Hmm… Can You Convert Commercial Title to Residential Title?
Yes, it is possible to convert a commercial title to a residential title. Most of the homeowners are converting their commercial property title to residential property title is because of the higher assessment rates and utility charges.
Residential Title vs Commercial Title
1. What are commercial-titled properties?
Commercial real estate is developed for business activities or business-related activity purposes. Therefore, commercial rates including utilities and taxes are higher than the fees charged for residential-titled properties. Also, these properties do not fall under the jurisdiction of the Housing Development Act (HDA), and the owners are not entitled to Real Property Gains Tax (RPGT).
Serviced apartments, SoHos, SoVos, SoFos, SoLos are all commercial-titled properties. Serviced residences and SoHos are largely marketed as residential properties, protected under HDA and buyers of these units will be signing a standard Sales and Purchase Agreement (SPA).
SoVos, SoFos, and SoLos are not designated for own-living. They are not protected under the Housing Development (Control and Licensing) Act 1966 (HDA), and buyers of these units will be signing a standard Sales and Purchase Agreement (SPA).
2. What are residential-titled properties?
Landed houses, condominiums, and flats are residential-titled properties. House owners can buy residential properties for own-living or investment purposes. There are also other property titles that homeowners and potential buyers must be aware of. For instance, Master Title, Individual Title, Strata Title, Malay Reserve Land, and Bumi Lot. You need to do research and some studies before you buy any properties.
3. Can you convert commercial titles to residential titles?
A commercial title can be converted to a residential title, but the owner must be able to prove that the property is mainly or wholly used for residential purposes.
4. Can residential properties be used for business purposes?
The answer is ‘No’. Properties with residential titles can only be used for residential purposes. Whether it is a landed property such as terrace house, semi-Ds, bungalows or a stratified property such as flats, condominiums, apartments, it is for living in and not for any business activities.
Serviced apartments usually come with a commercial title, but these are also meant for residential use because the building is built on commercial land and it involves a mixed development with retail units, offices and hotels.
Offices, retail units, and shopping malls are meant solely for business activities. Small Office Versatile Office (SoVo), Small Office Flexible Office (SoFo) and Small Office Lifestyle Office (SoLo) can be used for business purposes while Small Office Home Office (SoHo) can be used for own-living only.
5. What are the differences in assessment rates, taxes and utility fees differ for residential and commercial properties?
For assessment and utility fees, domestic rates (which is lower than commercial properties) apply to all properties with residential titles, including stratified properties. Serviced residences, SoHo, SoVo, SoFo and SoLo units are commercial properties, the utilities bill is more expensive than residential properties. The good news is, owners of serviced residences and SoHos can apply to convert their utility fees (water and electricity) to a domestic rate.
Residential properties, including serviced apartments, are entitled to a once-in-a-lifetime RPGT exemption. SoHo, SoVo, SoFo and SoLo units, on the other hand, are not entitled to this exemption.
6. What legal protection do buyers of residential and commercial properties have?
Residential properties are protected under the HDA. SPA is standard.
Commercial properties are not protected under the HDA. Any disputes have to be settled in court based on the signed SPA.
7. How to convert a commercial property into a residential property?
Different areas may have different regulations and requirements for converting commercial property to residential property. If you’re planning for a property conversion, it is best to consult your local authorities.
8. How to change the category of land use?
Under Section 52 of the National Land Code 1965, all alienated lands are divided into three categories of land use – Agriculture, Building and Industry. Valuation for the change of land title or use is normally carried out by the Valuation and Property Services Department (JPPH).
If a landowner intends to use his land for other use than the category stated in the title, the owner must apply to change the category of land use accordingly. For example, it is for agricultural use land, and the owner wants to convert it to commercial land, the owner needs to apply from the authorities. Sections 124 and 124A of the National Land Code and the respective State Land Rules allow landowners to apply for such changes. The State Authority will charge an additional premium on all applications approved for change of use.
Application for conversion of land title
The landowner must submit his application to the Land Office/ Land and Mines Office and must comply with all the requirements. The landowner must be able to provide:
Copy of the title;
Address of the property (if any);
Site plan;
Location plan;
Development proposal;
Feasibility study (if any); and
Valuation report (if any)
If an applicant fulfills all requirements, JPPH will then report the valuation to the Land Office/ Land and Mines Office within 10 working days of receiving the application from the office.
9. How to change TNB tariff from commercial to residential?
If you live on commercial property, you’re paying a much higher utility bill as it is charged based on the commercial tariff. But don’t worry, as you can request and apply for it to be changed to a domestic tariff via the myTNB portal or myTNB app. According to Tenaga Nasional Berhad (TNB), ‘domestic consumer’ means a consumer occupying a private dwelling which is not used as a hotel, boarding house or used to carry out any form of business, trade, professional activities or services. Do note that TNB deserved the right to change the consumer’s tariff based on actual activity at the said premise.
Here’s the simple steps to change TNB tariff to residential:
Step 1: Login to myTNB portal. Then, click the menu and ‘Apply’.
Step 2: Click ‘I want to do something else’.
Step 3: After that, click ‘I want to find out more about other services’.
Step 4: After that, click ‘Change My Tariff’ and fill in the online form. For the premise type, select ‘Domestic’ and click the residential type.
Step 5: You are required to submit your MyKad (IC) copy. The name printed on your electricity bill must be the same as the one on MyKad.
Once you confirm the submission of the application, RM10 stamp duty will be charged and will be reflected in your upcoming bill. You will receive an email upon successful submission.
So, if you are looking for any residential properties or commercial properties, we are here to assist you. Click the button below to speak with us!
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