Property legal fees set to rise this Saturday

• According to the SRO 2023, the changes will “affect transactions involving non-contentious matters such as the sale and purchase of movable and immovable properties, financing and tenancies”.
• The SRO 2023 therefore 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).
• HBA: Increase in legal fees will, however, be set-off by (legal) discounts.

KUALA LUMPUR (July 13): Property legal fees will rise from July 15 onwards with the gazetting of Solicitors’ Remuneration Order 2023 (SRO 2023) which will come into operations on the same day.

According to the SRO 2023, the changes will “affect transactions involving non-contentious matters such as the sale and purchase of movable and immovable properties, financing and tenancies”.

The SRO 2023 therefore 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).

It replaces the Solicitors Remuneration Order 2005, which was revised in 2016 and again, in 2017.

The SRO 2023 was approved by the Solicitors Costs Committee (SCC) chaired by the Chief Judge of Malaya under Section 113 of the Legal Profession Act, 1976.

In a report by The Star,  senior lawyer Datuk Roger Tan, who represented the Malaysian Bar in the SCC, explained that: “The sale and transfer of property valued at RM500,000 and below will now be subject to a conveyancing fee of 1.25% (previously 1%). For properties valued between RM500,000 and RM7.5 million, the conveyancing fee is now 1%.”  

The same report stated that the conveyancing fees “will translate to RM2,500 for property valued at RM200,000, RM6,250 (RM500,000), RM12,250 (RM1.1 million), RM16,250 (RM1.5 million) and RM76,250 (RM7.5 million)”. Previously, the fees ranged between RM2,000 and RM48,000.

“The last few years have seen challenging times for many people, including professionals and lawyers too. In a nutshell, in line with the rising cost of living and doing business since the last revision of the SRO 2005, the SRO 2023 revised upwards the schedule of fees that lawyers can charge,” Datuk Chang Kim Loong, secretary-general of the National House Buyers Association (HBA) told EdgeProp.my.

Impact on homebuyers and discounts

“Although the new SRO 2023 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 more than six years ago in 2017,” said Chang.

“It is also to be noted that the SRO 2023 also charges a lower legal fee (discount) of between 25% to 50% for all properties governed under the Housing Development Act (HDA), ie bought directly from licensed housing developers. In comparison, the SRO 2005 reduced charges for such cases was between 25% to 35%. Under the SRO 2023, in some instances, the legal fee is actually even lower than previously,” he said.

“As the increase in legal fees is small and not significant when compared against the property value or loan amount, it is not expected to cause a domino effect towards the rising cost of living or house prices,” Chang explained.

Meanwhile, Chang and the HBA also posed a number of questions which will most probably in most homebuyers’ and tenants’ minds.

Q1) How would a potential increase in legal fees affect homeowners or first time homebuyers?

HBA: 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 petrol, toll or utility charges which need to be incurred on a daily basis.

Q2) Could the increase in legal fees also affect rent fees for future tenants?

HBA: No, it will not because many estate agents now have their standard Tenancy Agreement that they adopt with their ‘cut & paste’ to suit the arrangement between landlord and tenants. On top of that, the government has highlighted that a new legislation has been proposed to govern the rights of the tenants with the entitlement of the landlords under the proposed: ‘Residential Tenancy Act’. With the coming of the new legislation, a standard template will be made mandatory with ‘fair and reasonable’ terms and conditions in the Tenancy Agreement. Hence, the need for the involvement of lawyers (to draw up a Tenancy Agreement) will be minimized.

Q3) What do you think is the appropriate increase in legal fee structure to ensure lawyers financial wellbeing while also ensuring consumers aren't too heavily affected? (E.g, fees should increase according to half the inflation rate or etc)

HBA: We are of the opinion that the increase in legal fees are in tandem with current times.

Q4) Do you think an increase in maximum legal fee discounts would be enough to compensate for the increase in overall legal fees?

HBA: Yes. In my opinion the increase in legal fees are set-off by (legal) discounts. Discounts and rebates are now legalised and the clients are allowed to negotiate on their fee.