Land titles in Malaysia differs from other countries and should be clarified before even considering a property purchase. You should be aware of the different types of land titles to the properties you are buying. Why is this important? Property value could be affected by it and certain type of restrictions might be imposed on the land/property making it harder to transact the land/property.
Generally, the land/properties in Malaysia are catergorised into freehold, leasehold and Malay/Bumiputra reserve. These 3 types of land itself can either have an individual or strata title, which the differences will be discussed in my next article.
We will first look at the 3 main categories of land/properties:-
1. Freehold Land/Properties
As the name clearly suggests, lands/properties which falls under this category would be able to be held by the owner indefinitely which could be seen as a more secured asset as the State cannot claim the land/property from the owner. Should the owner wish to transact this type of land/property, there would be much fewer restrictions and limitations as compared to leasehold land/properties.
This would mean that the owner don’t need to apply consent from the relevant state authorities to transfer the land/property to the new buyer or when charging the land/property to a financier. Therefore, the process of transferring or charging a freehold land/property would be speedier. As such freehold lands/properties are said to be more favorable amongst investors.
However, do take note that there are certain areas within the Klang Valley although is categorized as a freehold land/property but is still subject to a “restriction-in-interest”. These type of property will still require the state authority’s consent prior to transferring or charging the land/property.
2. Leasehold Land/Properties
A leasehold land/property is a land/property which the owner is leasing from the government for a fixed duration. It will be stated on the title deed and most commonly for a period of 99 years. These lands/properties would also come with obvious restrictions stipulated on the title deed on what can and cannot be done. Therefore, it is really important for buyers to check what the remaining lease period is and what are the restrictions stipulated on the title deed for the land/property.
Although the duration of the lease is stated, should one wish to extend the lease nearing to the expirty date, one may do so by making an application to the relevant land office and paying for the lease. The amount could be quite substantial dependent upon the type of property (residential, commercial, agricultural, etc), location, period to be extended and a few other factors and such application for extension is not guaranteed.
Leasehold lands/properties has a longer process to sell or transact. A sale and purchase (S&P) transaction for a freehold land/property would normally take an average of 3 months from the date of the S&P agreement to complete. For a leasehold, the completion period of the usual 3+1 months would only start from the date the state consent for transfer is obtained from the relevant land office.
A fee is payable for the application for state consent and this varies depending on which state the land/property is situated at. The state consent depending on which date can sometimes take up to 1 year to obtain. Therefore, is the real estate market, leasehold lands/properties are less favorable and lower in value compared to freehold.
3. Malay/Reserved Land and Bumi Lot
People often have a common misconception that Malay Reserved Land and bumiputra lot are the same. Malay Reserved Land are lands that can only be owned and held by Malays and transacted between Malays. It will be stated in the title deed as “Tanah Rezab Melayu”.
A Malay is defined in Article 160(2) of the Federal Constitution of Malaysia as “a person who professes the religion is Islam, habitually speaks the Malay language, conforms to Malay customs AND was before Merdeka Day born in the Federation or in Singapore or born of parents one of whom was born in the Federation or in Singapore, or is on that day domiciled in the Federation or in Singapore OR is the issue of such person”.
The law stipulates that if a Malay Reserved Land can only be released of its classification if there is a piece of land of similar character and size is declared as a replacement (Malay Reservation Enactment).
A Bumi Lot on the other hand are units of land or property which can only be purchased and owned by Bumiputeras. However, Bumi Lots may be “released” and sold to non-Bumis. How? By application for consent to transfer by giving persuasive reasons i.e. financial difficulty, unable to look for Bumiputera buyers etc to the relevant land office.
However, a Bumi Lot that is released to non-Bumi buyers would not change the classification of that property. It will still remain as a Bumi Lot and if the non-Bumi owner wishes to sell the property, the owner would need to reapply to the relevant land office for consent to transfer.
As the classification of “Bumi Lot” are not always stamped on the title deed, it is important for the buyer to get their lawyers to conduct a search on the title deed to find out.
Now that you are aware of the classifications of the lands in Malaysia, do take precautions by getting your lawyer to check and conduct due diligence on the land/property to ascertain its classification prior to purchasing the land/property.
“Carmen Tham is a lawyer and she is actively involved in real estate legal work. She is the managing partner of Messrs. KEAY & CO., a boutique firm located in Publika @ Solaris Dutamas with one of their major specialisations in property development, sales and purchase of property, tenancies and real estate disputes.
If you have questions that you would like to ask Carmen, please feel free to drop her an email at email@example.com.
Disclaimer: The information here does not constitute legal advice, please seek professional help for your specific needs.”