Legal poser over condotels

NST 16/12/2000 By Nicholas Mun

A TREND is emerging in the development of stratified properties where more and more developers are offering serviced apartments for sale as opposed to conventional apartments and condominiums.

Prior to this emerging trend, the concept of serviced apartments was confined to units being rented out to travellers, in most cases here on business and whose duration of stay would make hotel accommodation uneconomical.

Serviced apartments offered them the home-like comforts of a condominium with all the attendant facilities, but with a greater degree of flexibility in terms of duration and the convenience of hotel-style housekeeping services.

These traditional serviced apartments are not within the scope of Housing Developers (Control and Licensing) Act 1966 (HDA), the Housing Developers (Control and Licensing) Regulations 1989 and the Housing Developers (Housing Development Account) Regulations 1991 (the Regulations) for the simple reason that they were not built for sale to the public.

The business traveller is merely a licensee with a right to occupy, or a tenant and does not take title to the serviced apartment, neither does any member of the public. Ownership of such units remains vested in the company that owns and or run them.

Such serviced apartments are condotels where condominiums are rented out much like hotel rooms, but for periods longer than what a hotel guest would normally require.

In the emerging trend, however, serviced apartments are almost indistinguishable from condominiums or apartments as we know them, except for the leaseback schemes, rental guarantees and housekeeping services offered by their developers. Yet they are being developed, advertised and sold to the public outside the ambit of the HDA and the regulations. The question is, should these properties fall outside the scope of the HDA and the regulations?

The regulatory framework of the HDA and the regulations are straightforward. The development for sale of more than four units of housing accommodation, which is defined as "any building, tenement or messuage which is wholly or principally constructed, adapted or intended for human habitation or partly for human habitation and partly for business premises", requires a licence.

Developers are also required to obtain sales and advertising permits and are subject to accounting restrictions in respect of the monies they receive from buyers.

In essence, they are the same as any other strata-title development within the scope of the HDA in that their owners are free to inhabit, rent or resell them at any time. This makes them glaringly different from the traditional serviced apartments that are owned by only one party.

On that count alone, shouldn't they be considered as housing developments and fall within the regulatory framework of the HDA and the regulations?

The labelling of such projects as "serviced apartments" with their leaseback schemes, rental guarantees and housekeeping services can arguably be considered an attempt at circumventing the provisions of the HDA.

After all, being out of the scope of the relevant legislation means more than just not having to obtain the required licences and permits.

Developers of serviced apartments are completely free to dictate the terms of the Sale and Purchase Agreements, the information they disclose in their advertisements and the manner in which the monies they receive, from the sale of units are dealt with.

Though they may be granted exemptions from obtaining licences, the question is whether the homes are being developed for sale to the public.

If so, then shouldn't such developments, regardless what they purport to be in name, be made to comply with the requirements of the legislation for housing?