June 30, 2007
EN BLOC SALES
Should lawyers keep interest on deposits?
AS OWNERS of a small condo which was sold en bloc recently, we now encounter a problem with our legal consultant with regard to interest on moneys held by the solicitor as stakeholder. He quoted the following ruling from the Law Society to support his claim to the money:
'The question as to who should be entitled to the interest on moneys held by a solicitor as stakeholder is entirely a matter of contract. If the contract is silent then the solicitor can retain the interest for his own benefit.'
The owners are asking for the substantial interest earned from the large amount of money/deposits held by the lawyer as stakeholder.
However, the lawyer went on to quote a letter from the Law Society of Feb 25, 1989, published in The Straits Times under the heading, 'Money held by lawyer as stakeholder no longer client's', to reinforce his point.
But the point is that, in 1989, there was hardly any en bloc sale. In my layman's view, what the Law Society was trying to address was the sale and purchase of a single unit of a building, not the situation of a large en bloc or collective sale.
If this were not the case, the interest alone would amount to as much as or even more than the consultation fees we are paying the lawyer for the job.
In addition, how are the owners, who are mostly ordinary men and women, expected to know that should the contract, or the Collective Sale Agreement in our case, be silent on this point, then the interest earned would go to the lawyer?
It seems that lawyers know about this Law Society ruling. However, if a lawyer held back this knowledge when negotiating the appointment terms with the owners, can the lawyer still claim caveat emptor on the part of the owners as a form of natural justice?
Considering the case of, say, a billion-dollar collective sale, if the interest accrued were to go to the lawyer, then he need not be paid any more consultation fee as the interest alone would add up to a few million dollars.
Teo Kim-See