House Earnest Deposit in Malaysia: Who Should Hold It, Refunds & BOVAEP Complaints

An earnest deposit (also called a booking fee, "wang cengkeram" or earnest money) in a Malaysian property deal is safest when a neutral party holds it as stakeholder. That is usually a lawyer, or a registered estate agency that keeps it in a proper clients' account. It should not go into an agent's personal account or straight to the seller's personal account. Mishandled deposits are one of the most common triggers for complaints to the Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVAEP, known in Malay as LPPEH), and a complaint can put a real estate negotiator's (REN) registration at risk. This guide explains who should hold the deposit, how refunds are handled properly, and how agents can protect themselves from complaints.

Quick summary

• The earnest deposit is safest with a neutral stakeholder: usually a lawyer, or a registered agency using a separate clients' account. It should not go into a REN's personal account.

• Deposit handling mistakes are a leading cause of complaints to BOVAEP under the Valuers, Appraisers, Estate Agents and Property Managers Act 1981 (Act 242).

• Whether the deposit is refunded depends on the written terms in the offer letter, booking form or SPA.

• Agents protect themselves by never holding deposits in a personal account and by making sure the refund conditions are in writing.

Who should hold the earnest deposit?

In proper practice, the deposit is held by a stakeholder. A stakeholder is a neutral party who holds the money for both the seller and the buyer until the agreed conditions are met.

• A lawyer is the most common and the safest stakeholder.

• A registered estate agency may hold the deposit before the Sale and Purchase Agreement (SPA) is signed, but only through the agency's clients' account, kept separate from its operating account, with clear records.

The risky situations are an agent taking the deposit into a personal account, or handing it straight to the seller with no written terms. When the deal then falls through, this is where disputes and complaints begin.

Common mistakes that lead to BOVAEP complaints

• The deposit goes into the agent's personal account, mixing client money with the agent's own money.

• There are no written refund terms, so the buyer and seller disagree on when the deposit must be returned.

• The deposit is passed to the seller before the conditions are met, and is then hard to recover.

• No official receipt is issued, or the records are incomplete.

• The agent makes verbal promises about refunds that do not match the documents.

These mistakes do more than invite complaints. They can also cause the buyer to lose money. For what can happen to the deposit if the buyer's financing fails, see loan rejected after signing the SPA: what happens to the deal and deposit.

How the earnest deposit is refunded properly

How the deposit is dealt with depends on the written terms in the offer letter, booking form or SPA. As a general guide:

Because the legal outcome turns on the terms, an agent should not decide alone who is entitled to the deposit. That decision needs to be supported by the terms of the documents and by legal advice.

The line a REN must not cross

As a REN, your role is to coordinate the transaction. It is not your role to give legal advice or decide the parties' legal rights. You must be registered with BOVAEP under Act 242. Practising without registration is an offence punishable by a fine of up to RM300,000, imprisonment of up to three years, or both. Handling deposits correctly is one of the most practical ways to protect your registration.

How agents can protect themselves

1. Encourage the parties to have the deposit held by a lawyer as stakeholder wherever possible.

2. Make sure every payment has written terms and an official receipt.

3. Never mix client money with your personal account.

4. Do not make verbal promises about refunds that the documents do not support.

5. When a dispute arises, refer it to a lawyer. Do not try to settle the parties' legal rights yourself.

What does holding as stakeholder mean, and why does it matter?

Holding as stakeholder means the deposit is kept by a neutral party who cannot release it to either side until the agreed conditions are met. This is different from money handed straight to the seller as "part payment".

For agents, it matters because when a lawyer holds the money as stakeholder, no one can claim that the agent misused the money or took sides. That protects the agent from accusations and complaints. If the deal is cancelled, the lawyer releases the money according to the written terms and legal advice, not according to pressure from either party.

In a subsale, the SPA deposit (commonly 10% of the price, including the earnest deposit already paid) is often held by the seller's or the buyer's lawyer as stakeholder, on the terms set out in the SPA. To see how the deposit fits into the whole transaction, read the subsale process in Malaysia: a guide for real estate agents.

"The simplest way for an agent to avoid a BOVAEP complaint is not to hold the deposit in a personal account. Under the Valuers, Appraisers, Estate Agents and Property Managers Act 1981, the handling of client money is bound by strict rules. At ASCOLAW, our team regularly holds deposits as stakeholder on behalf of agents and clients, a simple step that takes the agent out of that risk entirely," says Akmal Saufi Mohamed Khaled, lawyer and principal of ASCOLAW (Messrs Akmal Saufi & Co).

How ASCOLAW can help

Whether you are a buyer, a seller or a REN handling a deal, ASCOLAW can hold the deposit as stakeholder under clear written terms, explain the refund and forfeiture conditions before money changes hands, and advise when a deal is cancelled and the parties disagree about the deposit. Fill in the ASCOLAW enquiry form below with a short description of the transaction and our team will contact you.

Frequently asked questions

Who should hold the earnest deposit when buying a house in Malaysia?

Ideally a neutral stakeholder, usually a lawyer. If an estate agency holds it, it must go through a separate clients' account with clear records, not an agent's personal account.

Can an earnest deposit be paid into an agent's personal account?

This should be avoided entirely. Mixing client money with personal money is a common cause of complaints to BOVAEP and can put a REN's registration at risk.

When should the earnest deposit be refunded to the buyer?

It depends on the written terms. For example, if the buyer's loan is rejected and there is a loan condition clause, the deposit is usually refunded. The actual outcome must be supported by the terms of the offer letter or SPA.

Can the agent decide who is entitled to the deposit?

No. That depends on the terms of the agreement and legal advice. The agent coordinates the deal but does not decide the parties' legal rights.

This article is general information only and is not legal advice. Every property transaction is different. Get specific advice from a licensed lawyer before taking any action.

Related guides

• Loan Rejected After Signing the SPA: What Happens to the Deal & Deposit

• The Subsale Process in Malaysia: A Guide for Real Estate Agents

• 7 Important Legal Services That Real Estate Agents and Agencies Need to Know

• Balance Purchase Price in a Malaysian Property Sale: What It Means & When You Pay

• Property lawyer services at ASCOLAW