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The National House Buyers Association (HBA) refers to the Solicitors’ Remuneration (Amended) Order 2017 (SRAO 2017) which has been gazetted and will come into operations on March 15, 2017.

The SRO 2017 governs the legal fees that lawyers can charge in Malaysia in respect of Sale and Purchase agreements and financing agreements involving immovable properties (land and building) and amends the Solicitors Remuneration Order 2005 (SRO 2005 ) which has been in place since 1 January 2006 . The SRAO 2017 was approved by the Solicitors Cost Committee chaired by the Chief Judge of Malaya under Section 113 of the Legal Profession Act, 1976.

In a nutshell, in line with the rising cost of living and doing business since the SRO 2005 first took place, the SRAO 2017 revised upwards the schedule of fees that lawyers can charge. Please refer to Table 1 below for the comparison of the fees chargeable.

We have analysed the possible impact to prospective house buyers on the increase in legal fees payable for properties/loan value under different scenarios, ranging from:

  • Affordable properties costing RM200,000 and RM300,000;
     
  • Mid-range properties costing RM500,000 and RM750,000;
     
  • High-end properties costing RM1,000,000 and RM1,500,000.

Our findings can be summarised below:

Although the new SRO 2017 does result in an increase in legal fees payable for both the SPA and the Loan Agreements, the increase can be considered as reasonable as the last revision was almost 11 years ago in 2006. Assuming a prudent inflation rate of only 3.0 percent per year, this will translate into an adjustment of at least 33 percent but the increase in our examples above, only ranges from 8.1 to 26.6 percent.

The increase is also quite minimal in comparison to the cost of the property. Based on Table 2 above, the increase in legal fees payable only translates into additional legal fees payable of only 0.08 to 0.21 percent compared to the value of the property or loan value which can be considered as immaterial to the total cost of acquiring the said property.

It is also to be noted that the SRO 2017 also charges a lower legal fee (rebate) of between 25 to 35 percent for all properties governed under the Housing Development Act, ie bought directly from licensed housing developers. This is consistent with the previous SRO 2006. Hence, the increase in legal fees payable in Table 2 for properties under HDA would be between 25 to 35 percent lower (depending on the value of the property). Please refer to Table 3 to Table 5 for the actual increase in legal fees payable for HDA properties.

In summary, HBA is of the opinion that the increase in legal fees payable under the SRO 2017 for the SPA and Loan Agreements is reasonable and justified, taking into consideration the rising cost of living and doing business since the last revision in 2006. The rate of increase is lower than the official inflation rate of about 3 percent and house buyers would not find the increase in legal fees too burdensome in comparison to the actual cost of the said property.

As the increase in legal fees is small and not significant when compared against the property value or loan amount, (the increase is between 0.08 to 0.21 percent) it is not expected to cause a domino effect towards the rising cost of living or house prices.

Most people can only afford to buy one property in their lifetime and a small minority might be lucky enough to afford a second property for long-term investment. Hence, such one-off increase is not expected to impact their daily living expenses compared to say increase in toll or utility charges which need to be incurred on a daily basis.


CHANG KIM LOONG is honorary secretary-general, National House Buyers Association (HBA).

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