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Beware of Misleading Private Lease Scheme

The public must be warned of the misleading Private Lease Scheme (PLS) where homebuyers believe they are buying a property but are in fact signing a long tenancy (lease) and paying “rent” up front. This leaves them with no proprietary rights to the property.

Most homebuyers fail to recognise a long term lease disguised as a conventional property purchase. Buyers of PLS properties must be made aware that they are not buying the said properties but merely renting or leasing them from the seller for a specific number of years. At the end of the lease period, the future descendants of the buyers or lessees must surrender the said properties to the seller or lessor.

Hence, in this article, the terms “buyer” shall also mean “lessee” and the term “seller” shall also refer to “lessor”.

A report entitled “Leasehold: A Life Sentence?” published two years ago by the National Association of Estate Agents (NAEA) of UK discussed the problematic private leasehold scheme in England.

The NAEA report highlighted some issues, which we foresee would happen in Malaysia if PLS were allowed:

  • 62% of leasehold homeowners feel like they were mis-sold

  • 65% used the developer’s recommended solicitor

  • 57% of leasehold house owners didn’t understand what being a leaseholder meant until they had already purchased the property

  • 48% of leasehold homeowners were unaware of the escalating ground rent

  • Difficult to re-sell

Call for government intervention

Property developers often advocate that the property market should be driven solely by market forces and that government intervention is bad. However, market forces as a market shaper is only applicable when there is a level playing field between consumers and sellers and consumers can easily switch to other sellers.

However, when it comes to property and land transactions, a level playing field does not exist. Land is a scarce resource and property developers are multi-million ringgit corporations with deep pockets. If the government were to allow PLS, many property developers, regardless housing or commercial, will jump onto this bandwagon which offers one-sided high benefits to developers/proprietors as landowners. Eventually, all projects will be under PLS and future generations of house buyers, instead of becoming homeowners with land titles, will be reduced to mere renters in perpetuity. The entire landscape of sale of property will change to “take on lease”.

The government must immediately stop this tyrannous PLS from taking root to protect the interest of all house buyers and the rakyat.

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