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CONDOMINIUMS OR SERVICED APARTMENTS? 7 THINGS YOU MUST KNOW BEFORE YOU BUY!

Many residential properties are being marketed with the promise that residents can “live, work and play” all in one place. They often look like condos, but are usually called “serviced apartments”. Now, there are newer commercial property concepts, which may be misunderstood as being similar to serviced apartments. These are marketed as office cum residences, usually called SOFO, SOVO, or Flexi/Designer Suites. These may have residential features such as bedroom space, bathroom and pantry but are also suitable as office space.

While these properties are attractive to potential homeowners, there are important differences between condos and serviced apartments, and even SOFOs, and it pays to be aware of them.


Wait…isn’t a “serviced apartment” just another type of condo or apartment?


Well…no.

“Serviced apartments” are commercial units, fully-furnished, with services such as housekeeping, room service, and concierge. They are usually rented out for short-term or long term to tourists, business travellers, or expats. On the other hand, condos are private properties meant to be occupied by homeowners or long-term tenants. However, the lines are often blurred between the two types of properties these days.

The core difference is that the land status of condos is “residential”, whereas the land status of serviced apartments is “commercial”. The laws, regulations and functions surrounding these types of properties are quite different, and can affect buyers’ legal rights and lifestyles.


HERE ARE 7 KEY DIFFERENCES YOU NEED TO CONSIDER BEFORE SIGNING ON THE DOTTED LINE

1. You pay different utility charges
Because of their land status, serviced apartments are charged commercial rates for utilities, which are much higher than residential rates. Deposits collected by utility companies are also higher. Some developers do try to work around this by negotiating with utility companies for lower rates. They may or may not be successful, so it pays to confirm this with the developer.

2. You pay different tax rates
Quit rent and assessment rates for serviced apartments are also calculated at commercial rates, much higher than condos. Some developers try to get lower rates by finding some loopholes in zoning laws to reclassify the apartments. But again, they may or may not succeed in doing so, so do check and make sure.

3. You will be living in different environments
Condos are designed for privacy, and security controls the flow of unknown persons into the property.

Most serviced apartments are attached to a shopping mall or retail shops. You have no control over the type of businesses there and the flow of non-residents in the area. But if you like the idea of convenience, where you live upstairs and can just hop into the lift to go downstairs for dinner or a movie, this is a great plus point.

But there are also some serviced apartments that are not attached to any malls or shops. This could be because the developer had converted the land status from “residential” to “commercial”. Why would they do this? Well, maybe the next point might shed some light.


4. You will have different population densities
Residential developments are built based on units or population per land size. However, commercial developments are based on plot ratio, which is the total built-up area per land size. This affects the number of neighbours you will have.

For example, say a developer gets permission to build a condominium based on a population of 1000 people per acre. Assuming 5 people live in a 1,000 square foot unit, a developer can only build a maximum of 200 units per acre of land.

One the other hand, let’s say a developer gets permission to build serviced apartments based on a plot ratio of 1:10. Now, for the same one acre of land (measuring about 44,000 square feet), the developer is allowed to build up to 440,000 square feet. That means developers can now easily build 400 units of 1,000 square foot apartments! Or even more, if they build smaller units.

5. You MAY be governed by different laws
The Housing Development Act (HDA) places strict standards on developers of residential properties to protect home buyers. Although serviced apartments are built on commercial land, they have been classified as residential properties, so buyers are protected by the HDA as well.

BUT...the HDA may NOT cover developers of certain types of “residential” properties built on commercial land, such as SOFOs, SOVOs, or Flexi/Designer Suites.

These may be marketed as residential cum office space, but they may be legally classified as office/commercial properties, which do not come under the HDA. Do check these properties’ status to be sure what type of property you are actually buying.

6. There is no standard S&P for commercial properties
Under the HDA, developers and buyers sign a standard S&P agreement. The agreement’s terms are set by law and non-negotiable. This applies to both condos and serviced apartments. However, there is no standard S&P agreement for the other types of properties mentioned above, if they are classified as office/commercial properties.

The only legally-binding conditions on such commercial property developers are found in the S&P agreement. So if you do decide to go ahead and buy such a property, read the agreements carefully to make sure they are fair.

7. You MAY be regulated by different Ministries
If buyers of condos or serviced apartments under HDA have problems with the developer, they can go to the Ministry of Housing and Local Government for help. However, the Ministry may not be able to help buyers of properties that do not come under the HDA. If problems crop up with developers of office/commercial units mentioned above, the recourse is usually to go through lawyers or the courts.


SO, IS IT BETTER TO BUY A CONDO OR SERVICED APARTMENT?

Well, it depends on what you want. If living in the midst of a happening commercial area is your thing (and you are ok with the higher bills or possible issues with red tape), then a serviced apartment could be right for you. But if you want a more private residential area, and lower bills, then perhaps a condo would be better.

M  e74c3c small

Very helpful info. Keep them coming. Thank you.

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Oh yeah, I agree on the serviced apartments part because I used to rent a unit there. The name 'serviced apartment' sounds very glorified, but the monthly bills most certainly aren't! Now that I've finally bought a place of my own in a residential condo, I'm so glad to be rid of all these commercial rates.

P  2c3e50 small

Traditional thinking - separate office and home....

R  16a085 small

Useful info. Everyday is a learning curve. Thank you.

R  16a085 small

Useful info.  Everyday is a learning curve.  Thank you.

Lim keat foong small

well, location and price factor will supersede other factors, the serviced apartments higher maintenance fee, utility fee, quit rent and assessment will only be the last thing to consider

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Just curious here..Will the status of these properties i.e. residential or commercial, affect one's application for a housing loan?

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@kevinho88, yes I am pretty sure that the land title does affect your housing loan. If I remember it correctly, if this is your 1st property - Residential, you can get up to maximum of 90% loan and if Commercial, up to 80% loan only.

Lim keat foong small

it actually depends on bank, certain condos under commercial title but banks willing to loan 90%

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good informations about condo and apartment.. @kevinho88 it's greatly depend on your financial status

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Yea, I agree with @virspirit. Very much depending on your current assets and monthly income level & your CTOS

D  f39c12 small

yes agree with the writer

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I recognize that as lobby of Armanee Terrace 1 :) Beautifully shot, as if I was just there moments ago!

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thank you

L  27ae60 small

there is no. 8 too :)GST related...Sofo and Sovo is under commercial..if u invest in more than 2 units or 1 unit more than 2mil...it is gst taxable..good luck..

M  c0392b small

HDA has been amended in 2007 and the utilities fees will be based on residential rate instead of the commercial rate, as stated in point 1, isn't it?

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@mingjiantee613, if a residence is under commercial title, once there is 60% occupancy of that said property, the developer can apply for changing the utilities fees to follow residential rate.

Kate chew small

@propertyX, I thought as long as if the property is built for residential purposes, even if it's commercial title, it will be exempted from GST?

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