If you want to know how the leasehold extension premium is calculated, this article is for you.

For people who say leasehold and freehold property is the same, LET ME PROOF YOU WRONG.

Today, one customer inquire about the leasehold extension premium fees in Selangor.

As we all know, Leasehold property and Freehold property are not the same.

Leasehold property has 99 years or less lease on it, while freehold property doesn’t have this.


If you are the leasehold property owner, you will have to renew the leasehold extension premium once the leases expire.

Leasehold property doesn’t mean you will have a balance of 99 years on the property. It can be a balance of 70 years or less.

That is why a knowledgeable consumer will check this BEFORE BUYING ANY PROPERTY.


I want to tell you a story.

When I was a banker, that was what I think about 13 years ago.

I used to attend a project launching for a high-end property in Bangsar.

The project was on leasehold land with 89 years balance lease.

The developer sold the property unit to many high-end buyers.

You will be surprised to see the name on that list.

Previously, the landowner held the property for a couple of years before selling the land to the developer. And the developer built a luxury condominium on it.

During the launch, the developer received many complaints from the buyer on the balance lease years.

As a result of the tremendous pressure, the developer decided to renew the land lease to 99 years.


At that time, the bank I’m working for is the bridging financier.

The advantage of being a bridging financier is you will have all this information, and you are the only bank allowed to be there at the project launch.

In addition, we are closed with the project manager and work hand in hand with them.

And these buyers are not ordinary people like you and me; they are CEO of multinational companies, ministers, Datuk, Datin, people with influence and reputation in society.

So because of the pressure, the developer renews the lease to the maximum, which is 99 years.

I’m telling you this story is to let you know the balance of lease years is essential.

If you want to buy a leasehold property, please ensure you get the maximum balance lease; the ideal is 99 years.

As we all know, the longer the lease, the much better the property value and vice versa.


In future, if you are buying an under-construction property, you might want to check the property balance lease. And usually, the developer will print it on the brochure.

If they don’t, you can ask to see the title, and from there, you will find your balance lease.


On the other hand, if you buy a sub-sale property, do a land search on the property, and you will see the balance lease.

Once you know the balance lease years, decide by having these details and weigh the property’s pros and cons.


So, let say you want to renew the lease; how much is that?

Here is the formula.

Premium = ¼ x 1/100 x Market Value of land (in sq ft) x number of years to renew x land area (in sq ft)

This is the formula to calculate the premium for the leasehold renewal in Selangor.

It will depend on the land area and how many years to renew, and there is currently a 30% rebate on the premium. (At the time of writing this article 6/9/2021).

The discount may or may not be here in the future.


Here I have an example of the calculation,

For a 3,000 sq ft residential property in PJ with 10 years remaining on the lease (assuming it was valued @ RM120 per sq ft by the Authorities),

the lease renewal fee calculation is = 0.25 X 0.01 X 120 X 89 X 3,000 = RM 80,100.

Leases are usually renewed so that there are 99 years of the lease on the title.

Therefore, if you have ten years remaining on your lease, you need only pay for an extension of 89 years (99 years-10 years).

After deducting the 30% rebate, the fee payable would be RM 56,070.

So, if there is no discount, the amount is RM80,100.

Yeah, I know it’s a lot!

But that is the leasehold extension premium calculation for property in Selangor, and different states will have their own formula and calculation.


If you own a Leasehold property, you will need to pay for a leasehold extension premium.

While, if you own a freehold property, you don’t need to.


In addition, Leasehold property requires consent before any transactions like selling a house, refinance, buying the house, etc.

The consent will take about additional 2-3 months.

Suppose a freehold property can complete a transaction in 3 months. Leasehold property will take 6-7 months.

Because by the end of the day, you are not the sole owner of the land. The states government is.

A way to see it is the state government leases the land to the property owner for 99 leases; once it expires, you’ll need to renew the leasehold extension premium.

You need to know; there is nothing wrong with buying a leasehold or freehold property as long as you understand both land titles entirely and take advantage of the property.

Alright, that is my sharing for today!

As always, thanks for reading!

If you have any further questions, please feel free to reach us at +6012-6946746.

Before you go, you might want to read this.

Freehold vs Leasehold, which is better?





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