In previous article, we’ve talked about the types of land title in Malaysia, you can click the link here to read it if you have missed. Well, in today, we will discuss about the problems or challenges that you have to be prepare to face when you buying a leasehold property;
1. Bank Loan Entitlement
This is the main problem that the potential buyers will face up to. The banks are typically not willing to offer the loan to the property that less than 30 years lease left after the expires of loan tenure. The international banks are more stricter as they require that the property has 60 years lease left once the loan tenure expires.
Some of the bank may willing to offer financing to the buyers, but the loan amount will be very low and it will only be for a short loan tenure. This is because they don’t want to take the risk that they can’t auction off the property if the buyers failed to make the monthly loan repayment.
It is fine if you buying a leasehold property that has a lease of more than 70 years for your own stay. Well, you need to know that a leasehold property will normally go through at least 2 generations. Hence, think a little further before you make the decision.
2. Its Process Is Complicated
In resales market, a leasehold property is usually takes a very long time to get the transferred from sellers to buyers. For freehold property, the complete transaction is usually takes up to 3 to 4 months while for the most leasehold property, the transfer process will takes up to 6 to 9 months or even longer.
The reason for why so much time is needed is that the seller’s solicitor will have to apply to the related land office to obtain their consent for you to able to sell out its property. The seller has to pay all the costs during the process. How soon the consent is obtained will depend on how efficient the land office is.
Here’s a tips for you, when you buying a vacant leasehold property, do negotiate to obtain vacant possession upon signing the S&P Agreement. It makes little sense to keep the property vacant for 6 to 9 months while the legal paperwork is in process because an empty property will fell into decay. Besides, the rents that you receive each month will gradually reducing the initial down payment of 10% that you have been paid i.e. a 2% to 3% earnest deposit plus the balance 7% to 8% on signing the S&P Agreement.
3. Verify The Remaining Lease
If you’re buying a leasehold property from the developer, it is very important to check on what is the remaining lease. Don’t assume that the lease is still have 99 years. Once the developer obtain the permission to develop the entire township, and they will build their projects in phases. The time lag between the first and last phase in a big township may need as long as 10 years. If your property is at the last phase, in the day you sign the SPA and the lease will be 89 years left. 3 years later, you finally receive the keys, and the lease may be have only 86 years left and assume there is no construction delays.
Some of the reputable developers may promise you that even there are only 80 years lease left on the master title, when the individual titles are issued, the lease will be back to 99 years that means the developer have pay the additional lease premium to extend the lease to 99 years.
These are the problems that the buyers should be concerned about before decide to buy a leasehold property. Besides, it is difficult to make sure that the lease extension will be granted in time as it is depends on the land office efficiency. Do consult the land office to get more details of lease extension.