Last few years property industry has changed a lot with developers keep pushing for the commercial-titled residential property like Small-offices Versatile-offices (SoVos), Small-offices Flexible-offices (SoFos), Small-offices Lifestyle-offices (SoLos), basically a designer suite or commercial office unit of residential elements.

These few years, I keep asking myself why? Why the drastic change in developer focus. Why are developers selling these properties? What good in this property?

Until one day, I was chatting with a friend of mine, and she was working with a developer. The developer handed keys to new owners during vacant possession (VP) without completing the property. I was shocked; I can’t imagine this can happen to anyone.

But, that’s the reality of buying a property without under Housing Development (Control and Licensing) Act 1966 (HDA). You’re at the mercy of the Sale & Purchase Agreement (SPA) which drafted in favour of the developer. I guess not everyone knows about this. Especially, not the greenhorn in the industry.

I’m not saying all these properties are bad, but I think it is good to evaluate all the risk before purchasing such property.

So, before being bedazzled by the stylish showrooms of buying SOHO, SOVO, SOFO, SOLO or any commercial-titled with residential element property, you must read this article to understand and equip with the necessary knowledge.

1.All the protection offered by the Housing Development (Control and Licensing) Act 1966 (HDA) for residential property buyers will not apply to commercial property owners.
The terms for commercial property transactions are purely based on the contractual agreement between the buyer and seller. Hence, the developer of a commercial property bears less liability than a developer of a residential property.

2. Artist impressions used in marketing brochures may look like a residential project and you may not know it is actually a commercial project unless you read the small print.

3.Commercial properties with residential elements are regulated by different laws and guidelines from residential-use commercial properties. Such developments do not fall under the jurisdiction of the HDA.

4.In commercial properties with residential elements, the owners do not have the right to stay overnight in the property if the management does not allow them to.

5.Unlike for residential properties, the developers of commercial properties may not need to list down details in the Sale and Purchase Agreement (SPA), such as:-
a. The date of commencement and completion of the project,
b. The building plan and floor plan,
c. Schedule of payment of purchase price.
d. Compensation for late delivery (LAD)
e. The delivery of vacant possession (VP)
f. Defect liability period

6.Developers of residential properties need to apply for the advertising permit and developer license (APDL) before they can start placing advertisements to sell their products, while the developers of commercial properties do not.

7.In the case of dispute, strata home buyers can bring up their cases to the Strata Management Tribunal. However, for commercial property purchasers, their legal recourse is through the courts, and the arguments will be based on the SPA signed by both parties.

8.The rights of commercial buyers are strictly governed by the SPA with the developer.If the developer breaches the SPA, the buyer will have to file a legal claim against the developer through the dispute resolution mechanism agreed in the SPA.

9.Purchasers should engage their own lawyers to look into the SPA to safeguard their interests.
Unlike residential properties, which are governed by the HDA, commercial properties do not have a standard SPA. Therefore, buyers may be subject to unfavourable terms and be placed in vulnerable positions.

10. Do ask for a copy of the agreement before making the purchase decision.

11. Commercial properties require higher maintenance fees, utility tariffs, insurance premiums, assessments and quit rents.
The minimum monthly electricity charge for low voltage commercial premises is RM7.20, compared with RM3 for a private dwelling that does not carry out any form of commercial activities.

Syarikat Bekalan Air Selangor Sdn Bhd states on its website that the minimum water tariff for commercial usage is RM36 per month compared with RM6 for domestic usage.

12.There is no exemption on the Real Property Gains Tax if a commercial property is sold within five years, whereas a residential property is entitled to a “once-in-a-lifetime” exemption.

13. For commercial properties, it is the duty of the seller to obtain the developer’s consent as a condition precedent to the sale or assignment. At times, a developer may impose stringent terms and conditions on the parties.

Despite the risks and costs, commercial properties are sometimes worth the investment depending on the location and price. Some could be very attractive.


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