Singapore Property Scam? Understanding Private Lease (PLS) Before You Buy!

Understanding Malaysia's Private Lease Scheme (PLS)

This article will explain the Private Lease Scheme (PLS) in Malaysia, a property ownership model that has recently generated controversy. We'll cover what PLS is, the concerns surrounding it, its impact on buyers, and how to avoid potential misunderstandings when purchasing property.

What is PLS?

PLS, or Private Lease Scheme, is a long-term lease agreement for property. Unlike traditional freehold (permanent ownership) or leasehold (ownership for a set period) titles, PLS offers buyers a long-term right of use rather than permanent ownership. This means the buyer essentially leases the property for an extended period.

• Buyers do not own the property outright.

• The development company (e.g., Iskandar Investment Berhad (IIB) in Medini) retains ownership.

• The right of use is typically for a period of 1 to 129 years.

PLS in Medini

Currently, PLS is primarily found in the Medini area of Iskandar Puteri, Johor. Many developers in Medini utilize this property title.

Controversy and Developer Response

The emergence of PLS has sparked controversy, with some Singaporean buyers reportedly feeling misled after purchasing properties under this scheme, believing they were purchasing freehold or leasehold properties.

Developers have responded by:

• Clarifying that PLS is a legal and transparent business model.

• Emphasizing that the terms of PLS are outlined in the Sale and Purchase Agreement (SPA).

• Suggesting that some property agents may have over-promised, leading to misunderstandings.

• Maintaining that PLS projects are often cheaper and suitable for first-time buyers or short-term investors with limited budgets, provided they understand the terms.

Expert Opinions on PLS

Real estate lawyers have stated that PLS is legal, but the crucial point is whether the buyer fully understands the terms. Many past disputes arose from buyers not understanding the difference between long-term leases and outright ownership, especially among foreign buyers unfamiliar with Malaysian property laws.

Impact of Buying PLS Properties

Purchasing a PLS property has several implications:

1. Limited Ownership: The buyer does not own the property permanently. They have the right to use it for a specific period.
2. Resale Value: Resale prices may be affected because future buyers might be unfamiliar with PLS.
3. Loan Approval: Banks may have stricter lending policies for PLS properties, and some may not offer loans at all.
4. Contract Pricing: The contract price might not be the same as lease price and is determined by developer or designated company. Non-contract situation might arise.

Advantages of Buying PLS Properties

Despite the concerns, PLS properties also offer certain advantages:

• Lower Price: PLS projects are generally more affordable, making them attractive to first-time buyers and investors with limited budgets.

• RPGT Exemption in Medini: Properties in Medini, a special economic zone, are exempt from Real Property Gains Tax (RPGT).

• No Bumi Quota in Medini: The Bumi quota (reservation for native Malaysians) does not apply in Medini, meaning any unit can be purchased regardless of ethnicity.

How to Avoid Misunderstandings When Buying Property

To avoid potential problems when purchasing property, consider the following:

1. Clarify Property Title: Before signing any agreement, confirm the property title with the developer or a lawyer.
2. Check Land Records: Verify the property title at the Malaysia Land Office (Jabatan Tanah).
3. Ask the Developer Directly: Inquire about the property title and request confirmation from the sales gallery.
4. Consult a Trusted Professional: Seek advice from a trusted lawyer or property agent for review and confirmation.

Is PLS a Scam?

PLS is not inherently a scam. It's a legal business model, but it's relatively unknown to the general public and previously more common in industrial settings. Misunderstandings arise when property agents fail to fully disclose the nature of PLS to potential buyers.

Option to Convert PLS to Freehold

According to reports from The Star and The Edge Malaysia, Iskandar Investment Berhad (IIB) is offering Medini property owners the option to convert their PLS properties to freehold. This involves paying a fee:

• For Projects Not Yet Built: RM8 per square foot.

• For Completed Projects: A fixed fee of RM10,000 per unit (studio, apartment, or landed property).

Lawyer fees will also apply for the conversion process.

Conclusion

PLS in Malaysia is a legitimate property ownership model but requires careful consideration and thorough understanding. Buyers should conduct due diligence and seek professional advice to avoid potential misunderstandings and ensure that PLS aligns with their investment goals and long-term plans.