Changes in the Solicitors’ Remuneration
Thursday, 19 April 2007, 03:53pm Contributed by Yang
1. Date of commencement - 1 January 2006
The Solicitors’ Remuneration Order 2005 (“the SRO 2005”) came into force at
the beginning of last year, i.e. on 1 January 2006. It was gazetted on the
last day of the previous year (i.e. 31 December 2005). That is why it is known
as the SRO 2005 (and not SRO 2006).
The previous Solicitors’ Remuneration Order 1991 (“the SRO 1991”) had been
in force effective from 1 January 1992, exactly 14 years before the commencement
of the new SRO 2005. The SRO 1991 has since been revoked.
Under the new SRO 2005, not only the various
schedules of scale fees have been amended, but the rules governing them have
also been modified to a large extent. Below are some important changes which
are worthy of note.
2. Scale fees for non-contentious matters
One of the most important features of the SRO 2005 is that it introduces new
scale fees for non-contentious matters (such as transfers, charges, debentures,
discharges, tenancies and leases). The new scale fees can be found in the
First Schedule of the Order. It applies to all transactions taking place on
or after 1 January 2006.
However, does it apply to a case where a sale and purchase agreement was signed
before 1 January 2006? To answer these questions, one may refer to the saving
provision of the SRO 2005. It says: “… any non-contentious business commenced
before the coming into force of this Order shall be governed by the provisions
of the Solicitors’ Remuneration Order 1991”: paragraph 9.
This would mean that the revoked SRO 1991 still applies to sale and purchase
transactions, etc. commenced before 1 January 2006. But the question is: when
does a non-contentious matter “commence”?
3. When does a non-contentious matter “commence”?
The SRO 2005 merely states that “…any non-contentious business commenced
before the coming into force of this Order” must be governed by the previous
SRO1991: paragraph 9.
A conveyancing matter, such as sale and purchase of a property, is deemed
to have commenced as soon as a file has been opened for that particular matter.
There may be doubtful or ‘borderline’ cases,
but there are few and far between. The benefit of the doubt ought to be given
to the solicitors concerned. By adopting such a liberal attitude, the Bar
Council will be spared the accusation of conducting a “witch-hunt”.
4. New scale fees
For ease of reference, a brief table of the new scale fees for transfers and
charges is worked out as follows:
Sale and Transfer
|Consideration or Adjudicated Value
||New scale of fees
|First RM150 000
||1 500 [minimum RM300]
|Next 850 000
|First 1 000 000
|Next 2 000 000
|First 3 000 000
|Next 2 000 000
|First 5 000 000
|Next 2 500 000
|First 7 500 000
|Excess above 7,500, 000
||(maximum: 0.4% of the excess)
5. The following observations may be made
on the new scale fees:
(1) New scale fees are higher
The new scale fees are higher than the previous ones. For example, for the
first million, the legal fee has been increased from RM5 500 to RM7 450. There
is an increase of RM1 950.
To illustrate the difference between the two sets of scale fees, a comparison
of some legal fees chargeable is given below:
|RM 1 million
|RM 3 million
|RM 5 million
|RM 7 million
(2) Computation of new scale fees
- more complex
The computation of the scale fees under the SRO 2005 is rather complex, compared
to that under the revoked SRO 1991.
It is time-consuming and cumbersome to compute the legal fee payable for any
transaction above RM150,000 under the new scale of fees, especially in respect
of housing developer’s transactions.
Obviously the computation under the previous scale fees was very much simpler.
Under the revoked SRO 1991, for any transaction up to RM5 million, the formula
for calculating the legal fee was: 0.5% of the adjudicated value + RM500.
In most cases, without much difficulty a solicitor could advise his client
of the legal fee payable. It is not so under the new SRO 2005: the legal fee
payable for almost every transaction has to be worked out.
(3) Salient points of SRO 2005
Some of the following salient points of the new SRO 2005 are noteworthy:
(a) Minimum fee RM300 - A minimum fee of RM300 is payable for any normal
transaction worth RM30 000 or below.
For other low-medium-cost houses, the scale fee for the transfer of any property
worth RM150 000 and below is 1%. For example, a dwelling house worth RM150
000, the legal fee payable is RM1 500.
