Land held under leasehold title means that the land is owned by the State Authority but the individual who has acquired a leasehold title in the said land may occupy the land for any time period not exceeding a term of 99 years (the maximum period of lease permitted under Section 76 (a) National Land Code [the NLC]).Upon the expiry of the period of the lease, the land reverts to the State Authority. The NLC does not provide any specific provisions for the extension of leasehold land.
However there are certain provisions in the law which have been invoked for the extension of lease as set out in Section 76 (a), Section 197 and Section 204B of the NLC. Section 76(a) gives power to alienate land for a term not exceeding 99 years. Section 197 sets out the procedure for a proprietor to surrender his/ her title to the State Authority. Section 204B provides for power to the State Authority to approve surrender and realienation.
The extension of lease is also governed by the land rules of the various States. As for Selangor, it is governed under the Selangor Land Rules 2003 and Selangor Quarry Rules 2003 and for Kuala Lumpur, it is governed under the Federal Territory of Kuala Lumpur Land Rules 1995. The Selangor Government has provided for 2 options for the extension of residential leasehold land as follows (among other things):
To pay the full rate of premium on the lease extension with a 30% rebate.
To pay a nominal premium of RM 1,000. This is provided that the owner does not dispose the land. The State Authorities will lodge a Registrar Caveat on the land to prevent the owner from disposing the land under this option. Should the owner decide to dispose the property at a later date in the future, the owner shall pay the premium for the land valued at that time in the future according to a prescribed formula.
As an example for Option 1 – for a bungalow land with 9,000 sq ft in land area and with a remaining lease of 30 years valued at RM 300 per sq ft:
Among the documents to be submitted to the relevant authorities are as follows:
1. Borang 12A (seksyen 197 KTN) :Permohonan untuk Menyerah Balik Tanah (mengenai kesemua tanah itu);
2. Borang Jadual 1 (Peraturan 2, KTN);
3. Borang Perihal Tanah dan Peribadi Pemohon;
4. Copies of the Quit Rent and Assessment receipts for the current year; and
5. The original title of the land;
6. Copy of official land search;
7. Copies of the location plans;
8. Consent from Chargee and caveator (if applicable);
9. Forms 24, 49 and Memorandum & Articles of Association (if corporation);
10. Copies of the identity cards of the Board of Directors (if corporation);
11. The prescribed application fees.
The value of the land is determined by the Valuation and Property Services Department (JPPH). The value excludes the value of any building on the land.
FOR COMMERCIAL LAND IN SELANGOR
3/4X 1/100 X value of the land X term of new lease minus balance of existing lease. As an example for a commercial land with 35,000 sq ft in land area and with a remaining lease of 30 years valued at RM 150 per sq ft: 3/4 X 1/100 X 5.25 million X 69 years = RM 2,716,875 is the premium payable. For industrial land in Selangor, the formula is the same as that for commercial land.
FOR KUALA LUMPUR
The premium on lease to be re-alienated in Kuala Lumpur can be found under Part 3 Premium Rule 9 of the Federal Territory of Kuala Lumpur Land Rules 1995. Sub-rule 8 (b) states that where alienation is by way of lease, the rate of premium to be charged shall be calculated as follows: For residential land: 1/4 X value of land X 1/99 X term of new lease minus balance of existing lease.
It is advisable to extend the lease of the land before it expires. In the event that the lease has already expired, then the owner will apply for lease renewal by way of an application for land re-alienation process subject to procedures set out in the NLC.
This article was first published in the iProperty.com Malaysia September 2016 Magazine. Get your copy from selected news stands or view the magazine online for free at www.iproperty.com.my/magazine. Better yet, order a discounted subscription by putting in your details in the form below!