Prop Legacy had the opportunity to be invited to the Executive Guest Lecture Series 2019 Seminar at UCSI College (Damansara Utama). The seminar featured two guests to speak and share their insight and expertise into matters targeted at Real Estate Negotiators. The first speaker Ms Sophia Ling gives us some insight into ‘Common Legal Issues faced by Real Estate Practitioners & how to secure your Contractual Rights’.
Ms Sophia had highlighted the few common legal issues that Real Estate Agents faced, which are Negligence and Breach of Duty. She had also given a few examples of how agents can secure their contractual rights, protect their interest and how oral agreements work and are binding on their clients.
She has explained that as an agent, their role is important as they are the first point of contact with the clients, as Lawyer seldom present during the viewing of the Property. Sale & Purchase Agreement usually will that the Property is sold on “as is where is” basis. It is the agent’s role to INFORM the Potential Purchaser about all the information received from the Seller.
Generally avoidable by being truthful and leaving no room for Misinterpretation.
An agent should always check with a lawyer on any unclear terms, clauses or issue to reduce the chances of legal action taken against them.
An example given is that when an agent wants to sell off a property quickly, they might miss out certain aspects of the property that the buyer does not ask about. Hence the buyer might make his or her own assumption about the matter. In layman terms, freehold is always thought to be without problem, however certain rare cases where the property would require application of consent even with a freehold status. The Application of Consent would drag the time for the handover of the keys, causing the client to be frustrated due to delays.
Negligence & Breach of Duty
These two are the most common lawsuits brought against a Real Property Agent. In Law, Negligence is defined as breach of a duty of care which results in damage.
Agent owe their Client a duty of care as their Client are trusting them for their expertise in the real estate process. As an agent, they must always act in the best interest of their client and should have a high standard of honesty.
An example of how it may happen is that, an agent is told by the vendor some information on the property before the agent advertises, but the agent chooses not to disclose to the potential buyer in an attempt to quickly close the deal. A scenario would be in properties that have pictures of furnishing in their viewing or pictures but the furnishing and features are not included into the selling price.
It maybe also a flaw in the property or information about the neighbourhood that may sway the buyer’s decision not to purchase it.
If the agent notices that there are leakages, they should propose to have a service person or expert to check it.
Another example would be how sometimes real estate agents would fail to recommend property inspection to prospective buyers before making the purchase and the Purchaser suffer damage from this.
But of course, the agent should get a third-party opinion which include but are not limited to Real Property Gains Tax (RPGT), Inland Revenue Board of Malaysia (LHDN) or Legal matters before giving advice on matters that are not included in their expertise.
Another example would be Low-Cost property, while checking for the client if they are eligible for Low-Cost property approval. Or for instances where the property is unsure whether it falls under low cost category but the surrounding units do fall under that category. So, the best advice in this case is to check it out with a lawyer or by going to the appropriate department (Dependent on state).
Real Estate Agents are held to a high standard of honesty and full disclosure, therefore, to avoid this common pitfall, agents should always practice honesty. Never attempt to hide any information and never exaggerate to induce potential buyer to buy the property. A quick buck is never worth the risk of running into litigation.
It is also worth noting that Negligence is different from Fraud if your client cannot prove you have the “Intention” to do so.
How to protect your interest in your letter of appointment / Letter Offer with your clients.
All information should be stated clearly on the booking form, any agreements by the seller should be written down in black and white. These agreements can include things like an agreement to repair any leakage, what keys are being delivered (Post-box or Window grille keys). An example would be for older condominiums or apartments, the grille keys are lost or missing, therefore the seller should disclose if they have the keys to give or not.
Another important point is the validity of the offer and also any additional condition precedent to satisfy in order to proceed the case.
As for working for the client, the agent should always check if both parties have concluded their negotiations and agreed on the essential terms of their bargain. Agents should not rush the signing of letter of offer to purchase until both parties have concluded their negotiations.
To avoid complications, the terms of bargain should be checked if they are subjected to some further terms that are agreed upon and preparation of a formal agreement. As most of the agreements are based on case-by-case basis, it is best to have good practice when identifying special conditions to avoid future complications. For example, approval of minimum loan of 80% within 3 weeks from booking form date, or for purchase be made including cabinet (fixture and fittings) or loose item excluded.
Miss Sophia shared her own experience with how complications can arise from an incomplete or vague booking form in two scenarios.
Delivery of vacant Possession, the house was different from the time of signing the booking form.
In this scenario, the Booking Form never stated if the furniture were included in the selling price, but the purchaser has claimed that the seller’s agent told them that everything will remain the same as the viewing.
The property was found to be different from the time of viewing, it was thought to have included furnishing and fixture, hence the best advice is to include that into the booking form and/or the agreement to avoid dispute.
Another situation shared by Miss Sophia is where the Purchaser took the keys after one month the vendor had already passed the keys to the purchaser’s lawyer. It is a rare case, in which the purchaser was overseas, hence the time taken to collect the keys were after a month. The Property was burglared and Property was damaged. The question put forth was whose fault is it.
The purchaser put the fault on the purchaser’s lawyer, however as the purchaser’s agent had already inspect the property with vendor’s agent one day before passing the keys and had included taking pictures to prove as-is-where-is basis. It was considered bad luck for the purchaser, as the lawyer had already reminded them to collect the keys within the average time frame of 5 days. It is advised that purchasers would collect the keys within the time frame and inspect the property. This will help find who will be at fault if any issues occur.
The audience had put forth a question if what if the vendor has insurance for the property, would the purchaser be able to claim it?
In this case, as the purchaser or purchaser’s solicitor has already collected the key, the land and property title has already been transferred, hence it is not within the vendor’s responsibility to claim.
How Agents Secure Their Contractual Rights
All contracts are agreements but not all agreements are contracts, Miss Sophia continue to explain the following as;
In order for any contract to be effective in Malaysia, the contract must consist of 4 Elements:
- Offer made;
- Offer must be Accepted;
- Offer must have an Intention to create Legal Relationship; and
- There must be consideration given.
Section 2(A) of Contract Act 1950 defines the term “proposed” as “When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent* of that other to act or abstinence, he said to make a proposal.”
* express approval or agreement.
The offer is made when a person either by his or her words or conduct expressly or impliedly showed a willingness on his or her part to enter into a contract that is legally binding on him or her as soon as it has been accepted by an act on the fulfilment of a promise by the person to whom it is addressed.
There must be an intention to create legal relation for the agreement to be a binding contract, it must show that it was made with the intention to create a relation that is enforceable legally and would have legal consequences.
This is part 1, For Part 2 Click Here.
by Bob Tan with permission and edits from Miss Sophia Ling from Leong & Co
2nd February 2019 15:25