What Is The Differencs Between Deposit & Booking Fee In A Sale And Purchase Transaction

What is the difference between ‘Deposit’ and ‘Booking Fee’ in a sale and purchase transaction?

The ‘deposit’ is a payment by way of guarantee that the buyer shall perform the contract and if the buyer fails to perform the contract, the deposit can be forfeited by the vendor.

In the case law of Linggi Plantations v. Jagatheesan [1972] 1 MLJ 89, the court held that:-”the deposit serves 2 purposes. If the purchase is carried out , it goes against the purchase money. But its primary purpose is a guarantee that the purchaser means business; and if there is a case in which a deposit is rightly and properly forfeited and it is when a man enters into a contract to buy real property without taking the trouble to consider whether he can pay for it or not.” Thus the court here allowed the vendors of an estate, on the interpretation of the contract, to forfeit the deposit though the vendors suffered no damaged as a result of the breach of the purchasers.

The ‘booking fee’ usually means a payment to enable the buyer to make a ‘booking’ for the purchase of the property under development. Generally there are 2 types of booking fee:-

i). the buyer pays a booking fee and fills in an application to purchase. The developer has an option whether to sell or not; and

ii). the buyer selects a specific property and pays a booking fee pending the execution of a formal contract.

Unlike a ‘deposit’, whether a booking fee is recoverable or not would depend on whether there is a legally binding contract in existence between the buyer and the developer. As in the case law of Skyline Trading Co. v. Tiow Yoke Lan [1969] 2 MLJ 212, the court held that there was no express or implied right to forfeit the booking fee.