Land status
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. |
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