21 September, 2006

Freehold / Leasehold

Under the land laws of Malaysia are governed by the National Land Code, 1965 (Act 56 of 1965). Section 40 of the National Land Code, 1965 states that all state land belongs to the state authority.

When state land is disposed off by the state authority to an individual in perpetuity for an indefinite period, this land is now granted as freehold title.

When the state land is disposed of by the state authority to an individual for a term of years, by virtual of law, not exceeding 99 years, this land is now granted as leasehold title. Upon expiry of the period of the lease, the land should be reverted to the state authority.

The owner will then have to either apply for a renewal of the lease before its expiry or apply for a fresh alienation if the lease has expired. These will involve the payment of a hefty premium which would be close to buying the land all over again with perhaps some discount.

Refering to the above, it is more advisible to choose freehold property as it can avoid those hefty premium and messy process, but of course, it will be only after the expiry date of 99 years.

When there is an option, of course everyone will rush for freehold. In fact, Who care much on Leasehold or freehold, as you have 99 years absolute right in that piece of property. Nobody will bother what will happen in 99 years later.. perhaps in 50 years time it already is the end of world.. Who know, right? The truth is 99 years has sufficient for three generation use.

For my point of view, there is only one reason to deter from buying leasehold property, there is when your final aim of buying house is to invest on the appreciation. Because the value appreciation is slower compare to freehold property.

So understand your intention first before decide on leasehold / freehold..