Law firms to lose right to hold property deal money
Ministry seeks feedback on proposals to protect buyers and sellers
By K.C. Vijayan, Law Correspondent
ALL payments for property deals will in future be held by the Singapore Academy of Law (SAL) or commercial banks, and not law firms.
General details of how this will work were released by the Law Ministry yesterday as it sought public feedback on a final solution to the longstanding problem of lawyers running off with their clients' money.
In the last five years, rogue lawyers have absconded with almost $20 million in funds meant for property transactions, and held in client accounts in law firms.
The Law Ministry's proposals were sparked by the need to protect monies entrusted to lawyers by buyers and sellers of properties.
For instance in 2007, a 47-year-old woman who sold her property for $740,000 and hoped to use the gains of $200,000 to get out of bankruptcy, came to grief when the lawyer she hired, Zulkifli Amin, skipped town with her money.
It was part of a $6 million loot he had stolen from conveyancing transactions entrusted to him to handle.
The case showed that earlier moves to safeguard such deposit monies were inadequate.
After rogue lawyer David Rasif fled with $11 million in 2006, the rules were changed so that at least two lawyers had to sign off on cheques withdrawing more than $5,000 from clients' accounts.
Despite this, Zulkifli still managed to disappear with $6 million in November 2007.
The Law Ministry's recommendations will stop lawyers from handling monies meant for property deals altogether and provide for punishments if the rules are breached.
Property buyers and sellers will not be inconvenienced.
The SAL takes over the role of the law firm in holding the deposit, which it pays out in due course.
Clients do not have to deal with the academy directly.
The moves follow the recommendations of a review committee appointed by Chief Justice Chan Sek Keong and chaired by Justice V.K. Rajah last year. A team headed by Senior Counsel Wong Meng Meng then worked out the implementation.
Under the current system, a prospective buyer gives a cheque for the deposit on the transaction price to the seller's law firm once he has exercised his option to buy. The money is kept in the client's account for 12 to 14 weeks while lawyers work to complete the sale, and then it is released to the seller.
In future, the cheque will be replaced by a cashier's order payable to the SAL which the buyer's lawyer can forward directly to the academy.
The balance of the sale price will also be paid by cashier's order - to the seller, the lawyer for his legal fees, and the property agent for his commission.
While the SAL will be the main body to hold the conveyancing deposits, the ministry is in talks with local banks such as UOB, OCBC and DBS to provide the service.
A spokesman for heavyweight firm WongPartnership said the proposed changes would have minimal impact on the conveyancing transactions of large law firms, which already have 'stringent measures' in place.
It should even reduce administrative work, said Ms Edna Lim, a lawyer from a small firm, Jing Quee & Chin Joo.
'While the details have yet to be established, there would be no inconvenience if the firm's role is to forward the cashier's order to SAL on the client's behalf,' she said.
Lawyer Amolat Singh noted that the changes would be an enlargement of the SAL's role, which now holds deposits paid by owners of new homes, worth about 5 per cent, to guarantee against defects in construction.
The funds are released to the developer only a year after owners have taken occupancy.
A Law Society spokesman said the society would be responding to the recommendations.
The public may view further details at the Law Ministry's website at www.minlaw.gov.sg .
Feedback may be faxed to 6332-8842 or e-mailed to MLAW_Consultation
－
