Freehold or Leasehold? The Choice Is Yours

SO, you are now looking to own your own pad. Looking for a property which you wish to own fulfilling all your criterias AND within your budget is a tall order – and definitely not an easy task. This is particularly so for fresh graduates or first time home-buyers/owners!

BUYING a house in Malaysia now involves a large sum of money and the buyer of the property spends a good part of his/her life repaying back loans taken from the bank to purchase the property.

As we all know that low cost apartments, ordinary apartments, condominiums, double storey houses etc denote to different levels of comfort, facilities, areas and luxury. So, as the facilities and luxury that you obtain in whether an ordinary apartment or a low costs apartment are different.

It is helpful to look through at the characteristics of a property and different kind of aspect when purchasing and the manner in which information is disclosed.

Often, ONE of the factors which may concern you, and which you may not understand is the difference between a leasehold property, and a freehold property.

So, what is the Difference between a LEASEHOLD and FREEHOLD property?

This is clearly an important consideration as you will need to find out the tenure of the lease – whether it is 99 years or even a shorter period than 99 years. Not all leasehold properties can be presumed as having a lease tenure of 99 years. Another consideration is having to apply for the consent to transfer/assign the leasehold property to new owner(s). Generally, there should not be any issue in the State Authority granting of the consent to transfer/assign of the same provided all requirements imposed by the State Authority are met. Having said that however, the regulations pertaining the same may change in the future and if that is so, any transfer/assignment of a leasehold property may be affected.

It is a fundamental for purchasers to take note the remainder of the lease of that property. As an example: A developer might have purchased and acquired the land 15 years ago to develop the project and now 15 years later, the developer decided to start developing the piece of land, and the construction may take 3 years time so this means that if the lease tenure is 99 years, then you have only 81 years of the lease rather than 99 years of lease left for occupation.

Now, a freehold property means once you bought the property, you are the owner of the property and land forevermore. Having said that, the law is such that the government may revoke your ownership for very specific reasons. Pursuant to the Land Acquisition Act 1960, in the event that the land is to be developed for public purposes such as: KTM, LRT, MRT etc or economic development, the government has the absolute right to re-claim the private property or private land at anywhere and at anytime for a consideration or compensation.

For a leasehold property, once the lease expires, the land reverts to the state. The owner will then need to reapply it from the state department for consent of renewing his/her property. The renewal of the lease will involve a large sum of money including a premium. It would be difficult to sell a leasehold property with a good value unless your lease still remains a time frame of 90-70 years to go. The value for leasehold property in the market decline as the time goes by whilst freehold property is more stable and secure.

Freehold property is generally more expensive than the leasehold property. Moreover, the owner of the freehold property has more freedom to do what they wish with the property subject to following the local planning regulations.

So, to go for a freehold or leasehold property? The choice is yours.

By: Ms Megan Tai; 
       Intern at Lee & Chong – Mini-placement 2013;
       Pre-University
Supervised by: Ms Irene E. Tan, Esq

 

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