Imagine this, Aishah (fictional character) is on her way getting her first apartment. She did research on what she wants, her agent has found a perfect home for Aishah. It is also within her budget, All is good.
Now it’s time to process it. Aishah’s agent, John (also a fictional character) said, “Hey, you can proceed for your loans now”. So to the bank, Aishah went. She then filled in some documents and after signing it the bank said the house is strata title. Aishah panicked, “DID I JUST SELL THE HOUSE OFF TO “STRATA”!? WHO IS THAT?”
If you missed the joke, you have to read this. Let’s not be like our Aishah. Here’s a crash course on terms you need to know before getting your house.
Let’s start with the common abbreviations~
DR: Dining room
FB: Full bathroom (toilet, sink, and shower/bathtub)
HB: Half bathroom or powder room (only toilet and sink)
LR: Living room
SQ FT: Square footage of the home
W/D: Washer and dryer
Got that? Now on to the basics.
Freehold — a freehold property is owned by the buyer indefinitely. The land and property are yours forever. However, the state can still take back the freehold plot if it is for public purposes such as building highways. In such a case, compensation is given, usually in the form of cash or discounted new properties.
Leasehold — a leasehold property or land belongs to the state authority and is leased to the buyer not exceeding 99 years. Upon expiry of the leasehold title, the land is reverted to the state authority. Owners will have to apply for a lease renewal, the cost of which differs from state to state.
Individual/Strata title— developers are responsible for obtaining the titles for individual properties within a stipulated time after the handover. Like birth certificates, these titles validate the existence of the property and its ownership. An individual title is given to owners of landed properties such as terraced, bungalow and semi-detached homes. Meanwhile, strata titles are issued to property owners with shared facilities such as condominiums, apartments and gated-and-guarded landed homes.
Flipper — Not duck flippers, no. Flippers purchase a property for a resale profit. These properties are usually the ones with the highest capital appreciation/gain in the shortest amount of time. The duration can range between a few months to a few short years.
That’s the basics. It gets wilder from here but don’t worry we’ll go through this.
Accessory parcel — not a decorative patch of land, but any parcel shown in a strata plan that is used exclusively by the homeowner. A common example is the car park bay.
Assessment tax — or more widely known as “cukai pintu” here. It is payable twice a year to the respective local authorities to finance the maintenance cost of the city such as waste transportation, landscaping, and street lights. It is payable on or before every Feb 28 and on or before every Aug 31.
Base rate (BR) — a minimum interest rate based on a formulated calculation that includes the financial institutions’ cost of funds and other administrative costs. The current BLR is 6.6%. So, if a bank advertises their home loan interest rate as BLR -2.20%, then the interest rate for your home loan will be 4.40%
Certificate of completion and compliance (CCC) — a document issued by local authorities and endorsed by a registered member of the Board of Architects Malaysia. It is a vital document to show that the property is completed according to the required standards and is fit for occupation.
Common property — areas of a property that do not belong to any individual, such as stairways, guard houses, cables, open spaces, walls and fences, swimming pools, playgrounds, jogging tracks. Basically any part of the land that anyone can use and enjoy.
Covenants — terms listed in the agreement.
Defect liability period — a period of between 18 and 24 months whereby the developer must repair any defect(s) identified by the homeowner due to defective workmanship or non-compliance to the original floor plan. In other words, this is a warranty period given by the developer after the key collection.
Encumbrances — a registered interest in land by a person who is not the landowner. This is stated on Land Title, which can be obtained from a title search with the Land Office. Examples of encumbrances include easement, mortgage, covenant, and other liabilities.
Joint management body (JMB) — established under the Strata Management Act 2013, comprising the developer and homebuyers. They are responsible for maintaining the common properties, determining and collecting the service charges necessary for such purposes, ensuring the building against fire and other risks, complying with orders given by local authorities and enforcing house rules.
Joint management committee (JMC) — the committee elected by the JMB to carry out the duties and powers of the JMB. A JMC should consist of at least one representative from the developer and between five and 12 purchasers. A purchaser can only hold office for no more than three years.
Management Corporation (MC) — must be formed to take over the JMB’s responsibilities within two years after the handover. An MC consists of owners who have their strata titles and registered themselves as parcel owners. It exists under the Strata Titles Act 1985 and does not need to be registered with the Registrar of Companies or the Registrar of Societies. It is a corporate body that may prosecute and be prosecuted and has a perpetual succession right.
Memorandum of Transfer (MOT) — signed by both the developer or seller and homebuyer after the signing of the SPA and before the payment of balance purchase price. MOT is an official form that needs to be submitted to the Land Office for the ownership transfer of the property to the buyer.
Mortgage Reducing Term Assurance (MRTA) — a home loan life insurance that provides financial protection for property loan borrowers and their families by helping to settle outstanding loan amounts in the event of death or disablement of the borrowers.
National Land Code (NLC) — the mainland laws for all states in Peninsular Malaysia. Sabah and Sarawak are governed by Sabah Land Ordinance and Sarawak Land Code respectively.
Quit rent — or “cukai tanah”, which literally means land tax. The NLC makes it compulsory for all landowners to pay quit rent annually to the relevant state Land Office usually by every Jan 1.
Real Property Gains Tax (RPGT) — a form of capital gains tax on chargeable gains (profit) from the sale of your property. The rate varies according to your ownership tenure (date of SPA signed to date of disposal). If you want to avoid paying RPGT, it is best to sell your property after at least five years of ownership.
Service charges — funds collected by the JMB or MC from owners to maintain and manage a strata development.
Sinking fund — a special fund opened and maintained by the JMB or MC for unexpected costs that may arise and for the long-term structural upkeep or upgrades to the common property such as:
(i) painting or repainting any part of the common property
(ii) purchase of costly materials for the upkeep or upgrade of the common property
(iii) renewal or replacement of any common facilities
(iv) any other expenditure as the committee deems necessary.
Vacant possession (VP) — property handover day! With the delivery of vacant possession, homebuyers will also receive a copy of the CCC.
That’s all about it. You’re now ready to seal the deal!
And if you’re not ready to purchase just yet, you can rent deposit-free with SPEEDHOME!