Why Developers Can Pay More Than 3% While Sub-Sale Agents Cannot
Understanding the Regulatory Difference in Malaysian Real Estate Practice
A common question in the industry is this:
“If the maximum fee for an estate agent is 3%, how can developers legally pay 5%, 7%, or even 10%?”
The answer lies in the legal distinction between consumer agency work and corporate project marketing. Both are real estate transactions, but they are governed differently because they protect different parties.
1. The 3% Rule Applies Only to Public (Consumer) Transactions
Under the Seventh Schedule of the Valuers, Appraisers, Estate Agents and Property Managers Rules, the 3% maximum fee applies when:
- The agent is acting for a private seller or a private buyer
- The transaction involves the sale or purchase of land or buildings
- The client is a member of the public
This is a consumer-protection rule, not a universal fee limit for all real estate work.
| Type of Client | Treated As | Fee Capped at 3%? |
|---|---|---|
| Private owner selling a condo | Consumer | Yes |
| Buyer appointing agent for a landed home | Consumer | Yes |
When the client is an individual, the fee is regulated to prevent abuse.
2. Developers Are Not Classified as “Public” Under the Same Rule
When a real estate firm is appointed to market a new project, the client is a developer — a corporate entity hiring a professional sales and marketing service.
The Seventh Schedule makes this exception explicit:
“For sale and marketing of projects by registered estate agents, the fees are to be agreed between the estate agent and the client.”
This clause removes the fee ceiling entirely for project sales, because it is not a consumer-level transaction.
| Type of Client | Treated As | Fee Capped at 3%? |
|---|---|---|
| Developer launching a 300-unit project | Corporate | No |
That is why developers can legally offer:
- 5% project fee
- 7% clearance incentive
- 10% marketing override
- Bulk or tier-based commission structures
All are permitted because they are B2B contracts, not regulated consumer fees.
3. Why Developer Fees Are Higher
Developer appointments typically include far more than agency representation. They may cover:
- Marketing and branding
- On-ground sales activation teams
- Digital lead generation
- Overseas sales channels
- Roadshows and exhibitions
- Showroom staffing
- Mortgage pre-screening
- Bulk deal negotiation
This is not the same scope as selling a single subsale unit. Therefore, the fee is not treated as “commission” in the sense of a capped percentage — it is a negotiated commercial service fee.
4. Why Sub-Sale Agents Cannot Use the Same Structure
Sub-sale involves:
- A single seller
- A single property
- An individual client protected by law
So the 3% limit applies automatically. Any attempt to charge more — even if “agreed” verbally — is treated as a breach of the statutory fee scale.
| Sub-Sale Example | Status |
|---|---|
| Agent charges 4% to a homeowner | Not allowed |
| Agent charges 7% “like a project” | Not allowed |
| Agent claims “seller agreed verbally” | Still not allowed |
The difference is not in the property. It is in who the client is, and what the law protects.
5. Summary Table
| Scenario | Client Type | Regulated Fee? | Why |
|---|---|---|---|
| Selling a private owner’s terrace house | Public | Yes (max 3%) | Consumer protection |
| Acting for a buyer purchasing a condo | Public | Yes (max 3%) | Consumer protection |
| Marketing a new development for a developer | Corporate | No cap | Commercial contract |
6. Key Takeaway for Agents
If the client is a member of the public, the statutory fee scale applies.
If the client is a developer, the fee is fully negotiable.
The law does not limit income — it limits how much can be charged to the public under an agency role.
