Legal Update 11 of 2011

Conveyancing - Vendor's solicitor's duty to the purchaser.

CASE:

Siew Kin Meng v Tetuan Nasharuddin, YK Chew & Partners [2009] 1 LNS 698

BRIEF FACTS:

• The plaintiff (Siew) in 1995 purchased a condominium from the developers for a price of RM265,900.00.

• To finance the purchase, he took a loan from a bank and the bank created a security over the property by way of a Loan Agreement cum Assignment.

• Under this agreement, Siew agreed to assign all his rights to the said unit to the bank until repayment of the loan sum.

• The developer did not complete the project on time and was late in delivering the unit.

• Siew subsequently also found out in 2000, that the developer did not have a developer's licence and advertisement and sale permit approval from the Ministry of Housing and Local Government.

• Siew defaulted on his loan repayments and the unit was sold in an auction for the price of RM97,000.

• Siew initiated this suit to sue the defendant (the lawyers) for failing to ensure that the developers had a developer's licence and advertisement and sales permit.

ISSUE:

Whether the solicitors who, on paper, represent only the developer are liable to the purchaser for failing to ensure that the developer had the relevant licences.

DECISION: Siew's claim dismissed with cost.

• The only cause of action Siew may have would only be against the developer for late delivery.

• However, there is no professional relationship between Siew and the lawyers as they are officially the solicitors for the developer; not for Siew.

• As solicitors for the developer, their only job was to ensure that the property was conveyed to Siew. This they did.

• They conducted the relevant searches at the Land Office and Official Receiver's Office to this end.

• There is no obligation on the part of the lawyers to ensure that the developer had a valid licence and advertising and sales permit.

• There is also no mechanism for a search to check whether a developer had the relevant licences.

• Furthermore, Siew has no standing to maintain this suit as he had assigned all his rights in the property to the bank. The bank also had not given Siew any consent to initiate this suit on its behalf.