A Lapsed Negotiator Tag, an Undisclosed Conflict and a Contested Booking Deposit
Encik Rahman is the sole proprietor of a licensed estate agency in Petaling Jaya. He lists a 1,200 sq ft condominium at RM680,000 for Puan Lim under a 90-day sole agency at 3% commission. The viewings are conducted by a negotiator attached to Rahman's firm whose REN tag lapsed nine months ago; that negotiator collects RM2,000 from the buyer, Mr Tan, and issues a receipt describing it as a 'processing fee'. Mr Tan then pays a further 2% booking deposit of RM13,600 into Rahman's client account and signs an offer to purchase. The bank later rejects his loan because its panel valuer assesses the unit at RM610,000. Mr Tan demands the RM13,600 back; Puan Lim insists it is forfeited. While reviewing the file, Rahman notices that Puan Lim's husband holds a 30% shareholding in Mr Tan's company, that neither party was told the firm was dealing with both sides, and that with ten days of the sole agency left, a second agent has produced a buyer at RM660,000 who is ready to sign.
1. Identify the licensing and professional-conduct breaches disclosed by these facts and state the consequences for Rahman, his negotiator and the transaction.
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Licensing. Under the Valuers, Appraisers, Estate Agents and Property Managers Act 1981 (Act 242), estate agency work must be carried out by a registered estate agent, or by a negotiator registered with the Board and attached to a registered firm. A lapsed REN tag means the individual was not authorised to negotiate during the relevant period. This cannot be cured retrospectively; the firm is exposed to disciplinary proceedings before the Board (censure, fine, suspension or revocation), and every transaction that negotiator touched is evidentially tainted.
Unauthorised charge. The RM2,000 'processing fee' is not a fee prescribed by the Board's scale and was not disclosed to the buyer in advance. Collecting it is a conduct breach. The sum must be refunded or properly accounted for with a corrected receipt; a fee cannot be retained for work that was not authorised.
Conflict of interest. Acting for both seller and buyer, where the seller's husband holds 30% of the buyer's company, is a material conflict. Written disclosure to both parties, followed by their informed consent, is a prerequisite. Neither occurred, so Rahman must withdraw from at least one side immediately and record the withdrawal on file.
Client money. The RM13,600 is stakeholder money and must sit in the client account, never the office account, and must not be applied to the firm's commission without written consent.
Remediation: refund the fee, disclose the conflict in writing, cease dual representation and prepare contemporaneous file notes. Silence aggravates the breach if the Board later investigates.
2. Advise on the RM13,600 deposit: who holds it, whether a low bank valuation justifies a refund, and how it should be released.
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The answer turns on the wording of the offer to purchase and on the capacity in which the money is held.
1. Character of the sum. A 2% booking deposit is normally an earnest deposit that is credited towards the 10% deposit when the sale and purchase agreement is signed. Whether it is refundable depends on whether the offer was conditional on loan approval. If the offer, or the SPA, gives the buyer a stated period to obtain financing, a genuine rejection entitles Mr Tan to a refund. If the offer is unconditional, the seller may forfeit.
2. Is a low valuation a 'loan rejection'? Yes, in substance. A bank that lends on the lower of price and valuation is declining to fund the agreed price. But the buyer must show he applied to a reasonable number of lenders and did not simply walk away, so the file should contain the rejection letters.
3. Stakeholder, not agent for the seller. Rahman holds the deposit as stakeholder. He cannot release it to Puan Lim on her instruction alone; doing so exposes the firm to a civil claim and to a disciplinary finding. Release requires the buyer's written consent, a joint instruction, or a court or Tribunal order.
4. Misrepresentation. If the negotiator told Mr Tan the unit was 'worth RM680,000' or 'bank-value', a misrepresentation claim exists independently of the deposit question.
Recommended action: read the offer terms, put both parties' positions in writing, propose mediation, and release only on signed joint instructions.
3. What should Rahman do about his commission and the competing RM660,000 buyer, given the sole agency has ten days left?
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Sole agency is not exclusive agency, and it is not a guarantee of commission.
Entitlement. Rahman earns commission when he introduces a purchaser who is ready, willing and able, and that introduction is the effective cause of the sale. He has not yet produced such a buyer. The second agent's RM660,000 buyer is a separate introduction; if that sale completes, the second agent earns the fee, not Rahman.
Sole agency clause. Many Malaysian sole agency forms provide that commission is payable if the property is sold during the agency period 'howsoever effected', including by the owner or through another agent. If Rahman's form contains that wording, he may claim against Puan Lim even for the other agent's sale. Such clauses are construed against the party who drafted them, so the wording must be clear.
Practical steps.
- Notify Puan Lim in writing of the RM660,000 offer and of the fact that Rahman has not yet produced a buyer, so she cannot later say she was kept in the dark.
- Do not withhold the RM13,600 deposit as a set-off against commission. That is client money and using it as leverage is a separate breach.
- Disclose the conflict and the negotiator problem before making any claim; the seller will discover them anyway.
- If commission is disputed, issue a proper invoice with the agency agreement attached and pursue it as a civil debt.
Pressing a weak claim while sitting on an undisclosed conflict invites a counter-complaint to the Board, which is a far worse outcome than losing one fee.