(b) Simple formula - For any property worth RM1 million or below (but
above RM150 000), the following simple formula may be used for computing the
scale fee: legal fee = price x 0.7% + RM450
For the sale of a double-storey terraced
house worth RM300 000, the scale fee is RM2,550 arrived at as follows: RM300
000 x 0.7% + 450 = RM2,550.
This is the simple formula (price x 0.7% + RM450) for any transaction of RM1
million or below. It is to be borne in mind that the simple formula applies
only to any transaction worth RM1 million or below (but above RM150,000).
(4) Either “Consideration” or “Adjudicated Value” - why?
Under the SRO 2005, the legal fee for a transfer is based on the “consideration
or adjudicated value” of a property. This is a departure from the previous
SRO 1991. An uncertainty has therefore been created by this new provision.
The legal fee for the transfer is now based on either the “consideration”
or “adjudicated value” of a property. A solicitor is at liberty to use either
the purchase price (consideration) or the value (adjudicated by the Valuation
Office) to work out the legal fee payable for any transaction.
The problem is: the purchase price and the adjudicated value may or may not
be the same. The adjudicated value can be higher than the purchase price,
especially in time of an economic boom. For example, the purchase price of
a house may be RM500,000, but its value as adjudicated can be higher, e.g.
RM600 000. Hence a difference of RM100 000.
If the purchase price is taken into account, the legal fee payable is based
on RM500 000. But if it is computed on the value as adjudicated (RM600 000),
the legal fee can be higher. One fails to understand the rationale behind
the creation of such an uncertainty in the computation of legal fees.
When prices fluctuate
In time of an economic boom, the difference
between the consideration and the adjudicated value of the property can be
substantial. The adjudicated value may be much higher than the actual price.
For instance, if the purchase price is RM300 000, the adjudicated value could
be RM400,000 as a result of fast appreciation in value of the property. The
amount of the legal fee for such transaction therefore varies, depending on
whether the purchase price (RM300,000) or the adjudicated value (RM400,000)
of the property is taken as the basis of computation.
A solicitor may therefore charge his legal fee according to either the consideration
or the adjudicated value of the property. Why is a solicitor given such a
choice? Some may construe this as a veiled form of giving a discount, that
is, the legal fee for the difference between the adjudicated value and the
price of the property.
(Note: Under the previous SRO 1991, there was no such uncertainty. The scale
fee for the transfer was based on the “consideration/adjudication value
(whichever is the higher)”. The words “whichever is the higher”
have been deleted in the new SRO 2005. Invariably, the legal fee was based
on the higher amount of the two. The adjudicated value was always used as
the basis for computing the legal fee payable.)
(5) Flat rate of RM250 fee for a developer’s low-medium-cost house
For the purchase of a low-cost or medium-cost house governed by the Housing
Development (Control and Licensing) Act 1966 (“HDA 1966”), special concession
is given to the lower-income group.
RM250 - for a developer’s transaction of RM45 000 and below
Under the new SRO 2005, a flat rate of legal fee of RM250 is payable for the
purchase of a low-cost or medium-cost house governed by the HDA 1966, where
the purchase price is RM45 000 or below. (Note: In this article, any sale
and purchase transaction governed by the HDA 1966 is referred to as a “developer’s
However, such special rate of scale fees applies to developers’ transactions
only. It does not apply to any sub-sale, for example, a transfer between the
first purchaser and a subsequent purchaser, or a transfer between two individuals,
even though the price is RM45 000 or below.
If you buy a house from an individual owner at the price of RM40,000, you
are to pay the usual legal fee RM400 (i.e. 1% of RM40 000), and not the special
rate of RM250, simply because it is not a developer’s transaction.
[Note: Under the revoked SRO 1991, you paid RM120 only for the purchase of
a low-cost house from a developer, if its price is RM30 000 and below. In
this sense, the legal fee of RM120 has been increased to RM250. But if the
purchase price of a property was RM100 000 and below, a discount of 25% on
the legal fee must be given to you.]
(6) Discounted legal fees for all developers’ transactions
The scale fee for any housing developer’s transaction is now always discounted,
and it is therefore lower compared to that of a non-developer’s transaction
(e.g. a sale and purchase) between individuals.
