Do I want a leasehold or freehold property? That is just one of those crucial questions every homebuyer asks themselves at some point and keeps circling back to when embarking on their house-buying journey. After all, it is a major decision that will have a lasting impact on their future.
There are many reasons why people prefer a leasehold land title initially like lower costs and a better location as with some properties in Petaling Jaya, but over time these preferences can change.
However, if you own a property on leasehold land it doesn’t always mean you’re stuck with it. In fact, there are cases in Malaysia where land titles have been successfully converted to freehold status.
What Makes A Freehold Property So Desirable?
Among the reasons freehold properties are a coveted choice among Malaysians include the perceived security that comes with the idea of permanence in owning a piece of land.
These property types also tend to command a higher rental rate and appreciate faster, thereby carrying higher resale value.
Meanwhile, leasehold properties are built on government land and the tenure can run anywhere from 30 to 99 years, with the exception of some pieces of land in Sabah and Sarawak that hold 999-year leases.
Before the lease comes to an end, a premium is paid if an extension is granted or the land is returned to the government. This also makes leasehold properties with tenures below 50 years less desirable, which has an effect on the price of the property.
Where Do I Begin If I Want To Convert My Leasehold Land Title And What Will The Process Entail?
Before venturing to convert your leasehold land title to freehold, there are some considerations that need to be taken into accounts, such as the state's law that applies to the property in question, the application process, associated fees, legal documents, and professional fees.
In Penang for example, under the National Land Code and the Federal Constitution, the state government has to first get permission from the National Land Council before it can award freehold status to leasehold landowners.
An application must then be submitted and processing fees paid by the landowner to the state land office. Once approved, the land would then be re-alienated with a fresh title to the owner after a land premium and any outstanding expenses like quit rent is paid.
Timeline And Cost Factor
The timeline for this process can take anywhere from a few months to a few years depending on the state and federal governments. So, it is best to get a head start on the process before your lease comes to an end.
In terms of cost, the processing fees and land premium to convert a land title also vary depending on the state.
The estimated land premium price can be calculated based on the difference between the freehold land price, determined by the state valuation department, and the property’s current market price.
These fees can also be reduced or waived on a case-by-case basis, as was the situation with 20,000 owners of low- and medium-cost flats in Penang who only had to foot the bill for processing fees related to their applications.
What If I Own Two Or More Pieces Of Land?
If you own two or more parcels of land that share a common border, it might be worth it to look into the land amalgamation as a possible way to convert your leasehold land title to freehold.
Amalgamation is the process of combining two or more adjoining pieces of alienated land.
The documents you will need for land amalgamation include:
Certified copy of the land title
Copy of quit rent receipt for the current year
Appointment letter of Licensed land surveyor from Land Surveyor Board
Authorized letter from every person or body having a registered interest in the land
Contact details of the applicant
Copy of authorization letter from planning authority
The entire process can take anywhere between 18 and 24 months and some of the costs you will need to consider include fees for the application, land title survey, title registration, fees for plans and quit rent for the first year.
It might seem daunting but there have been cases of people successfully converting their land titles.
In the years to come, its Joint Management Body managed to change the land title to freehold, making it the only freehold high-rise residence in the vicinity at the time.
More recently in January, the Negeri Sembilan state government released the guidelines on the application to convert leasehold land titles to freehold titles for residential properties in Sikamat, Ampangan, and Paroi.
The document outlined eligibility criteria, the application process, premium costs and restrictions.
Conclusion: Tough But Possible, If The Conditions Are Right
At the end of the day, the right of land is a state matter as provided in the Constitution. This means that each state has its own land policies in place which requires some familiarisation.
It is because of these reasons homebuyers are advised to conduct thorough research, speak to experts and understand state laws before making a decision on purchasing a property.
This is because converting a leasehold land title to freehold while possible, is a costly and long drawn out affair.