When selling a property in Malaysia, a vendor may sometimes wonder whether it is necessary to appoint a separate lawyer.
After all, the purchaser has already appointed a lawyer to prepare the Sale and Purchase Agreement (“SPA”). Can the purchaser’s lawyer simply handle the entire transaction for both sides?
The short answer is that a vendor should seriously consider appointing their own lawyer to represent and protect their interests in the sale transaction.
This is because the purchaser’s lawyer acts for the purchaser, not the vendor.
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Does a Vendor Have to Appoint a Lawyer?
In a typical subsale property transaction, it is possible for a vendor to choose not to appoint their own lawyer.
However, if the vendor does not appoint a lawyer, the vendor is generally regarded as unrepresented in the sale transaction.
Ideally, each party to a conveyancing transaction should have their own solicitor, and a solicitor should not represent more than one party in the same conveyancing transaction.
Therefore, just because the purchaser’s lawyer is communicating with the vendor, sending documents to the vendor or arranging for the vendor to sign documents does not necessarily mean that the purchaser’s lawyer is acting for the vendor.
“But the Purchaser’s Lawyer Prepared the SPA”
This is where confusion commonly arises.
In many property transactions, the purchaser appoints the solicitor who prepares the SPA.
If the vendor does not appoint their own solicitor, the purchaser’s solicitor may send the SPA directly to the vendor for execution.
However, the important point is this:
The purchaser’s solicitor remains the purchaser’s solicitor.
Their role is to protect the purchaser’s interests in the transaction.
The vendor should therefore not assume that the purchaser’s solicitor has reviewed the SPA from the vendor’s perspective or will advise the vendor whether a particular provision is commercially or legally favourable to the vendor.
Why Does the Vendor Need Their Own Lawyer?
An SPA is not merely a standard form that records the agreed purchase price.
It contains important contractual provisions dealing with the rights and obligations of both parties.
Depending on the transaction, these may include:
- the completion period;
- payment of the balance purchase price;
- extension of time and late payment interest;
- redemption of the vendor’s existing housing loan;
- delivery of vacant possession;
- existing tenancies;
- apportionment of quit rent, assessment and maintenance charges;
- representations and warranties given by the vendor;
- state authority or other consent requirements;
- delivery of documents;
- consequences of default by either party;
- termination rights;
- forfeiture or refund of deposits; and
- release of the balance purchase price to the vendor.
A vendor’s lawyer can review these provisions from the vendor’s perspective, negotiate appropriate amendments where necessary and explain the vendor’s obligations before the SPA is signed. Read more: What Does a Vendor’s Lawyer Do in a Property Sale?
This becomes particularly important when the transaction contains unusual arrangements or special conditions.
Can the Purchaser’s Lawyer Still Assist the Vendor With Certain Matters?
Yes, in certain circumstances.
There is an important distinction between:
- acting for the vendor in the sale transaction, and
- being separately engaged to attend to a particular ancillary matter.
For example, where a vendor is otherwise unrepresented, the purchaser’s solicitor may, where appropriate, assist with matters such as:
- redemption of the vendor’s existing loan;
- discharge of charge or receipt and reassignment;
- an application for the relevant consent to transfer; or
- preparation and submission of the vendor’s Real Property Gains Tax documentation.
However, doing so does not automatically mean that the purchaser’s solicitor also represents the vendor in the SPA itself.
This distinction is important.
A vendor should therefore understand exactly who the solicitor represents and the scope of that solicitor’s appointment.
What Does the Vendor’s Own Lawyer Do?
Where the vendor appoints a separate solicitor, the vendor’s solicitor would ordinarily manage the transaction on behalf of the vendor.
Depending on the circumstances of the sale, this may include:
1. Reviewing and Negotiating the SPA
The vendor’s lawyer reviews the draft SPA prepared by the purchaser’s lawyer and advises the vendor on its terms.
Where necessary, amendments can be proposed to protect the vendor’s position.
