the right to use their own lawyers when buying residential properties from developers. Contrary to what many purchasers may have been led to believe, they cannot be compelled to use the services of panel lawyers assembled by developers for their projects.
According to Bar Council president Kuthubul Zaman Bukhari, buyers ultimately retain the right to choose their own legal representation. However, he pointed out, lawyers are prevented from acting for both the developer and buyer in the same transaction.
“Strictly, under the Legal Profession Act, lawyers cannot act for two parties. Buyers who find themselves in such a situation can lodge a complaint with the Bar Council’s disciplinary board,” he said.
Kuthubul advised buyers “not to be taken in by the persuasions” of developers and to educate themselves on what their rights are in such a situation.
A developer who spoke to PropertyTimes on condition of anonymity maintained that buyers have the final say on who should represent them in the purchase of a residential property.
“The free legal fees incentive given to buyers who use lawyers on a developer’s panel was formulated to help lower the costs of acquiring a property, not to take away the buyer’s right to select his own lawyer,” he said.
“Purchasers have all the while had the right to choose (their own lawyers), but many did not because the Sale and Purchase Agreement (SPA) is already gazetted and can’t be changed.”
The developer explained that many buyers opted to use developers’ lawyers because they preferred the convenience and the faster processing that comes with such an arrangement.
He also explained that developers are able to take some steps to lower the disbursements involved in a purchase. For instance, their lawyers need only carry out a land title search once, and all the buyers could share the cost of this.
“By doing this, we ensure that disbursements are kept to a minimum because of the economies of scale involved. Buyers who use their own lawyers will have to bear the entire cost of these checks and searches to verify a developer’s profile and the details of the land,” he said.
But what about buyers who are pressured by developers to use the services of panel lawyers?
The National House Buyers Association (HBA) says developers are dependent on the custom of buyers - therefore, buyers should be able to select their own lawyers.
“If they (the developers) don’t agree, our advice to the purchaser is not to buy from them,” said HBA secretary-general Chang Kim Loong.
He said buyers should not be “penny-wise and pound-foolish” and “save RM500 for a property that costs hundreds of thousands of ringgit”.
Chang pointed out that notwithstanding the fact that the terms of the SPA are standard and cannot be varied, buyers, especially those making cash purchases, should appoint their own lawyers.
He explained that with the end financier out of the picture, it was up to the cash buyer to ensure that he obtained a clean title when the property was delivered.
“A lawyer acting for the developer is certainly not going to inform the buyer that the master title, or sometimes even the individual title, is still charged to the developer’s financier.
“And there have been cases where buyers who pay cash discover their title isn’t free of encumbrances, even after they have completed the progress payments,” added Chang.
He also warned buyers considering using developers’ panel solicitors to be cautious if they were asked to sign other documents in addition to the SPA.
“As is often the case, buyers are required to sign declarations that they are aware that the lawyers are acting for the developer, and that they have waived their right to legal representation. In some other situations, they could be asked to sign consent forms that permit the developer to create a second charge over the project’s master title,” Chang said.