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Strata Property Purchasing: A Quick Guide

Stratified buildings may have proven that they stack up as a solid investment but when it comes to selecting, one wrong move may cost you a great deal.

By Reena Kaur on Apr 03, 2017

With high population growth fuelled by the increased migration rate, the concrete jungle that is Klang Valley has been battling with land scarcity for a while now. In its early stages, living vertically and building as many units on as little piece of land possible may have seemed like the perfect solution, but without governance, it comes with its own set of problems.

Today, an approximately six million of the population in Malaysia live in strata titled property. Although they are much sought after due to the price, most people fail to understand the many distinct advantages and disadvantages that come with them. Sr Adzman Shah of Exastrata Solutions  Sdn Bhd shares what you should look into when looking for a strata property and the pitfalls that could be avoided.

Weeding out the bad apples

When looking for a strata titled property, it is important that you do your homework and your legwork. Safety and security should be at the top of your checklist. Information such as the frequency the security service company has been changed and whether the CCTVs are functioning are all tell-tale signs of neglect. Next, take a peek at the upkeep of the common facilities—this should tell you if there is an issue with the maintenance fee and sinking fund collection.

“The two main facilities that you have to look at are the swimming pool and the lifts,” stresses Sr Adzman. “If the pool water has turned green and some of the lifts are poorly functioning, that is a sure red flag.”

Next, take note the number of cars parked in the common area or along the outside of the building; this may be an indication of parking insufficiency. Sr Adzman also advises investors to look at the state of cleanliness of its surrounding. “These are all signs that management isn't doing its work. It presents a bad impression to potential buyers or tenants.”

Know Thy Neighbour

One of the gravest mistakes an investor could make is to purchase a property without knowing the demographic of its occupants. Properties with high student occupancy aren’t your best bet if you’re looking for value appreciation. “Overcrowding is a common problem with student populated buildings—it makes leasing out your unit to a non-student difficult. And even if your unit is well maintained, chances are the common facilities aren’t.”

Sr Adzman also suggests to take a spin around the neighbourhood at night and observe the number of units that are lit up. If majority of the units have their lights turned off, it may be an indicator that most of the units are owned by non-owner-occupiers, which means collection of maintenance fee may be more challenging than usual.

Avoid these pitfalls

1. Failing to Sort out the legal issues

During your purchase and submission of memorandum of transfer (MOT), you are required to show your quit-rent receipt. “The developer’s quit-rentpayment must be up-to-date before they are able to accept the MOT for registration so as to facilitate the transfer of the strata titles,” informs Sr Adzman.

Also, do make sure that the previous owner has been paying the maintenance charges, or you could be the one bearing the consequences as the current proprietor if not covered in the sale & purchase agreement.

2. Failing to Recognise The Best Value

“You have to recognise the value of the unit you’re buying,” says Sr Adzman. The general understanding is that the price will increase in tandem as the floor level gets higher since the view improves—but this doesn’t always apply to rental.”

Those who purchase a walk-up apartment for example, generally prefer the first floor followed by the ground floor where the rental tends to be higher.

3. Failing to Understand Responsibilities

There’s a certain responsibility that comes with the strata title holder. It is important that everyone understands the significance of playing their part in maintaining the harmony and the quality of living of all the residents. It is as simple as taking care of leakages in your unit and paying your maintenance fee on a timely basis.

4. Failing to Monitor Management

The role of a property manager in maintaining a building is often overlooked when it is, in fact, a vital position to fill. It is important that the Joint Management Committee (JMC) or Management Corporation (MC) is willing to fork out that little extra to appoint an experienced property manager.“ Always try to look for a building that has a good track record with hiring managers. It contributes towards its value,” advises Sr Adzman.

5. Failing to Understand the Role of Management Committee

The whole point of strata management is to give the owners the authority to decide on matters pertaining to the common property. However, without a strong Management Committee and the lack of enforcement of House Rules, living in a stratified property is as good as living in a soon-to-be a rundown shell of a building. An effective Management Committee could act as a dispute or altercation resolution mechanism and help promote neighbourliness.

DISCLAIMER: The opinion stated in the article is solely of Sr Adzman Shah and is not in any form an endorsement or recommendation by iProperty.com. Readers are encouraged to seek independent advice prior to making any investments.