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What is the difference between leasehold and freehold tenures?

 

THE land laws of Malaysia are governed by the National Land Code, 1965 (Act 56 of 1965). Section 40 of the National Land Code, 1965 states that all state land belongs to the state authority.

When state land is disposed off by the state authority to an individual in perpetuity for an indefinite period, this land is now granted as freehold title.

When the state land is disposed of by the state authority to an individual for a term of years, by virtual of law, not exceeding 99 years, this land is now granted as leasehold title. Upon expiry of the period of the lease, the land should be reverted to the state authority.

The owner will then have to either apply for a renewal of the lease before its expiry or apply for a fresh alienation if the lease has expired. These will involve the payment of a hefty premium which would be close to buying the land all over again with perhaps some discount

Summary

Issue

Leasehold

Freehold

Comment

Land uses

- Lease duration  usually 30, 60, 99 or 999 years.

- Limited by purpose of lease and land legislation.

- Stocking levels, cultivation, etc may be restricted by lease conditions.
- Limited by environmental and town planning controls.

Limited by environmental and town planning controls Leases are subject to a higher level of control.
Duty of care - High level of duty of care defined in land legislation.
- May be responsible for developing and maintaining improvements.
- May be required to engage in property planning.
- Duty of care following common law and as required by some Environment Protection Acts or its equivalent. Leases are subject to a higher level of control.
Transferability, aggregation and subdivision Lease transfers require State or its equivalent's approval. - Few limitations on transfer.
- Unlimited right to subdivide and aggregate subject to town planning controls.
Leases are subject to a higher level of control.
Retrieval/resumption Powers to acquire leasehold interest or withhold land when lease expires. Some powers to acquire land for public works. Leases are subject to a higher level of control.
Security of tenure Varies according to lease type but forfeiture for non-performance may be possible. Very high level of security. - In general, leases are less secure than freehold.
- Perpetual leases approach the level of security of free hold
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