Freehold, Leasehold, Bumi Lot? Know The Differences And Restrictions!

We cover four main types of land found in Malaysia – Bumi lot, Malay reserved, Freehold, and Leasehold; as well as the three relevant titles – master, individual, and strata.
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Buying a property entails much research, whether you wish to purchase a secondhand/ pre-owned house or purchase a new development.

The factors that need to be looked into is the planning of the budget of the property, selecting the perfect location for the property, and understanding the documents that'll be needed in purchasing a property.

And some of the other biggest deciding factors is the Land Title of the property. The 3 main types of titles in the market are Freehold, Leasehold and Bumiputera Lot - otherwise known as Bumi Lot.

Freehold properties are generally considered to be “better” and more valuable, while Leasehold are considered to be risky.

To read more about the comparison between Leasehold and Freehold properties, click here.

Below is an infographic to explain this, with more details for each Land Title type at the bottom:

Explanation of the differences between bumi lot, Malay reserved land, freehold, leasehold in Malaysia infographic

 

Bumi Lot

Bumi Lots are open for sale or lease only to Bumiputera. Bumiputera is inclusive of Malays, Sabahan and Sarawakians, and also non-Malay Muslims.

This property type exists in every new development where a certain percentage of the development has to be allocated to Bumiputera.

For example, within the Klang Valley every new development must allocate 30% of its units as Bumi Lots. This regulation was put in place in order to boost the shares of Bumiputera in real estate.

Changing the land title of a Bumi Lot to a non-Bumi lot requires much time (counted in years), and procedures in order to obtain consent from the government. In many cases, most requests are also rejected.

However, you can definitely try your luck in requesting for the “release” of your Bumi Lot, so it can be sold to non-Bumis. Here are the steps to follow:

  • Submit an application for consent to transfer. You'd need to provide convincing reasons as to why you're looking to do this (for example: there's no demand for your property even after years of advertising) to the Land Office.
  • If your application has been rejected, you'd need to submit an appeal to the Land Office.
  • Once your application is successful, you would be required to reimburse the developer with the discounted amount from initial purchase.

Now, if you're a non-Bumi buyer who's looking to purchase, you'd have to keep in mind that a "released" property does NOT mean that it's no longer a Bumi Lot!

It actually still is, and a non-Bumi owner of that Bumi Lot would need to reapply for consent from the Land Office should there ever be a need to sell/transfer.

That's not the end of it, though! Your land title may not be stamped as a Bumi Lot, and is rarely endorsed on a Sales and Purchase Agreement (SPA).

Bumi Lots are the least considered property type among investors, as their market is limited and its price appreciation is considered to be the slowest among all land title types.

But, if you're still looking for a Bumi Lot to buy, view all Bumi Lot homes for sale here!

 

Malay Reserved Land

Often mistaken for Bumiputera Lots, Malay Reserved Land titles are actually slightly different.

Where Bumi lots are open for sale to Malays, Sabahan and Sarawakians, and also non-Malay Muslims, Malay Reserved Land; otherwise known as "Tanah Rizab Melayu"; are only for Malay Muslims

Sabahan and Sarawakians, and also non-Malay Muslims are not eligible to purchase properties on Malay Reserved Land.

 

Freehold Title

Freehold properties have always been the most coveted and are often the biggest consideration when buying a property.

The reason for Freehold properties being the most coveted is because of its perceived permanence in title.

Buyers are of the impression that these homes will be able to last forever in their families, that the owners will be able to transfer the property from one generation to the next without impediment from the government or state authorities.

Freehold property buyers are also usually under the impression that their land will not be at the mercy of the government’s whims should there need to be a new highway or new federal development built. This idea is especially popular among the older generation.

This idea is however false, as the government still has the right to reacquire any land - whether it is freehold, leasehold or Malay reserved.

The government is allowed to acquire the land to build government developments, be it a new highway, new public transportation system or other such public projects.

Yes, your freehold property might be taken away by the government to build a new train station!

The owners of the properties are usually forced to sell their homes to the government at the current market rate with no further compensation - whether the owner is able to repurchase a similar property in the same location or not. This process is termed ‘forced acquisition’.

The market value of the property will be determined by a professional valuer that is appointed by the government.

Even if the property owner calls in their own valuer to get a more accurate valuation, in case of any differences the government will still follow the value tagged by their appointed valuer.