2. Advising on the Vendor’s Obligations
The vendor may be required to provide various documents, settle outstanding sums, obtain consent or comply with particular conditions before completion.
The vendor’s lawyer can identify these requirements at an early stage.
3. Attending to Redemption of the Existing Loan
If the property is still charged or assigned to the vendor’s bank, the existing financing will normally have to be redeemed as part of the transaction.
This involves obtaining the redemption statement, arranging payment of the redemption sum and procuring the relevant title and discharge or reassignment documents.
4. Attending to Consent Requirements
Certain properties may be subject to restrictions in interest or other requirements requiring consent before the property can be transferred.
The vendor’s lawyer can advise on and attend to the necessary application where applicable.
5. Attending to RPGT Matters
The disposal of real property may involve obligations under the Real Property Gains Tax regime.
The vendor’s lawyer can advise on and prepare the relevant documentation within the scope of the solicitor’s appointment.
6. Monitoring the Completion of the Transaction
The vendor’s lawyer communicates with the purchaser’s lawyer and, where relevant, the banks involved to monitor the progress of the transaction.
This is particularly important where the vendor is expecting the balance purchase price to be received within the contractual completion period.
7. Advising the Vendor If Problems Arise
A conveyancing transaction does not always proceed exactly as anticipated.
Issues may arise involving delayed loan disbursement, inability to obtain consent, failure to deliver documents, requests for extensions of time, defects, vacant possession or alleged contractual breaches.
Having a conveyancing lawyer who acts specifically for the vendor means that the vendor has someone who can advise them independently when these issues arise.
Is Appointing a Separate Vendor’s Lawyer an Unnecessary Additional Cost?
Some vendors choose not to appoint their own lawyer because they wish to reduce the cost of selling the property.
However, legal fees should not be considered in isolation.
A property transaction may involve a substantial sum of money and significant contractual obligations.
If an issue subsequently arises concerning the SPA, completion, release of the purchase price or a party’s contractual rights, resolving the problem after it has occurred may be significantly more difficult than dealing with it properly from the outset.
Separate legal representation also makes the respective roles much clearer: the purchaser’s lawyer protects the purchaser’s interests, while the vendor’s lawyer protects the vendor’s interests.
Situations Where Separate Representation May Be Particularly Important
Although independent legal representation is generally advisable, it becomes even more important where the transaction is not straightforward.
Examples may include:
- the property is subject to an existing tenancy;
- there are known defects or rectification issues;
- the vendor requires an extended period to deliver vacant possession;
- the property is subject to restrictions in interest;
- there are title or ownership issues;
- the vendor’s name or particulars differ from those appearing on the title;
- the original title or important documents are unavailable;
- there are outstanding maintenance charges or other sums;
- the vendor is executing documents outside Malaysia;
- the sale involves an estate or deceased owner;
- there are several registered proprietors;
- special arrangements have been agreed concerning deposits or completion;
- the vendor requires the sale proceeds to complete another transaction; or
- disputes or disagreements arise during the transaction.
In these situations, seemingly small contractual details can have significant consequences.
Conclusion
A vendor selling a property in Malaysia may choose not to appoint their own solicitor in certain circumstances.
However, the fact that the purchaser already has a lawyer does not mean that the vendor is also legally represented.
The purchaser’s lawyer acts for the purchaser and is responsible for protecting the purchaser’s interests.
A vendor who wants independent advice on the SPA, their contractual obligations, the completion process and any issues arising from the transaction should consider appointing their own conveyancing lawyer.
For a transaction involving a valuable property, having separate legal representation from the outset can also provide clarity as to who is responsible for advising and protecting each party throughout the sale.
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Read more:
Housing Loan Fully Settled in Malaysia: What Should You Do Next?
How Much Are the Legal Fees for a Sale and Purchase Transaction in Malaysia?
How Long Does a Subsale Property Transaction Take in Malaysia?
This article is intended to provide general information on conveyancing practice in Malaysia and does not constitute legal advice. The appropriate steps may differ depending on the terms of the transaction, the nature of the property and the particular circumstances of the parties.