(Note: Any transaction between individuals or companies (that is, not a developers’
transaction), has often been described as a “sub-sale”. The transaction may
not relate to any housing project.)
Discounted legal fees are payable for all developer’s transactions. There
are 3 different rates of discount ranging from 25% to 35%, depending on the
price of the property (except that a low-priced transaction of RM45 000 or
below, attracts a legal fee of only RM250). The natural and logical conclusion
that can be drawn from such provision is that every purchaser is entitled
to a statutory discount when buying any housing developer’s transaction.
It is mandatory for every solicitor to give the prescribed discount for any
developers’ transaction. If he fails to give the discount, he will be liable
to disciplinary proceedings on grounds of ‘overcharging’. A complaint may
be lodged with the Disciplinary Board against the solicitor concerned.
(7) Statutory rates of discount for developers’ transactions
Unfortunately, the provision in the SRO 2005 relating to the 3 different rates
of discount is couched in a verbose language. You may have to take some time
to grasp it. It could have been worded in a simpler language (as had been
done in the revoked SRO 1991) For ease of understanding, it may be summarised
|RM100 000 or below (but above RM45 000)
|RM500 000 or below (but above RM100,000)
|Above RM500 000
In the revoked SRO 1991, the statutory discount
is worded in the plain language, easily understood by all and sundry:
“Where the consideration is in excess of RM 30,000
but not more than RM100,000:
||Scale fees less 25%
||Scale fees less 25%”
Such plain English is easily comprehensible.
In fact, the 3 different statutory rates of discount given in the new SRO
2005 could have been similarly worded. The relevant part of the SRO may be
re-worded in the following manner:
|Consideration or adjudicated value (RM)
||scale of fees
|45 000 or below
|100 000 or below (but above 45 000)
||Scale fees less 25%
|500 000 or below (but above 100 000)
||Scale fees less 30%
||Scale fees less 35%
Such simple schedule can be grasped at a
glance. It makes for easy reading and understanding.
(For your reference, the actual provision of the SRO 2005
is set down below:
“Notwithstanding the above rates, in the case of any transaction governed
by the Housing Development (Control and Licensing) Act 1966 [Act 118] (or
any subsidiary legislation made under that Act), the remuneration of the
solicitor having the conduct of and completing the transaction, whether
acting for the vendor or the purchaser, shall be-
(a) RM250, if the consideration is RM45,000 or below;
(b) 75% of the applicable scale fee specified, if the consideration is in
excess of RM45,000 but not more than RM100,000;
(c) 70% of the applicable scale fee specified, if the consideration is in
excess of RM100,000 but not more than RM500,000; or
(d) 65% of the applicable scale fee specified, if the consideration is in
excess of RM500,000 .)
It is believed that most of the lawyers
may find it difficulty to understand the provision at first glance.
8. Developers maximising profits at the expense of the legal profession?
Such discounted legal fees certainly are to the benefit of purchasers. However,
viewed in the consumers’ perspective, some may feel that the different rates
of statutory discount of legal fees given in developers’ transactions are
designed to assist housing developers in promoting the sale of their products.
Undeniably, the end result is certain purchasers benefit from such arrangements,
because they are entitled to a maximum of 35% discount.
No blame can be attached to anyone who regards this as a special privilege
bestowed upon developers with a view to assisting them in promoting the sale
of houses built by them. Such privilege enjoyed by developers may give rise
to misgiving that the legal profession is practising unfair discrimination
against a certain class of purchasers.
Purchasers in sub-sales have yet to be convinced why they are not entitled
to similar rates of discount. When a purchaser buys a house from an individual
seller (i.e. not a developer’s transaction), he does not enjoy the benefit
of any discount; he has to pay the full scale fee for the transfer.
As a consumer, the purchaser in a sub-sale may fail to understand the justification
for such discrimination against him. Why is he not given the same benefit
as enjoyed by the purchaser in a developer’s transaction?
He may feel that he is being treated differently in an unfair way, simply
because he does not buy the property from a licensed developer governed by
the HDA1966. He may want to know why he is not accorded similar preferential
treatment. Is he to blame if he feels that he is a victim of unfair discrimination?
