Traditionally, a multi-storey residential building is generally addressed as an ‘apartment’. However, when the apartment is built with facilities such as swimming pool, gymnasium, multi-purpose hall, etc., the terminology ‘condominium’ had been used to differentiate apartment as without facilities and condominium as with facilities. For serviced apartment, it refers to an apartment or condominium that is built on a commercial land.
Owing to the land title, a serviced apartment is normally charged on commercial rates for the utilities (i.e. electricity, water, etc.), which are typically much higher than residential rates for apartment/condominium. The deposits imposed by the utility companies are also higher.
In addition, the maintenance fee and assessment rate for a serviced apartment are also evaluated based on commercial rates, which are typically much higher than residential rates for apartment/condominium.
Compare to an apartment/condominium that normally 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’.
An apartment/condominium built on a residential land is built based on units or population per land size. However, serviced apartment is based on plot ratio, which is the total built-up area per land size. This would increase the maximum allowable units or population for a serviced apartment if compared to a condominium for the same land size. For example, if a developer is granted to build a condominium based on a population of 1000 people per acre, assuming 5 people live in a 1,000 square foot unit, the developer can only build a maximum of 200 units per acre of land. However, if a serviced apartment is granted on the same piece of land based on a plot ratio of 1:10, the developer is allowed to build up to 440,000 square feet. This means the developer can now easily build 400 units (or even more, if they build smaller units) of 1,000 square foot apartments.
Although serviced apartments are built on commercial land, they have been classified as residential properties, so buyers are protected by the Housing Development Act (HDA) as well.
However, the HDA may not cover developers of certain types of ‘residential’ properties built on commercial land, such as SOFOs, SOVOs, or Flexi/Designer Suites. Hence, a serviced apartment may be marketed as residential cum office space, but it may be legally classified as office/commercial property, which does not come under the HDA.
Under the HDA, developers and buyers sign a standard sales and purchase (S&P) agreement. The agreement’s terms are set by law and non-negotiable. This applies to both condominiums and serviced apartments. However, there is no standard S&P agreement for the other types of properties mentioned above (e.g. SOFOs, SOVOs, or Flexi/Designer Suites), 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.
In addition, 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.
To avoid facing potential endless headache or additional cost incurred from the property purchased, buyers should review the S&P agreement carefully prior to signing on the dotted line.
