Freehold vs Leasehold in Malaysia: What Happens When a 99-Year Lease Ends?

Freehold land is yours with no end date. Leasehold land is yours for a set number of years, at most 99, and then it goes back to the state unless the lease is extended. So for a leasehold unit, the number that matters is how many years are left, and that date is on the title.

What the two words mean

Under the National Land Code, the state gives out land in one of two ways. It can give it for a term of years, and the law caps that term at 99. Or it can give it in perpetuity (with no end date), which is what freehold means.

The law treats the term of years as the normal way. It allows land to be given out with no end date only in three cases: when the Federal Government needs it, when the land is for a public purpose, or when the state is satisfied there are special circumstances.

A 99-year lease is the longest the law allows, and a lease can be shorter. The state sets the period each time it approves the land.

Where to find it on a condo title

A condo or serviced apartment unit gets its own strata title (the ownership paper for one unit in a building split into separately owned units). The legal form for that title has a printed line for the tenure (whether the land is freehold or leasehold): either “Grant in perpetuity” (freehold), or “Lease for the term of … expiring on …” (leasehold, with its end date). Read that line on your own unit’s title.

What happens when a lease ends

When the term on the title runs out, the land goes back to the state. Permanent buildings on the land go to the state as well, and the National Land Code says the state pays no compensation for them. There is one exception: the land title can set a different rule for the buildings. That is one more reason to read the title before you buy.

How a lease extension works

The owner can apply to extend the term, and must apply before the term ends. A federal land circular (an official instruction to land offices) from 2024, issued with the agreement of every state’s land director, sets out the steps:

• Where: the application goes to the land office.
• When: before the lease ends. Each state’s own policy applies.
• How long: the extra years plus the years still left cannot go over 99.
• What you send: the application fee, written consent from anyone with a registered interest (a right recorded on the title, such as your bank’s loan).
• The price: the land office asks JPPH (the government valuation department) for the land’s market value, to work out the premium (a one-off payment for the extension).
• The decision: the state approves or rejects it as it sees fit. If it approves, the land office sends a notice with the sum to pay. If the money is not paid in time, the approval lapses (is cancelled). Once paid, the new end date is written on the title.

For a condo block, the law says the management corporation (the owners’ body that runs the building once each unit has its own strata title) may apply for the whole building, but only with a unanimous resolution of the owners. The circular says a strata application must come from the management corporation, with proof of that resolution. Once the extension is approved and paid for, it is written on the main land title and on every unit’s title.

The circular gives no premium rate. It says the rate and the way it is charged are each state’s own policy. We found no official premium rate or formula for homes from any state.

A worked example

These dates are made up, to show the sum. Say a 99-year lease starts in 2024 and your unit is handed over in 2029.

• The lease ends in 2024 + 99 = 2123.
• At handover, 2123 - 2029 = 94 years are left.
• With a 35-year loan from handover, the loan ends in 2029 + 35 = 2064.
• When the loan ends, 2123 - 2064 = 59 years are left.

Now say the state approved 60 years instead, from 2024. The lease ends in 2084. At handover 55 years are left, and when the same loan ends only 20 are left. Both titles say leasehold. The years left are very different.

And for an extension: with 30 years left, the most you can ask for is 99 - 30 = 69 more years. With 60 years left, it is 99 - 60 = 39.

Freehold still pays yearly rent

Freehold does not mean no payments to the state. The law sets land rent by area and rate, and it does not tie the rate to freehold or leasehold. For strata units, in states where parcel rent (a yearly rent for each unit, instead of for the whole plot) has started from a date the government has published, each unit’s rent is worked out per square metre. It is a debt owed to the state. If the land office serves a demand notice for unpaid rent and it is not paid in full in time, the law says the unit is forfeited (taken back by the state).

State consent is not only for leasehold

Some buyers think only leasehold land needs the state’s consent to sell. The law lets the state put a restriction in interest (a limit on what the owner can do, such as needing consent to sell) on any title, freehold or leasehold, and that limit must be written on or referred to in the title. A bank loan on the unit is subject to that same limit. While the loan runs, the first bank is entitled to keep the title document, unless you have agreed otherwise.

Our guide to commercial vs residential title explains another line on the title that changes what you pay.

What to check before you buy

• Is the title freehold or leasehold? On a condo, read the tenure line on the strata title.
• If leasehold, when does it expire? Do the sum for handover and for the year your loan ends.
• Is there a restriction in interest on the title, such as needing the state’s consent to sell?
• How does your bank treat the years left on the lease?
• Does the title set its own rule for what happens to the building when the lease ends?
• Is the sale under the HDA (the main law protecting people who buy homes still being built)? See our HDA guide.

This is a general guide, not legal or financial advice, and rules can change. Check your own title with your lawyer and your bank.