Obviously, housing developers are given preferential treatment. In the circumstances,
if some developers still clamour for scrapping the no-discount rule practised
by legal practitioners, one may be compelled to conclude that the developers
concerned are seized with the insatiable obsession with the objective of maximising
their profits, to the detriment of the legal profession. They show a callous
disregard for the interests of the legal profession.
(9) Computing scale fees for developer’s transactions
Under the new SRO 2005, some may find it rather cumbersome to compute the
legal fee for a developer’s transaction (if the purchase price is above RM45,000).
[Note: No such difficulty was encountered under the revoked SRO 1991. A statutory
discount of 25% was given in a developer’s transaction of a medium-cost house
of RM100 000 or below (subject to a flat rate of RM120 for any low-cost house
priced at RM30 000 or below)].
The scale fee for a developer’s transaction has to be laboriously worked out
before one can arrive at the legal fee payable for it. A solicitor will have
to work out the normal scale fee first. Then deduct the discount which must
be given before he can arrive at the actual legal fee payable by his client.
Below are some examples:
Example 1 [price up to RM100,000 – less 25%]
In a developer’ transaction of RM100,000, the fee after discount is RM750
Normal scale fee = RM100,000 x 1% = RM1,000
Less 25% discount RM250
75% of scale fee = RM1,000 x 75%= RM750
Example 2 [price up to RM500,000 – less
In a developer’ transaction of RM250 000, the fee after discount is RM1 540
Normal scale fee = RM250 000 x 0.7% +
450 = RM2 200)
Less 30% discount 660
70% of scale fee = RM2 200 x 70% = RM1 540
Example 3 [price above RM500 000 – less
In a developer’ transaction of RM1 million, the fee after discount is RM4
Normal scale fee = RM1 000 000 x 0.7%
+ 450 = RM7 450.00
Less 35% discount 2 607.50
65% of scale fee = RM7 450 x 65% = RM 4 842.50
It is clear from the examples given above,
the SRO 2005 provides a cumbersome process for computing the legal fee payable
for a developer’s transaction. One wonders: why not devise a simpler process
for computing legal fees, instead of such a cumbersome one? The time spent
on computing legal fees could be more productively used to improve the professional
services rendered to clients.
(10) Tenancies - scale fees revised
The new scale fees for tenancies may be summarised as follows:
|For the 1st RM10 000
||RM2 500 (minimum – RM300)
|For the next RM90 000
|| RM9 000
|For the 1st RM100 000
|Above RM100 000
||negotiable on the excess
(up to 10% of such excess)
The minimum legal fee for a tenancy has
been increased to RM300 (instead of RM200). Consequently, the legal fee for
any tenancy with a monthly rental up to RM1 200 is a flat rate of RM300. Once
the monthly rental exceeds RM1 200, the scale fees shown above have to be
The monthly rental of a tenancy for an ordinary building (i.e. a dwelling
house, shophouse, apartment, shoplot, etc.) is largely within the range of
RM10 000 per month as far as Johor Bahru is concerned. The legal fee payable
therefore is usually 25% of the monthly rent. For example, for a tenancy of
RM2 000 per month, the scale fee is RM2 000 x 25% = RM500. (i.e. ¼ of monthly
(11) Discharge of Charge / Deed of Reassignment
The scale fee for attending to a Discharge of Charge is RM300. However, if
the Discharge of Charge involves more than one title, an additional sum of
RM50 is payable for each additional title to be discharged.
The legal fee for the Discharge of Charge has been raised from RM200 to RM300,
an increase of RM100. The additional fee for each additional title has been
increased from RM30 to RM50, an increase of RM20.
Apportionment of legal fees by solicitors
New provisions are introduced to spell out the manner of apportioning legal
fees between the borrower’s solicitor and the bank’s solicitor (or any financier’s
solicitor) for attending to the Discharge of Charge. The apportionment of
legal fees varies, depending on who prepares the Discharge:
i. If financier’s solicitor prepares the Discharge
If a borrower (or chargor) appoints his own solicitor to attend to the Discharge
of Charge, but the bank’s solicitor prepares the Discharge of Charge and attests
the signature of the bank’s attorney, the legal fee of RM300 is shared equally
between the 2 solicitors [see 4th Schedule, rule 2(a)] -
• The Borrower’s solicitor gets ½ of the scale fee (RM150).
