Buying a Strata Shop or Office Unit in Malaysia: Title, Maintenance Fee and Sinking Fund

In short: when you buy a shop, office or SOFO unit inside a strata building, you buy more than the space. You also join a management body, share the cost of the common property and accept its by-laws. Check the title, the approvals, the maintenance fee and sinking fund, any unpaid arrears and whether your business can be licensed there before you pay the deposit.

1. Know what you are buying: the title

Strata commercial units – shop lots in a mall, office suites, SOHO, SOFO and SOVO – are subdivided in Peninsular Malaysia under the Strata Titles Act 1985 (Act 318). Find out whether the individual strata title has been issued. If it has, your lawyer can do a land search on the unit. If only the master title exists, the sale is usually done by a deed of assignment, and the developer's (and any financier's) consent may be needed. Also check the category of land use and the express condition on the title: a commercial building should sit on land approved for commercial use.

2. Commercial units have less statutory protection

The Housing Development (Control and Licensing) Act 1966 (Act 118) protects buyers of residential housing, including SOHO. Purely commercial buildings are not covered. KPKT states that the Tribunal for Homebuyer Claims hears cases on houses, not commercial buildings. So when buying a new SOFO, SOVO, office or retail unit from a developer, there is no standard statutory sale agreement: the delivery period, late delivery compensation and defect liability period are only what the agreement says. Read it carefully with your own lawyer.

3. Who manages the building: JMB or MC

In Peninsular Malaysia and Labuan, strata buildings are managed under the Strata Management Act 2013 (Act 757), in force since 1 June 2015. Before strata titles are issued, the developer and then a Joint Management Body (JMB) manage the building. After the strata register is opened, the Management Corporation (MC) takes over. Sabah and Sarawak have their own laws. Each local council has a Commissioner of Buildings (COB) who oversees these bodies.

4. Maintenance fee and sinking fund

Every owner pays two things in proportion to the share units of the parcel:

• Maintenance fee (called “Charges” in the Strata Management Act) for the daily upkeep of the common property, such as cleaning, security, lifts, lighting and insurance.
• Sinking fund for major future works such as repainting, re-roofing or replacing lifts. Under the Act it is at least 10% of the maintenance fee.

Under a JMB, owners must pay within 14 days of receiving a notice, and under both a JMB and an MC the interest on late payment is capped at 10% a year. An MC may also set different rates for parcels used for significantly different purposes, so shop and office parcels in a mixed development may pay a different rate from the residential ones.

Unpaid maintenance fees can be recovered from the owner's successor-in-title. Before you sign, ask for a written statement from the JMB or MC showing that the unit has no arrears, and have the seller settle any amount owed up to completion.

5. By-laws, use and licences

Read the by-laws and any house rules. They may limit opening hours, renovation works, signage, loading and certain trades. Then confirm with the local council (PBT) that your business can get a premises licence at that unit, and check the Certificate of Completion and Compliance (CCC) for the building. A food outlet, tuition centre or clinic may need extra approvals.

6. Ask about the building's health

• The latest audited accounts and the balance in the sinking fund.
• Minutes of the last annual general meeting: planned works, special levies or disputes.
• Insurance of the building and the condition of lifts, fire systems and car parks.
• Occupancy: many empty units can mean low footfall and more arrears.

Disputes over maintenance fees, meetings or by-laws can go to the Strata Management Tribunal for claims of up to RM250,000.

7. Stamp duty on the transfer

The transfer is stamped on the higher of the price or market value: 1% on the first RM100,000, 2% up to RM500,000, 3% up to RM1 million and 4% above that. For example, a RM800,000 unit attracts RM1,000 + RM8,000 + RM9,000 = RM18,000. Foreign companies and non-citizens who are not permanent residents pay a flat 4% on non-residential property.

This is a general guide, not legal advice. Rules can differ by state and building, so confirm with your lawyer, the COB and the local council.

Looking for a well-managed shop or office unit? Chat with PropertyMsia on WhatsApp and we will help you shortlist and check suitable units.