What’s The Difference Between Freehold and Leasehold?

Category: Step 1: Find Your Dream Home | Tags: basics, education

Freehold vs. Leasehold

There are oh so many titles that the lands in Malaysia possess. Though we may confuse them around sometimes, it’s one of the most important things to remember especially when you’re buying a home. So let’s head over to Part 2 of our Titles, Titles, Titles Series!

Now, is it reaallyy important to know the difference between Freehold and Leasehold titles? The terms themselves are already pretty straightforward, right? You are somewhat right! BUT, there are still major differences and details in each title that you should know of so that you can make a better decision when you’re looking for your new home. So let’s get to it.

Freehold Property

Essentially, the definition for freehold property is simple. It basically means that the house and the land that it’s on belongs to you! The Freehold Title was decided way before because all land in Malaysia is governed by the National Land Code, 1965 (Act 56 of 1965). In Section 40 of the National Land Code, 1965, it states that all state land belongs to the state authority. So when the state land is disposed of by the state authority to someone for an indefinite period, this land is now granted the Freehold Title. 

Most homebuyers are under the impression that these freehold title homes will be able to last forever in their families and passed down from generation to generation. But does that mean that having the Freehold Title protects you and your home from the government forever? Unfortunately, no. :( Stated in the Land Acquisition Act 1960, the ownership of this freehold land can be changed to the government for the economic growth of the public and country. Though you might feel like you have very high levels of security because of the Freehold Title, there have been times where the government took back Freehold Title homes to further the country’s growth like the construction of the LRT or MRT. But if the government ever wants to take the land your home is on, a professional market valuer will be appointed by the government to evaluate the current value that’s going for your land and the government will compensate you for it. Nonetheless, freehold properties are still very popular in the market and it’s believed that it’ll get a nicer and bigger price tag when you decide to put your home on the market for sale!

Leasehold Property

Leasehold properties are usually looked down upon as the unpopular kid on the block. That’s because leasehold land is leased or rented from the government for a certain number of years  either 30, 60, or 99 years. If your home was built or owned before you’ve bought it, the number of years will be deducted. But sometimes, developers would renew the lease for their homebuyers once they’ve completed the project so that their homebuyers can have 99 years! 

Now, one of the misconceptions about leasehold developments means that once the lease tenure of your home expires, you have to hand the land and your home back to the government. But that’s not true because you can actually head to the Land Office to apply for an extension of the lease. If it’s approved, all you’ll need to do is pay a fee based on market value. However, there is an important fact that you should remember. One of the risky parts is that if the government has other plans for the area, they may choose to not extend your lease. 

So that’s something you should know of even though it doesn’t happen often.

Another thing that you should keep in mind for leasehold properties is the resale. Having a leasehold home does not mean that it diminishes the value of the house and the land. If you did your research and the home that you bought is in a good location, appreciation for your home will boom. Take Petaling Jaya for instance! Most homes in that area are leasehold with about 50 years or so left in its lease. But that definitely does not diminish the value of the homes as you can tell. In fact, there is great demand for homes in that area. But, the onlyyy teeny tiny thing to note is that reselling your property would need a little more time to coordinate as the state government would need to give their consent for the resale of your home. If there are any restrictions for your property, it will be stated in your Original Title and Consent document. So do give it a look!
That being said, the battle between deciding on a freehold or leasehold property isn’t just a smol thing to consider. It all goes back to what you as a homeowner would need and that’ll lead back to my #1 Step in the home buying journey which is to always always research before making this large decision! So do that and you’ll be one step closer to having a great journey!

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