20/04/2004 The Star Articles of Law with Bhag Singh
A PERSON buying a house comes across words such as “leasehold” and “freehold”
land in many cases. Where a person likes a house and the location, it is a
matter of taking or buying what is being sold especially when it is part of
a housing scheme.
In the ordinary course of events, it is not an option available to a buyer
who likes the house and its location but which is built on leasehold land
to say that he wants it to be freehold even if he is willing to pay more for
the changed status.
The conceptual difference between land that is leasehold and land that is
freehold is that in a lease the person who leases out the land does so for
a specific period while in a freehold, it is alienated and forever.
The word freehold though commonly encountered and not infrequently used to
refer to the manner in which land is described is also not unknown in Malaysia.
It even appears in media advertisements and other publicity material as well
as casual and not so casual conversations.
However, if the Land Law is looked at and in particular, the National Land
Code, it’s unlikely that these words can be found. The concept of freehold
as it exist in our legislation is through the phrase “Grant in Perpetualty”.
A question that arises is as to whether land that is leasehold is inferior
to land that is a grant in perpetualty and if so, what is the reason for such
a difference? Sometimes houses being sold in adjoining locations and even
in the same vicinity are similarly priced even though in one location the
land is a grant in perpetualty and in the other a “leasehold”.
The unsuspecting individual is sometimes made to feel that since the houses
are similar and the location is close, there might not be much of a difference
in the prices. This misconception is likely to be further fuelled by the sales
personnel at the point of sale who either do not know the difference or may
deliberately make the difference appear to be insignificant in their unbridled
enthusiasm to close the sale.
Just like in most other jurisdictions, land in our country vests in the State.
Individuals whether human beings or corporate bodies come to own land through
the land being alienated. Where land is alienated the recipient is either
granted a grant in perpetualty or a lease.
A grant in perpetualty is forever but a lease is usually for a fixed period.
It may be for a maximum period of 99 years or for a shorter period. This therefore
is in contrast to a grant in perpetualty which is without limit.
Irrespective of the duration a critical issue is, what happens when the lease
comes to an end? At the time that the house is bought when there are nine
decades and several years to go, the time of the expiry of the lease may appear
remote and insignificant.
However as the expiry of the lease begins to appear on the horizon and as
the end of the lease gets closer and closer, the possible though remote loss
of the property in which the individual has lived for years can be a serious
and troubling matter.
If the house owner wants to stay on after the lease expires what can or need
he do? And apart from that, what rights does he have? Can he continue staying
in and owning the property?
The clear answer is that the term for which the lease was granted has expired
and he has no right to stay there. However he could apply to the state for
the lease to be renewed for a further term.
When the lease has been obtained by the leaseholder from the State and the
property is part of a residential area it is unlikely that the State will
refuse to renew the lease or grant a further term.
Such a decision will also no doubt be influenced and affected by policy considerations
to meet the needs of the times in the context of prevailing circumstances.
However, what would be really occur is difficult to foresee.
Whilst most house owners of such leasehold property are likely to see the
lease renewed or a further term granted, the owner might be unhappy about
the renewal period as well as the premium that has to be paid.
There cannot be a guarantee that the renewal is for a duration which is equal
to the period of the earlier lease. Nor would the new premium to be paid likely
to be the same as when the lease was obtained on the earlier occasion.
There could also be instances where there is no renewal of the lease at all.
This is more likely to be the case where the lease is at the outset for a
shorter period and for non-residential purposes.
However even in the case of a residential area a possibility could exist where
the lease may not be renewed. This could happen if the area in question is
required by the State to meet a more pressing and urgent need in the national
interest, in which case the houses in the area concerned may have to be demolished.
Whilst the options of the house buyer are no doubt limited, the factors set
out above are matters which a house buyer should be aware of and appreciate.
This is particularly so given that, for an ordinary individual, buying a house
is a lifetime investment.
However, ownership of land in the form of a grant in perpetualty is not always
and necessarily absolute. A breach of conditions or acquisition of the land
under the compulsory acquisition laws could see a landowner having to part
with the land with different consequences.