THE lid has come off on how much lawyers should charge in property deals.
The Law Society yesterday said it will remove a controversial set of fee guidelines for conveyancing lawyers that was implemented six years ago.
A statement issued yesterday by the society, which represents all practising lawyers in Singapore, said lawyers should be free to negotiate fees with their clients. The removal of these guidelines will take effect from Oct 1 and will apply to all property deals signed after that.
The Law Society said the guidelines were meant as a 'transitional measure' and, after an ongoing review, its council decided to scrap them. Its statement also reminded lawyers that they have a 'fundamental ethical obligation' not to overcharge.
Back in 2003, the Law Society removed a fixed-fee structure that put a cap on what lawyers could charge their clients for property deals.
Instead, it put in place fee guidelines because many firms were undercutting one another by offering rock-bottom fees in order to secure clients.
The society felt then that the low fees, combined with a heavy case load, would lead to lawyers cutting corners and making mistakes, leaving the legal profession open to more complaints.
However, the guidelines, which pegged a 'fair and reasonable' fee at about 0.4 per cent of a property's purchase price, also meant that lawyers' conveyancing fees ended up being slashed by half.
This caused much unhappiness in the industry and led to some lawyers quitting conveyancing work for areas of law that were better paying.
The guidelines also ran into some problems with the Consumers Association of Singapore for being anti-competitive, although the Law Society is exempted from such laws because it is a regulatory body.
Property experts contacted yesterday said they do not foresee any impact of this change on the industry. They said consumers were now familiar with what was considered a reasonable fee, so the guidelines were now irrelevant.
Mr Mohamed Ismail, chief executive of real estate firm PropNex, said: 'Removing the guidelines will have little consequence on the market, because the market has already settled down with a very competitive and low cost for conveyancing.
'There are already a few specialised firms that do conveyancing in big volumes, thus enjoying relatively good economies of scale and therefore cost becomes low.'
HSR Property group executive director Eric Cheng said there would be little impact as legal fees were only a 'very small fraction of the entire purchase price'.
Consumers are the ones who will benefit from removal of the guidelines, he added. 'This gives consumers free play when it comes to services. If they pay more, they can expect better services. Lawyers who charge more must give better services.'
The current conveyancing fee for a $1 million property is about $4,000. Most buyers now do not pay lawyers directly for property transactions as legal fees are subsidised by banks to attract clients to take up their property loans.
Lawyer Amolat Singh said lawyers used to charge lower than the guidelines stipulated anyway. 'We have to lower our fees or lose business.'
Source, Straits Times 23 Sep 2009