ALL around the world, real estate practitioners play a pivotal role in marketing properties, getting qualified prospects, negotiations and guiding one through property transactions.

If you have sold/bought or let out/rented a property, chances are that you would most probably have made contact with an estate agent/negotiator. If you have not done so, you most probably will in the future. Hence it is of great importance that you know them well.

The profession of estate agency in Malaysia is governed by the Valuers, Appraisers, Estate Agents and Property Managers Act 1981 (Act 242), Valuers, Appraisers and Estate Agents Rules 1986, Malaysian Estate Agency Standards, guidelines, circulars and directives issued by the Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVAEP).

The Act provides for the setting up of BOVAEP which regulates the estate agency profession.

A registered estate agent as defined in the Act is a person whose name has been entered under Part IV of the Register and to whom an authority to practise has been issued by the board under Section 16 of the said Act.

“Estate Agency Practice” is defined in the Act as “acting or holding oneself out to the public or to any individual or firm as ready to act, for a commission, fee, reward or other consideration, as an agent in respect of the sale or other disposal of land and buildings and of any interest therein or the purchase or other acquisition of land and buildings and of any interest therein or in respect of the leasing or letting of land and buildings and of any interest therein including the act of making known of the availability of land, building or any interest therein for such sale or other disposal, purchase or other acquisition, leasing or letting”.

The Act in fact came into force on February 6 1981. At the time it governed only the professions of Valuers and Appraisers and the Act governing them was known as the Valuers and Appraisers Act 1981.

In 1984, in response to a critical need to regulate the estate agency profession as a result of unprofessional practices by unregulated people carrying out estate agency activities, the Act was amended to incorporate the profession of estate agency and hence it was known as the Valuers, Appraisers and Estate Agents Act 1981 which came into force on 7 September 1984.

Effective January this year, the Act was amended to facilitate the registration of property managers who will now also come under the Act. Hence, the Act is now known as “Valuers, Appraisers, Estate Agents and Property Managers Act 1981”.

To be eligible to be registered as an estate agent, one would be required to pass the board’s Written Estate Agents Examination Part 1 and 2 (or other equivalent course of study recognised by the board) and the Test of Professional Competence (TPC). It is a stringent process and it can take a good number of years before one is able to be registered as an estate agent.

A person who has passed the board’s Written Examination Part 1 and 2 (or other equivalent course of study recognised by the board) may then proceed to register as a probationary estate agent (PEA). A PEA registration number is denoted by PEA followed by a few digits. There are about 704 PEAs currently.

An estate agent’s registration number is denoted by an “E” followed by a few digits. Currently, there are about 1,964 estate agents in the country.

Once a person becomes a registered estate agent, he/she is then able to establish his/her own real estate agency practice by forming a body corporate, a partnership or a sole proprietorship.

The fee for engaging a registered estate agency firm:

a) Sale or Purchase

The maximum fee (as provided for under the Seventh Schedule of the Rules) is three per cent for the sale or purchase of land and buildings. The same maximum fee applies to the other services rendered by the estate agency firm, such as joint venture, sale of company, property swap. For chattels including plant and machinery, a fee of 10 per cent is chargeable on the proceeds.

The above is subject to a minimum fee of RM 1,000 per property.

For sale and marketing of projects, the fees are to be agreed between the estate agency firm and the client. This means that it is not subject to the abovementioned maximum cap and hence the fee could be higher than three per cent (subject to agreement from the client).

The above scale of fees will not apply to the sale of foreign properties in Malaysia or sale of Malaysian properties in foreign countries. It is therefore not subject to the maximum cap of three per cent and could be higher (subject to agreement from the client).

b) Lettings

A maximum fee chargeable is 1.25 months gross rental for tenancy of up to three years.

The above is subject to a minimum fee of one month rental.

For rent reviews, a fee of 50 per cent of the abovementioned rate is chargeable.

c) Additional Claims

In addition to the fees stated in (a) and (b), claims may be made for the following (subject to concurrence of the client):

i) The costs of printing, plans, copies of documents, lithography, travelling (only where the distance between the estate agent’s office and the property is more than 40km) and other expenses actually incurred.

(ii) The cost of media advertisements, signboards, brochures and other promotional material.

THE NEGOTIATOR

Prior to the recent amendments to the Act (which came into force in January this year), there was no mention of the word “negotiator” in Act 242. Since then, there is a new insertion under Section 22C where it states “a negotiator may assist the registered estate agent in the estate agency practice” and “negotiator means a person who is employed by a registered estate agent to assist him in the estate agency practice”. By this it means that a negotiator cannot work independently and must be always under the supervision of a registered estate agent. There are about 24,590 negotiators currently.

It is mandatory for anyone who wishes to become a negotiator to undertake the two-day Negotiator Certification Course (NCC), an intensive training course. This is a pre-requisite to formal registration as a negotiator with BOVAEP where one will be given a tag together with a REN Number (REN followed by a few digits digits). REN is an acronym for Real Estate Negotiator. Negotiators must wear the tag during the course of their business and the REN number must be stated in all forms of promotional and marketing materials.

Some of the important recent amendments to the Act:

1) There is a new insertion under section 22B of the Act on “Estate agency practice” wherein it states “In respect of any tenancy administration including the rental collection, payment of outgoings, arrangement for minor repairs and handing over and taking over the possession of a property of any land and buildings and of any interest therein”. This means that estate agents can now do tenancy administration for their clients. However the professional fee for tenancy administration has yet to be fixed by BOVAEP at this point in time.

2) A non-citizen and non-permanent resident of Malaysia can now register as an estate agent/probationary estate agent with the removal of section 22D subsection 5 of the Act on “Qualifications for registration of estate agents and probationary estate agents” (subject to them fulfilling the requirements for registration with BOVAEP).

The benefits of engaging a registered estate agency firm:

1) All registered estate agency firms are covered under the mandatory Professional Indemnity Insurance policy and Fidelity Guarantee Insurance policy.

2) Able to deduct the professional fees paid to the estate agency firm as incidental costs on the acquisition and disposal of the property as provided for under the Real Property Gains Tax Act 1976.

3) An aggrieved party has recourse to BOVAEP in the event of a dispute or complaint where the aggrieved party can seek assistance from BOVAEP. The Board has committees in place for this purpose, i.e. Complaints Management Committee and Complaints Investigation Committee.

The writer is a registered estate agent and the associate director of Hartamas Real Estate Group. He was elected as a director of the Malaysian Institute of Estate Agents (MIEA) for the term 2017 to 2019. He is the chairman of Membership Benefits of MIEA. He writes and speaks regularly on real estate in the media. He can be contacted at christopherchan@hartamas.com or at +6012 2323 837.