This title is issued for landed properties such as terrace houses, semi-Ds, and bungalows. When the developer completes a project and is ready to hand over to the respective owners, the developer needs to apply to the Land Office in order to divide up the master title.
This is for properties which comprise multi-storey buildings, also called stratified properties. The whole land of the project belongs to a single owner, and a strata title indicates that the buyer of individual units owns the said unit, as well as other shared common facilities within the development.
Fun fact: Gated-and-guarded landed properties come with a strata title too, such as townhouses, which basically offer the best of both worlds – the spaciousness and privacy of a landed home, with the exciting facilities of a high-rise development!
The owners must use the land according to the respective type, and follow the exact conditions stated in the title. The three categories are:
As the category suggests, agricultural land is used for purposes such as plantations, crop farming, livestock, and aquaculture.
The buildings that can be build on this land are only for owners and employees to stay, and should not be more than one-fifth of the total land area or two hectares, whichever is lesser.
The land under this category is used for purposes of manufacturing, smelting, producing or distributing power, as well as assembling, processing, storing, transporting, or distributing goods and other commodities.
The only types of buildings allowed are factories, workshops, warehouses, docks, jetties, railways, or other buildings used for the purposes mentioned above.
For this category, the land should only be used for the following purposes:
Administrative or commercial
Exhibiting, selling by retail, repairing, or otherwise dealing in any goods or services
Providing educational, medical, sanitary, or other welfare facilities
Entertainment, refreshment, or recreation
Under this category, a development will be divided into two titles, which are the residential title andcommercial title.
So, buyers will need to settle for a maximum of 80% loan-to-value ratio, which means they need a minimum of 20% down payment for the property (the amount could be more, depending on the bank’s approval).
Another difference is that unlike purchasing a residential property, only certain types of residences with commercial title are allowed to be purchased with the funds withdrawn from the purchaser’s EPF Account 2, such as studio apartment, service apartment, SOHO and a shop lot with a residential unit.
Datuk Chang Kim Loong, Secretary-General, National House Buyers Association (HBA) said that the HDA provides protection for homebuyers through Schedule H and Schedule I.
Over the years, amendments had been made to further protect homebuyers, which includes covering residential properties that have a commercial title, such as SoHos and serviced apartments.
"However, SoFo and SoVo units are still not regulated by the HDA, even though buyers will be signing a SPA just like any other residential unit. These units will be subjected to the control of the local authority, as mentioned in the NLC," he said.
Utility bills, such as electricity tariffs for commercial properties, are usually 30% to 50% higher than residential properties. So, clearly the serviced apartment, SoHo, SoVo, and SoFo units will be more expensive for owners.
However, you can apply to TNB to change the tariff to a residential rate from a commercial one. All you need to do is submit a formal application and pay the necessary stamp duty via the nearest Kedai Tenaga.
These commercial rates apply unless it can be justified to the relevant authorities of a unit’s residential usage. Once the owner is able to prove that it’s used as a residence, he/she will then be able to enjoy residential rates instead.
Tariff category (Tariff B – Low voltage commercial)
For the first 200 kWh (1 -200 kWh) per month
For the next kWh (201 kWh onwards) per month
The minimum monthly charge is RM7.20
Tariff category (Tariff C1 – Medium voltage general commercial)
For each kilowatt of maximum demand per month
For all kWh
The minimum monthly charge is RM600.00
Tariff category (Tariff C2 – Medium voltage peak/off-peak commercial)
For each kilowatt of maximum demand per month during the peak period
For all kWh during the peak period
For all kWh during the off-peak period
The minimum monthly charge is RM600.00
Quit rent and assessment rates for properties with a commercial title are generally higher than units with a residential title. The amount is approximately 2.5 times higher for a commercial-titled unit.
Converting A Land From Commercial To Residential Title
So far, we know that living in a home with a commercial title has quite a few disadvantages. The main question now is: Can we change the title from a commercial one to a residential title?
According to the Valuation and Property Services Department (JPPH), land title conversion can be done if the owner intends to use the land for another category of use (other than the one originally stated in the title).
Sections 124 and 124A of the NLC, as well as the respective State Land Rules, do allow landowners to apply for such changes.
However, bear in mind that the State Authority will charge an additional premium on all conversion applications approved for change of use.
The conversion can be done by applying to the Land Office/Land and Mines Office, and must comply with all the requirements. Information required from the landowner include the following:
Copy of the title
Address of the property (if any)
Feasibility study (if any)
Valuation report (if any)
Although choosing a commercial-titled residential property may have its own drawbacks, the lifestyle and convenience offered makes it ever-popular among the younger generation.
Buying and investing in these properties will subject to a caveat emptor (read: buyer beware) basis, since it isn’t as straightforward as a residential-titled one.
There are several matters to look into before deciding on your purchase. Make sure you do your necessary research before buying, so that you aren’t taken aback by unpleasant surprises!
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