• The Bank’s solicitor gets the other ½ of the scale fee (RM150).
ii. If the borrower’s solicitor prepares the Discharge
If the borrower’s solicitor prepares the Discharge of Charge, but the bank’s
solicitor attests the signature of the bank’s attorney, the respective solicitors’
fees are as follows [ see 4th Schedule, rule 2(b)]:
• The borrower’s solicitor is to charge the full fee (RM300).
• The bank’s solicitor can only charge the attestation fee (RM100).
All rules pertaining to the Discharge of Charge also apply to a Deed of Receipt
and Reassignment where the property is without title.
Comment: From the consumer’s point of view, it is more economical for the
borrower to appoint his own solicitor, but let the bank’s solicitor prepare
and attend to the Discharge of Discharge. By adopting such approach, he enjoys
the benefit of independent legal advice. The reasons are as follows:
i. If the consumer appoints his own solicitor, but the the bank’s solicitor
prepares the Discharge and attests the signature of the bank’s attorney, the
consumer needs to pay a total fee of RM300 only (i.e. RM150 to his own solicitor;
the other RM150 to the bank’s solicitor). Under this arrangement, he enjoys
the best of both worlds. His solicitor is spared the trouble of preparing
Both solicitors share the legal fee equally.
ii. If the consumer’s solicitor himself prepares the Discharge, but the bank’s
solicitor attests the signature of the bank’s attorney, the consumer has to
pay an extra sum of RM100 to the bank’s solicitor as attestation fee, in addition
to the full fee of RM300 to be paid to his solicitor. The consumer has to
pay a total sum of RM400. This arrangement is not to the benefit of the consumer.
iii. On the other hand, if the consumer’s solicitor himself prepares the Discharge
and attests the signature of the bank’s attorney, the borrower needs only
to pay the full fee of RM300 only to his solicitor. This was the most common
process adopted under the previous SRO 1991. Solicitors would invariably prefer
to adopt such procedure.
iv. Once the consumer has settled the full redemption sum, it is encumbent
upon the bank to forward the document of title and the duplicate charge to
any solicitor properly appointed by the consumer, since the bank has no more
interests in the consumer’s property by then.
It is highly improper in the circumstances for the bank to forward the documents
to its own solicitors, who have no instructions from the consumer to protect
his interests. The bank has no authority “to protect the consumer’s interests”,
particularly so when the consumer has appointed his own solicitor to protect
No witnessing or attesting fee re signature of unrepresented party
It is now specifically provided that, a solicitor acting for one party in
the sale or purchase of a property, cannot charge any witnessing fee (or attestation
fee) for witnessing and attesting the signature of the unrepresented party.
For example, a purchaser’s solicitor cannot charge any fee for witnessing
or attesting the vendor’s signature to the sale and purchase agreement.
(12) Revised scale fees re miscellaneous documents
The scale fees for preparing and filing “miscellaneous documents” are revised
upwards, except that the witnessing fee and the attestation fee, and the application
for consent for low-cost houses (priced up to RM45 000) remain the same.
|| Previous scale
||RM50 + RM10 per copy
||RM100 + RM10 per copy
|ROC forms (s108-s113)
||RM300 per set
|RPGT form 1 (for vendor)
|RPGT form 2 (for purchaser)
|Application for consent -
|(for price/loan up to RM45,000)
|(for price/loan above RM45,000)
|Filing any other form
|Entry of caveat
||RM200 (+ RM50/add. Title)
||RM150 + RM20
|Withdrawal of caveat
||RM150 (+ RM50/add.title)
||RM100 + RM20
[Note: An exemption order has been made
on the Real Property Gains Tax (RPGT). RPGT is exempted in respect of any
transaction taking place on or after 1 April 2007. No CKHT forms need to be
filed, and therefore no fees (RM300 and RM200) are to be collected for such
The changes made by the Solicitors’ Remuneration Order 2005 are substantial.
On the whole, fees have been increased. One of the most significant changes
is the introduction of various rates of statutory discount for the developers’
transactions. The purchasers concerned are given preferential treatment while
other purchasers are not. This may be viewed by some as a veiled form of unfair
discrimination. This may be viewed by some as a form of bias in favour of
the housing developers.