NEW RULES FOR PROPERTY LEGAL CONVEYANCING AUG 2011
Starting from 1st August 2011, the Conveyancing act 17 of 2011 (under the Miscellaneous amendments) shall come into force to safeguard stake holder’s money.
Conveyancing rules in Singapore previously
Conveyanging Lawyer Zulkifli Amin ran away with client’s conveyancing money meant for a property purchase. About $6 million was reported missing from the conveyancing accounts. (01 Jan 2008, The Straits Times)
In the past, when you paid for your typically 1% Option to purchase for a property, on exercising the option, you would need to pay 4% of the property price to complete exercising the option. After that, the lawyers will do the usual property and title searches acting on the Singapore bank’s letter of instructions before disbursing the housing loans agreed in the letter of offer.
It is usually during this stage that monies are collected by lawyers from property buyers and some rogue lawyers ran away with the money.
Most law firms hold this property buyer’s money (“Stake holder money”) under the law firm’s own bank accounts and they pay out the funds to the seller’s lawyers to complete exercising the option on the stipulated date.
However, in the above case, the lawyer took the 4% and failed to exercise the option by paying the seller’s appointed lawyer and siphon the funds from the law firm. This means that the property deal fell through. And the property buyer lost the 4% of the property price.
Law firms cannot Hold Stake holder’s money
Law firms in Singapore will be required to set up a special account with the designated banks or with Singapore academy of law. This money is kept safe by requiring 2 signatories of both the buyer and seller lawyer.
All the Buyers have to do is to put the law firm’s name and add “- CVY” to the law firm’s name and the money will be safely deposited into the special account.
As an illustration, Tan and Partners LLP, when you write a cheque, all you have to do is Pay to “Tan and Partners LLP – CVY”
You can also find more information on Conveyancing.sg
Property buyer and seller legal conveyancing flow
CONVEYANCING LAWYER – SUM OF FLOAT
In buying and selling a property, your lawyer may ask for a float of up to S$5000 to meet last minute adjustments. You may (optional) provide this money into the non-convenyancing account or you may also add “-CVY” to the name of the lawyer.
IMPLICATION OF SUCH A MOVE
The new rule while good for protecting the client’s money adds S$100 to S$150 per transaction to the law firm. If you include possible compliance and administrative costs, we estimate that this could easily cost the law firm up to $200 to $400.
Many conveyancing lawyer firms we spoke to felt that it’s a good move to protect client’s money. However they may have no choice but to pass on the additional cost.
Naturally an orderly and safe transactional environment is welcome, but the additional costs that comes with it, is not welcomed. Many banks are charging $150 (excluding GST), some industry insiders that we at Property Buyer mortgage brokers spoke to said, “It does not cost the banks that much to administer this.”
The new moves are definitely a boost in strengthening the confidence of foreigners buying properties in Singapore, for a small price.
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