SOHO, SOFO & SOVO

- So... what is the difference?

The trend of Small Office Home Office (SOHO), Small Office Flexible Office (SOFO) and Small Office Virtual Office (SOVO) is now on the rise. Originated from New York, this concept started in this country in 2007, when the Strata Titles Act was passed to include stratified landed development. 10 years later, this style of development has attracted the millennials, as well as Gen Y - either as a workspace or home, which affect the increase of the supply.

SOHO SOVO SOFO

To add, the state government has issued a directive to property developers to allocate about 30% of their SOFO, serviced apartment, SOVO and SOHO developments to reasonably-priced units, depending on location and property type in 2016. This to assist first-time homebuyers and the low-income group incomes with total household incomes up to obtain a foothold on the property ladder. So, as a buyer, what are the important things that you need to know before investing in one?

SOHO, SOFO & SOVO - What Are They Exactly?

Soho

It is generally small in size and is designed with a living room, bedrooms, as well as full-fitted bathrooms. Please do not be confused by its ‘office’ and ‘home’ definitions. It can be used for either way depending on the owner.

Sofo

SOFO usually do not have partitions for owners to modify their office space according to their preferences. But, it offers enhanced flexibility in regards to design. Besides, the occupants can use it as an office or home; or both.

Sovo

SOVO is mostly used by start-up companies as they are fully-equipped with the required facilities needed for the nature of the business. Although it is ideally for commercial purposes, the utility bill is said to be much higher. This is because it is charged according to commercial rates. So, think twice before investing on this type of property.

What Buyers Need To Know Before Buying SOHO, SOVO and SOFO?

1. Loan terms

First is the loan terms. As they are built on commercial land, SOHO, SOVO and SOFO are subjected to commercial loan terms. Generally, it is not favourable to an ordinary house buyer as the loan amount is much lower compare to those of housing loans. To know more, you can check out this article from Loanstreet.

 

2. GST

GST can be a headache. So, how can it affect you as a buyer? According to The Star, in the recent guidance published by The Royal Malaysian Department Customs, the director-general (DG) took the view that if a person owns more than two commercial properties, more than one acre of commercial land or commercial property, or land with a market value of more than RM 2,000,000 and has an intention to sell, they are considered to be in business.

 

3. Assessment tax and utility charges

SOHO, SOVO and SOFO tend to be more expensive compared to residential properties. This is because they are subject to numerous utility and tax charges such as telephone bills, commercial assessments. as well as quit-rents. For example, based on Tenaga Nasional Berhad (TNB), the electrical tariff for commercial property is much more expensive than residential property.

 

4. Legal protection and Sale and Purchase Agreements (SPA)

This is where the tricky and confusing part comes in. More often than not, buyers are not aware that SOFO and SOVO units do not have the standard Sale and Purchase Agreements. This is because they are not regulated in the Housing Development (Control and Licensing) Act 1966 (HDA).

SOHO SOVO SOFO What buyers

Nevertheless, SOHO have the usual standard SPA. If an individual decides to purchase SOFO or SOVO units, they need to sign non-standard SPAs with the developers, which are not regulated by the Housing Development Act. If SOFO and SOVO are meant for permanent residential usage, it will be subjected to the local authority’s regulations. This is clearly defined under the National Land Code in regards to residential usage on commercial land. On the contrary, buyers will be required to sign the SPA’s if they decide to buy SOHO units. If they sign the agreements, their rights will be protected under the act. It is because these properties are usually wholly or partially-used as residential purposes.

 

5. Property management

The value of a particular property is normally sustained by the property management. However, it is not as easy as it seems. For example, there could be multiple owners in a single SOFO, SOHO or SOVO building. To make things worse, it is even more complicated if the demographics of the occupants are from different walks of life, with different perspectives. There you have it. We hope that this information can give buyers out there some insights before investing. Although SOHO, SOVO and SOFO are popular among younger generation, buying or investing in either one of them are a different thing. Besides the points that we have highlighted, other factors like location, price, feasibility and many others also need to be considered.

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