It was reported in the New Straits Times on 13 October 2009 that the Real Estate and Housing Developers’ Association Malaysia (REHDA) had issued a statement that:
• Property developers have asked the government to ease the rules on legal fees for property deals to boost the industry;
• Solicitors and clients should be allowed to negotiate freely on a legal fee that is fair and reasonable without being governed by any regulation and on a willing buyer, willing seller basis;
• Solicitors and clients should be allowed to negotiate freely on a legal fee that is fair and reasonable without being governed by any regulation and on a willing buyer, willing seller basis;
• In line with the government’s move towards a liberalised market, the abolishment of the scale legal fees will have a positive impact on the housing and property industry;
• Such a move will lower the cost of acquisition and would spur greater buying interest in the market; and
• There are lawyers who want to see the rules liberalised so that they can be more competitive.
• Such a move will lower the cost of acquisition and would spur greater buying interest in the market; and
• There are lawyers who want to see the rules liberalised so that they can be more competitive.
The Bar Council wishes to respond accordingly and to state that the primary purpose of a fixed scale of fees for property transactions is to set a benchmark to establish a reasonable level of remuneration, commensurate with the provision of professional services of an acceptable and recognised standard.
The Malaysian Bar is not the only profession governed by scale fees as scale fees are an accepted and common method of charging for professional services in Malaysia. On 20 January 2006, in a joint memorandum signed by several professional bodies and boards on scale fees, the Bar Council together with the:
• Association of Consulting Engineers Malaysia;
• Association of Valuers & Property Consultants in Private Practice;
• Board of Town Planners Malaysia;
• Institution of Engineers Malaysia;
• Institution of Surveyors Malaysia;
• Malaysian Institute of Architects;
• Malaysian Institute of Planners; and
• Malaysian Medical Association;
• Association of Valuers & Property Consultants in Private Practice;
• Board of Town Planners Malaysia;
• Institution of Engineers Malaysia;
• Institution of Surveyors Malaysia;
• Malaysian Institute of Architects;
• Malaysian Institute of Planners; and
• Malaysian Medical Association;
jointly affirmed and declared that:
• Professional services are intellectual and creative products, and not commodities;
• It is not in the interest of the public or the various professions, for professional fees to be decided entirely by “market forces”;
• In a “free market situation”, it is often too tempting for consumers requiring professional services to seek out the cheapest, sidelining the issue of quality of service, in particular when such quality is not immediately or easily discernible;
• “Shopping around" or "marketing for cheaper fees" will lead to an unhealthy widespread undercutting of professional fees;
• When fees are uneconomic and are not commensurate with the level of the services that ought to be provided, it is not uncommon for the quality of professional services rendered to be compromised;
• Scale fees will not only benefit but will also protect the consumers since, with scale fees, professionals will then have to compete with one another on the quality of professional services, and not on pricing;
• The scale fees system prevents both overcharging and undercutting, and protects consumers by promoting high quality professional services; and
• It is necessary and desirable for scale fees to be maintained and effective, and stringent measures must be taken by the various professional bodies and boards to enforce their scale fees against their members in order to ensure and preserve high standards of the professional services rendered to the public.
• It is not in the interest of the public or the various professions, for professional fees to be decided entirely by “market forces”;
• In a “free market situation”, it is often too tempting for consumers requiring professional services to seek out the cheapest, sidelining the issue of quality of service, in particular when such quality is not immediately or easily discernible;
• “Shopping around" or "marketing for cheaper fees" will lead to an unhealthy widespread undercutting of professional fees;
• When fees are uneconomic and are not commensurate with the level of the services that ought to be provided, it is not uncommon for the quality of professional services rendered to be compromised;
• Scale fees will not only benefit but will also protect the consumers since, with scale fees, professionals will then have to compete with one another on the quality of professional services, and not on pricing;
• The scale fees system prevents both overcharging and undercutting, and protects consumers by promoting high quality professional services; and
• It is necessary and desirable for scale fees to be maintained and effective, and stringent measures must be taken by the various professional bodies and boards to enforce their scale fees against their members in order to ensure and preserve high standards of the professional services rendered to the public.
In October 2005, REHDA had made a similar representation to the government to intervene on scale fees and the no discount rule. On that occasion, the government had requested the Bar Council to respond to REHDA’s representation and the Bar Council had explained in great detail to the government the reasons why scale fees and the no discount rule ought to be maintained.
The Bar Council wishes to state that it is clearly provided in the scheduled agreements applicable for housing accommodation that each party shall pay his or her own legal fees. Payment of scale fees by homebuyers has never been an issue, and the Home Buyers Association of Malaysia fully supports the scale fees charged by solicitors for property transactions. The Bar Council believes that scale fees and the no discount rule are thorny issues for REHDA for the following reasons:
• Developers want homebuyers to appoint solicitors who are on their panel;
• Developers want to pay the fees of the solicitor for the homebuyer; and
• Developers want to dictate the amount of such fees.
• Developers want to pay the fees of the solicitor for the homebuyer; and
• Developers want to dictate the amount of such fees.
The Bar Council views the above as a very unhealthy practice and had recently ruled that a solicitor acting for a homebuyer shall not receive his remuneration for the transaction from the housing developer. The Bar Council is of the view that developers should focus on their business of providing high quality housing accommodation to homebuyers, and developers should allow homebuyers to engage or appoint their own solicitors, and further allow the homebuyers to pay their own legal fees. The Bar Council is determined to uphold and enforce the Solicitors’ Remuneration Order as mandated by its general body.
Tony Woon Yeow Thong
Treasurer
Malaysian Bar
23 October 2009