Freehold properties are however still popular in the market, and command higher price tags. These properties are believed to carry higher resale value, faster appreciation and higher rental yield.

Read more about Freehold vs Leasehold here.

 

Leasehold Title

Leasehold properties are by far the least popular land title in the market (with some valid reasons, of course).

These are properties where the property is situated on Leasehold land - land that is leased; or rented; from the government.

The typical maximum lease period allowed is 99 years, although the newer developments in the market have managed to get lease periods exceeding 100 years.

These cases are however rare and few between. The shortest lease period allowed is 30 years.

The “rental” paid for leasehold properties are considered money “burnt”, as the owner will not get any form of compensation upon expiry of the lease.

What happens when leasehold expires in Malaysia?

When the leasehold on your property expires, the land shall be "returned" to and be vested in the state government.

Extending the lease will require premium, whereby the property owner will need to visit the Land Office to renew the lease.

This is the risky part, because if the government has plans for the area, they can choose not to renew the lease.

In that sense, the land only belongs to the owner as long as they still have a tenure left on their lease.

Renewing the lease also requires heavy premium. The total amount depends on the property type, whether is a residential, commercial, agricultural or any other property type.

The property’s location also plays a role in the price of the lease renewal price.

Also, as the maximum tenure is 99 years, owners can only extend their lease to the maximum of 99 years. For example, if they have 20 years left on the lease, they can only renew the lease for 79 years.

 

Other Titles

There are other types of titles in the market, not relevant to just Freehold, Leasehold and Bumi lot.

There are also the Master Titles, Individual Titles and Strata Titles, which carry just as much importance in property purchases.

1) Master Title

A Master Title usually refers to the main title of the bigger parcel of land. It is a title that is usually held by the developer, as they are the land holders.

The Master Title is granted to the developer after they obtain permission to develop a parcel of land.

While the developer holds the Master Title, they have control over the entire sales and purchases of the land.

Upon developing the land, the developer can then subdivide the Master Title into block titles, individual titles or strata titles - depending on the type of developments that are being built on the parcel of land.

Upon completion of the development, the developer; aka the Master Title holder; will apply to transfer ownership of each property out to its rightful owner.

Each unit will then have its own Pemilik Tanah title, bound to its owner. The timeframe allocated to the developer to transfer the units to their respective owners is within 6 months of the development acquiring its Certificate of Fitness (CF).

2) Individual Title

Individual Titles are the titles that are allocated to each individual landed property unit, such as terrace houses, bungalows, semi-Ds, factories, and shop-offices. In this case, each individual unit will have its own Individual Title.

If purchasing from a developer, purchasers need to ensure that the developer submits their application to the Land Office to subdivide the Master Title into Individual Titles.

The time frame allocated to the developer for new developments is within 6 months of the development receiving its Certificate of Fitness (CF).

Property owners for Individual Title developments can usually get their title within a relatively short period of time.

The only exception to the Individual Title when buying a landed property is if the development has common facilities. These developments will then be under a Strata Title.

3) Strata Title

To find out more about the Strata Management Act 2013, read more here.

Strata Titles are usually applicable to high rises. Nowadays, it is however becoming quite common among landed properties, as they have common facilities and even common roads.

The Strata Title is usually applicable to condominiums, apartments, serviced suites, flats, and townhouses.

As with Individual Title properties, property purchasers of new Strata Title developments will need to ensure that the developer submits their application to the Land Office to subdivide the Master Title into Individual Titles.

Also as with Individual Title properties, the timeframe allocated to the developer for new Strata Title developments is within 6 months of the development receiving its Certificate of Fitness (CF).

The difference between Individual Title properties and Strata Title properties is that for high rises, the Strata Title is usually applied by the floor.

And unlike the Individual Title properties where the title can be obtained relatively quickly, Strata Titles are usually issued only after 7 years - where the longest time it has taken before was 20 years.

 

Individual Title vs Strata Title

So how to know if your property carries an Individual Title or Strata Title? Your S&P will carry this information.

If available, the property’s grant will also carry this information. Otherwise for new developments, the purchaser can always check with the developer.

For more guides on property buying, you can visit the following pages:

Otherwise, read on for more on the Loan Documents of a property or Payment Schedules

Source: http://u-element.com/2012/10/master-title-individual-title-strata-title/

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