News: KPKT Urged To End Booking Fee Scam In Property Buying

Jan 22, 2021

The Ministry of Housing and Local Government (KPKT) has been urged to clamp down on property developers or their agents who collect booking fees – which is an illegal practice.

National House Buyers Association honorary secretary-general Datuk Chang Kim Loong noted that the housing development regulations provide that no person, which includes parties acting as stakeholders, can collect any payment except that prescribed in the contract of sale.

Despite this, developers have been collecting booking fees. In fact, he noted that “there has been no reported prosecution in the courts against those housing developers and sales agents who flout this prohibition,” he said as quoted by Free Malaysia Today (FMT).

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He underscored that collecting booking fees is a criminal offence, with those found guilty liable to a fine of up to RM50,000 or imprisonment by up to five years or both.

According to the FMT report, the Federal Court on 19 January 2021 ruled that the calculation for late delivery payment for house buyers starts not from the date of signing the sale and purchase agreement but from the date the booking fee is paid.

Chaired by Chief Justice Tengku Maimun Tuan Mat, the five-member bench decided in favour of the eight buyers from Melaka and Kuala Lumpur, who filed cases against property developers GJH Avenue Sdn Bhd, Sri Damansara Sdn Bhd and PJD Regency Sdn Bhd before the housing tribunal for late delivery payment.

The court described the Housing Development (Control and Licensing) Act and related regulations as social legislations aimed at regulating the relationship between a stronger class of persons and a weaker class of persons.

“Given that one side always has the upper hand against the other due to the inequality of bargaining power, the state is compelled to intervene to balance the scales of justice by providing certain statutory safeguards for that weaker class,” explained Tengku Maimun.

Chang said buyers paid booking fees since they are gullible, plus there was a belief that it was legal considering that almost all developers, including their agents, practiced it.

It was even stated in the court by the developers that the collection of booking fees was “standard practice”.

According to Chang, speculators pay a booking fee to secure a unit or two, with the intent of flipping at a premium.

Developers, on the other hand, collect booking fees to gauge the market for a residential project, he added.

In all cases brought before the court, buyers paid booking fees, with the balance of the 10% deposit paid later.

Developers, however, insert the date of their choice for the start of the contract. The housing law and subsidiary legislation had no express mention as to when the agreement should be dated, added Chang.


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