Property owners often ask if they can convert a leasehold property into a freehold property. It’s a valid question and we are pretty sure people have at least thought about that question at least once. For many Malaysian property owners, getting a freehold property is a dream choice. It often means having a sense of security by owning a freehold property.
Before we proceed, there are actually several differences between a freehold property and a freehold property.
| Leasehold | Freehold |
| Leaseholds are often shared ownership properties. When you sign the legal documents, the property will not be permanently yours. | You will own the entire property under your name as soon as you have signed the legal documents. |
| There will be certain years to owning the leasehold property. It can be for 20 years, 40 years, 80 years, 99 years, 150 years, etc. Once the lease tenure is up, the property will be returned to the original owner. You may choose to pass it on to your next-of-kin before the lease is up. However, if the leasehold is for 50 years (for example) and the tenure is up when it is in your child’s name, your child will need to have that property returned to the original owner. | There is no leasing time period to a freehold property. As long as it is under your name, it will stay that way until the time of your death or when you choose to pass it on to someone else – whichever comes earlier. Let’s say if you have passed away and you have decided to pass the property to your child. Your child may not want the property anymore and choose to sell it, they can do that. |
| If you are holding on to a leasehold property, it means you are just leasing (read: renting) the property from the Legal Owner (most often is the Local authority) for a fixed period of time. | If you are holding a freehold property, it means that the property has no “permanent” owner before it gets passed on to you. Hence, the property is 100% in your name. |
| Leasehold properties tend to be slightly cheaper in price as compared to freehold properties. | Freehold properties tend to be a bit more expensive compared to leasehold properties. |
| As leasehold properties tend to be cheaper, it does not mean people do not want to buy it. The reason why people want to buy leasehold properties isn’t just for its price. People buy it as leasehold properties often come with more attractive and well-equipped facilities and features. That’s how leasehold property owners sell their properties. | Freehold properties are usually more expensive due to the location that they are situated in. It can quite likely be located at a place where it has easy access to many amenities. The property itself may not necessarily have a lot of attractive facilities and features. People often buy these properties due to its attractive locations. |
| These properties are often built in the centre of the city. | These properties are stereotypically built on non-government land, but it does not mean freehold properties are not constructed on government lands either. |
Can you convert a leasehold property to a freehold property then?
The short answer is yes, you can.
In certain states such as Penang allows leasehold property owners to convert their leasehold properties to freehold properties under the National Land Act and the Federal Constitution. Before trying to convert the leasehold ownership to freehold ownership, you may want to take into consideration certain things. You should think of:
- State laws that apply to the relevant property
- Application procedures
- Related fees
- Legal documents
- Professional fees
You will need to submit an application to the State Land Administration and the landowner will need to pay a processing fee. As soon as it is approved, the land will be re-transferred to the owner with a new owner’s name. All these will be completed as soon as the land transfer fee and other outstanding expenses such as exit rent have been settled.
Bottom Line
It may seem impossible to convert a leasehold property into a freehold property at first. However, if you do follow the steps correctly then there should be very little to no issues with converting the leasehold into a freehold.
