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Sr ADZMAN SHAH MOHD ARIFFINChief Executive Officer
ExaStrata Solutions Sdn BhdDeputy President
Malaysian Institute of Professional Property Managers (MIPPM)
AVOIDING PITFALLS IN STRATA PROPERTY INVESTMENT
A Bit of Background ..
Approx. 6 million occupy strata developments
(30% of the Population in Malaysia)
Approx. 16,000++ residential strata
development schemes
(Condo, apartments, service apartments)
1.5 million strata parcels
Sr Adzman Shah.ExaStrata 2
What is Strata Property ?
Ownership of parcel in multilevel or multi-storey buildings or landed building which will be or has been issued with strata title.
Sr Adzman Shah.ExaStrata 3
Forms of Strata Property
Multi storey building vs Landed Property
Sr Adzman Shah.ExaStrata 4
Freestanding Building vs Integrated Development
Low Cost / Affordable / Medium /High / Luxury
Types of Strata Property
Residential e.g. Condominium, Apartment, Flat, etc
Sr Adzman Shah.ExaStrata 5
Commercial e.g. Office Lot, Service Apartment, SOHO, SOVO, Hotel Suite, etc
Retail e.g. Shop Lot, Retail Lot, Kiosk, etc
Industrial e.g. Flatted Factory, Light Industrial, etc
New Legislation In Force
6Sr Adzman Shah.ExaStrata
New Legislation enforced since 1 June 2015 and soon to be reviewed to address latest concerns.
What is Common Property ?
“So much of the lot as is not comprised in parcels, accessory parcel and provisional blocks used or capable of being used by occupiers of two or more parcels” (Section 2 of SMA 2013)
i.e. the Land and Building are subdivided into ‘Parcel’ and ‘Common Property’.
e.g. open areas, corridors, lobbies,
lifts, fire staircases, flat rooftop,
external façade, etc.
Sr Adzman Shah.ExaStrata 7
Accessory Parcel
Common Property
Main Parcel
Who Manages Strata Development ?
Within 12 months after first owner receiving keys
- No Strata Title yet
12 months after first owner receive keys - No Strata Title yet
Individual Strata Title
Issued
Managed by Developer
Managed by Joint Management
Body(JMB)
Managed by Management
Corporation (MC)
Common Property
Sr Adzman Shah.ExaStrata 8
Developer Period JMB Period MC Period
Responsibilities as Strata Owner
Pay maintenance charges and sinking fund for the cost of maintenance and management of the Common Property
Abide by the Houserules and Bylaws
Keep own property in good condition
Respect thy neighbours and live in harmony
Sr Adzman Shah.ExaStrata 9
Steps When Looking for a Property
Sr Adzman Shah.ExaStrata 10
Choosing Investment Property
Types of Property :
• Residential – Condos / Apartments
• Commercial – Strata Office / SOHO
• Retail – Strata Shoplots / Retail Lots
• Industrial – Flatted Factories
Purchase from :
• Developer – New Launch or Unsold Stock
• Subsale
• Auction
Sr Adzman Shah.ExaStrata 11
Evaluation of Surrounding
• Security and safety
• Cleanliness
• Tidiness of surrounding
• Upkeep of common property/areas
• Operational condition of facilities
e.g. lifts, lighting in parking, gym, swimming pool, etc
• Communication, notices on board, signages
Sr Adzman Shah.ExaStrata 12
Check out the Neighbourhood
• Check occupancy rate of building
• Survey comments from residents on breakdown of occupants
• Owner/occupier : tenants : students : foreigners
• Check out neighbours
• Maintenance of common facilities
• Parking usage
• Check rental rate of units and compare with price
13Sr Adzman Shah.ExaStrata
Find out about Charges
• Maintenance charges - before buying, request info on how much the rate to pay and whether there is any outstanding
• Sinking fund - 10% of maintenance charges
• Parking charges - if no parking provided, will need to rent
• Fire insurance apportionment - to inform loan provider that you will be paying to JMB/MC
• Quit rent apportionment
• Bulk utilities meter - check if owing TNB/Syabas
• Any potential risk of legal action
Sr Adzman Shah.ExaStrata 14
Getting to know the People in Charge
• Find out and get to know management team and security
• Get a copy of houserules or bylaws
• Get to know who the JMC/MC office bearers
• Find out if the JMC/MC is run well and active
• Enquire when was the last and next AGM
• Check when next community event coming up
Sr Adzman Shah.ExaStrata 15
Pitfalls Alert
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Beware of the following Properties :
Still under Master Title and no prospect of getting strata titles
Under Liquidator’s administration
Dodgy developers/developers not registered with Ministry
Potential foreclosure case
Potential Strata Management Tribunal case
A lot of maintenance issues
…… Good start ends well !!
Sr Adzman Shah.ExaStrata 17
# Pitfall No. 1Sorting out Legal Issues
# Pitfall No. 2Failing to Recognise Best Value
Example : Residential Strata Property
• Walk up or with lift
• Walk up - highest value is FF/GF/2F/3F/4F
• High/tower - higher the level, the higher the price, with premium on view and orientation
• Easy to rent out at market rate
Sr Adzman Shah.ExaStrata 18
#Pitfall 3Failing to Understand Responsibilities
Embrace responsibilities as a Strata Owner :
Share ownership of the Common Property areas
Joint responsibility to manage the Common Property
Familiarise with Strata Management Act 2013
Pay Charges on timely basis
Avoid breaking the law – Penalty ranges from <RM5k to <RM500k or 3 years jail or both
… Avoid headaches as an Owner !!
Sr Adzman Shah.ExaStrata 19
Get to know the Management Team – JMC/MC & Strata Manager:
JMC/MC are capable to run the Management and look after the owners’ interest;
JMB/MC has adequate funds to manage and maintain Common Property in good condition; and
Experienced Strata Manager with good knowledge of SMA 2013 and Malaysian Property Management Standards.
… Good Managers enhance value !!
Sr Adzman Shah.ExaStrata 20
# Pitfall No. 4Failing to Monitor Management
Understand the Functions of Committee/Council Members:
Duties outlined under SMA 2013
Voluntary job, no monetary reward
A legal entity similar to board of directors in a company
Can sue and also be sued
Community Leader, Debt collector, Enforcer, Arbitrator
Find out if the Members are able and capable
…… It’s a dirty job but someone’s got to do it !!
21Sr Adzman Shah.ExaStrata
# Pitfall No. 5Failing to Understand Role of Management Committee
Conclusion
Sr Adzman Shah.ExaStrata 22
Conclusion
Is Strata Property a good investment ?
Increasingly more popular as investment property
More offering of facilities & features
Rental returns tends to be more attractive
Relatively easier to market and dispose.
… A good option for investment property !!
Sr Adzman Shah.ExaStrata 23
Conclusion
A well thought out purchase can avoid a lot of headaches :
Avoid Properties which have a lot of issues
Choose well located property near public transportation
Full understanding of responsibilities as Owner
Make sure investment gives good return.
… Avoid THE PITFALLS and avoid becoming a deficit investor !!
Sr Adzman Shah.ExaStrata 24
Thank You.
www.exastrata.net
Better Knowledge, Better Returns !