Contributed by Ron Ong, a member of the KL & Selangor Property Investors Club.
There are plenty of factors to take into consideration when buying property. Here is everything you need to know about land titles in Malaysia
Malaysia uses the Torrens system of ownership - meaning all property purchases must include official registration of the Issue Document of Title at the relevant land office to be legally binding. The Issue Document of Title or Land Title is the most important document in any land transaction that ensures your ownership is legal and recorded.
Read on about the indefeasibility of titles.
Categories and Types of Land Title
Let us help you familiarised with the categories of land you can buy in Malaysia. There are basically a few types such as residential land, agriculture land, commercial land, or vacant land which are not registered for any purpose. So you need to identify the purpose of buying the property. Are you buying a home for your family? Are you planning a durian farm for your retirement?
The second factor to consider is the status of the land title and the age-old debate of whether freehold or leasehold is the better choice. It comes down to the tenure of the land title and what you're comfortable with.
Freehold land titles have always been the most popular land title in the market because of its complete and permanent ownership and less strict limitations compared to transfer of ownership for leasehold properties.
But there are freehold properties that still need the state authority consent when transferring ownership. Potential buyers are strongly advised to not take this for granted and carefully look at the land title of the property to find out if there are any restrictions before deciding to make a purchase.
And, don't be too confident if you decide to own freehold property. Not many people know this, but the government still has the right to reacquire any land forcefully to build government developments. Owners will be forced to sell their homes back to the government at the current market rate, regardless of whether it is freehold, leasehold, or Malay reserved.
In comparison to freehold land titles, ownership of leasehold properties can be less popular as it can only be owned for a fixed amount of time (which can vary) – with the leases expiring or requiring renewal. Heavy premiums and restrictions to leasehold property are the reasons most people do not prefer to own leasehold properties. Uncertainty in the renewal of the lease also renders it more difficult for owners to sell and bank loans are harder to come by as well.
Did you know that for every developer project, a certain percentage of the development has to be allocated to the "Bumiputera"? These are known as Bumi lots. Notwithstanding this, Bumi lots are open for sale to anyone but it is difficult to obtain consent from the government to change a Bumi lot to a non-Bumi lot. As such, please exercise caution when deciding to buy a Bumi lot. You might have to wait for years to get the necessary approval.
In contrast to Malay Reserved Land or otherwise known as "Tanah Rizab Melayu", only Malay Muslims are eligible to sell, purchase, or lease properties on Malay Reserved Land. You should be aware of this fact when searching for property.
Other types of titles such as Master title land are usually owned by developers or proprietors who enter into a joint venture with the developer to develop the land. Depending on the type of development, the land itself will be eventually subdivided into individual units of either individual titles or strata titles. In the latter, strata titles typically apply to high-rise properties and are usually issued much slower compared to individual titles because of the long timeframe for developer's submission to the Land Office to subdivide the Master Title into Strata titles.
Nowadays, it is becoming common to see houses with common facilities in new developments will be under strata titles as well.
Finding the right land or property
A survey is an important part of a sale and purchase transaction. You can engage the services of a professional surveyor to provide you with a complete and updated survey or you can conduct your own due diligence if you're on a budget.
A land search can be conducted on your own or through a lawyer. It is important to check existing restrictions or dealings on the land. Moreover, you need to verify the seller's details to ensure that the property can be legitimately transferred. And you also need to check the particulars of the boundaries of the property as well as the surrounding area to ensure the property size fits the description of the property you are intending to buy.
You need to take into consideration what factors are important to you - the property's surrounding environment, its exact location, and access to work may be more important to you than the potential price appreciation of the property.
When you’ve decided on the land or property you wish to purchase, you would then need to ask yourself: is it for the right price? With property prices becoming the single biggest concern among first-time homeowners, affordability is the first priority.
Before negotiating with the owner, you can determine for yourself what the average market rate in the area and whether it is within your budget. It's easy to survey the location and similar properties to uncover property prices using search engines on the internet. You can also engage a property agent at this stage to help you find the property you want and make arrangements with the owner.
As mentioned at the beginning of this article, the land title is everything. Once the sale and purchase transaction is complete, your lawyer needs to follow the correct legal procedure to ensure that transfer of ownership has taken place at the land office and that your status as the new owner has been recorded in the land title.
What about properties bought under a Master title? Properties under such circumstances can be transferred using a Deed of Assignment document with full ad-valorem stamp duty paid. It basically assigns the seller's title and rights to the buyer. Only until the developer has successfully subdivided the master title into individual titles or strata titles, then the individual titles or strata titles can be officially registered at the land office.
To conclude, it can be nerve-wracking to buy a property, regardless of whether it's a massive plot of land or a tiny SOHO. But with plenty of research and with the help of this article, we hope that you will make the best-informed decision.
This article is intended to convey general information only. It does not constitute advice for your specific needs. This article cannot disclose all of the risks and other factors necessary to evaluate a particular situation.
Any interested party should study each situation carefully. You should seek and obtain independent professional advice for your specific needs and situation.
Stay informed and subscribe to the StarProperty Monthly Newsletter here.