SOHOs and serviced apartments – Commercial or residential titles?

Are SOHOs and serviced apartments under commercial or residential titles? Can residential properties be used for commercial purposes? Christopher Chan finds out.

SOHOs and serviced apartments built on commercial title – what are they actually?

Under the National Land Code 1965 (Act 56), land is categorised into one of the following uses: “Agriculture”, “Building”, or “Industrial”. Under the “Building” category, there is an express condition in the title (known as “Syarat Nyata” in Bahasa Malaysia) that states whether the land is to be used for residential or commercial use.

As an example, you can see the title below of a land in the District of Gombak with a “Building” category for residential use. This is also a Malay Reserve Land.

Let’s have a look at the express conditions in the master title for Scott Garden’s SOHOs in Old Klang Road and Marc Residence (Serviced Apartments) in KLCC.

Master title with ‘Syarat Nyata’ for Marc Residence (Serviced Apartments) in KLCC.

The express condition in the master title for Scott Garden’s SOHOs states that “Tanah ini hendaklah digunakan untuk bangunan perdagangan bagi tujuan kedai pejabat dan pangsapuri servis sahaja“. For Marc Residence, it is stated as “Tanah ini hendaklah digunakan untuk bangunan perdagangan bertingkat bagi tujuan pangsapuri servis sahaja“.

The individual strata titles for units of both of these developments have yet to be issued and that is why we are looking at the master titles at the moment.

Therefore, we refer to these developments as being on a commercial title as it is stated as “untuk bangunan perdagangan”. Therefore, on the same reasoning, the quit rent, assessment and utilities are usually charged based on commercial rate by the authorities.

For a stratified development, the master title (encompassing one piece of large title for the whole development to be developed by the developer) is deemed as the “Parent title” while the individual strata title (issued to the individual purchasers) can be deemed as the “children title”. Just like a human being where we inherit the DNA structure from our parents, the conditions in the master title would naturally be the same conditions as stated in the individual strata titles.

The Housing Development (Control and Licensing Act) Act 1966 (Act 118) and Regulations was amended in 2007 to widen the definition of “housing accommodation” to include SOHOs and other similar developments. The new definition is as follows: “Housing Accommodation” is defined under Part 1 sub-section 3 of Act 118 on “Interpretation” to include any building, tenement or messuage which is wholly or principally constructed, adapted or intended for human inhabitation or partly for human inhabitation and partly for business premises and such type of accommodation as may be prescribed by the Minister from time to time to be a housing accommodation pursuant to section 3A.

Under the above definition, SOHOs and the likes, would fall under the definition of a housing accommodation and therefore they are subject to Act 118.

Can residential properties be used for commercial purposes?It is interesting to note that the Petaling Jaya City Council (MBPJ) has, for some time now, allowed residential homes to be turned into commercial use as provided for in the Petaling Jaya Local Plans 1 & 2.

I paid a visit to MBPJ on June 30 to seek clarification on this matter. Interestingly, my findings are as follows:

> The MBPJ allows certain residential areas to be turned into “limited commercial use” as provided for in their local plans. This is allowed for certain areas in Petaling Jaya such as Jalan SS2/24 (partial), Jalan Universiti (partial), Jalan Utara (partial), Jalan Kemajuan, Jalan Gasing and Jalan Penchala (partial), among others.

> Limited commercial use means that the council allows for certain types of commercial activities such as art galleries, showrooms (excluding cars), agencies (including tourism, advertising and real estate agencies) and Care Homes for the elderly, among others. One may obtain a booklet from the council titled, “Garis Panduan Bagi Membuat Perubahan Matan Perdagangan Dan Perniagaan Di Majlis Bandaraya Petaling Jaya” dated July 14, 2007 for more details on this.

It is interesting to note that quite a number of these properties have not been formally converted to commercial use as such. They have merely been given an approval by the council to be used for the above mentioned purposes, subject to an annual payment of RM2,000 to the council. One would need to continue to renew this on a yearly basis. The title of these properties remains residential as stated in the express condition.

Beginning next year, MBPJ will cease to allow the yearly annual payment of RM2,000. This means that the owners should then proceed to convert their land from residential into commercial use.

The owner would have to apply under section 124 – “Variation of Conditions, Restrictions & Categories” of the National Land Code 1965 for approval. For this, one would need to apply at the Petaling Land and District Office.

>> Christopher Chan is a registered estate agent and an associate director with Hartamas Real Estate (Malaysia) Sdn Bhd.

Master title with ‘Syarat Nyata’ for Scott Garden’s SOHOS in Old Klang Road.

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