A Primer on Land Ownership
by Prof. Salleh Buang, NST Property Times 11-May-2002
Land ownership in Peninsular Malaysia is governed by the National Land
Code 1965 (NLC), in force since January 1966.
Since the law is based on the Torrens System (where “the register is
everything”) ownership is evidenced by having one’s name on the title.
There are three routes to ownership. The first method is by “dealings,”
such as by purchase and followed by transfer, which must be in the
prescribed form followed by registration at the relevant land registry.
The second is through inheritance (from one’s parents or ancestors),
and the third is by acquiring it through “alienation” from the State
Authority.
The term “dealings” includes not only transfers, but also leases,
charges, easements and liens, while “alienation” is the process by
which state land is “disposed by way of alienation.”
Under the law as it stands today, there is no limit to the number of
land titles or the size of land area a person can own. State policy,
however, currently allows a person to own only one low-cost housing
unit. Some people, however, still manage to own more than one unit of
low-cost housing - by using their children’s and relatives’ names.
The NLC recognises two types of land ownership. The first type is “land
held in perpetuity,” commonly referred to as “freehold land.” The
second is “land held for a term of years,” commonly referred to
“leasehold land.” The maximum term of the latter is 99 years.
Land ownership carries with it certain duties. Briefly, these are - (a)
paying the annual quit rent to the State Authority (in default of which
the land can be forfeited by the State Authority); and, (b) complying
with all the express and implied conditions affecting the land.
“Express conditions” are those specially endorsed or expressed on the
land title while the implied conditions are those stated in sections
115 (for agricultural land), 116 (for building land) and 117 (for
industrial land) of the NLC.
Breach of any of these conditions, if not remedied in time, can result
in forfeiture. Beyond that, the land can also be subject to certain
“restrictions in interest” (e.g. the land cannot be sold or transferred
without the consent in writing of the relevant authority).
Land ownership is protected by the NLC and guaranteed by the Federal
Constitution. Under the NLC, if a person is registered as owner of a
piece of land, his title (or interest) is “indefeasible.”
Indefeasibility of title means that one’s ownership cannot be
“challenged or questioned,” unless the case falls under any one or more
of the circumstances mentioned in section 340(2) NLC - e.g. where there
has been fraud, misrepresentation, or so on, when ownership is
acquired.
Land ownership is guaranteed under Article 13 of the Federal
Constitution. Simply put, this means that land cannot be compulsorily
acquired or used by any one (even by the government) unless it has been
acquired in accordance with the procedure laid down in the law (the
Land Acquisition Act 1960) and “adequate compensation” has been paid.
What is “adequate compensation” is spelt out in detail in the First
Schedule of the 1960 Act. The NLC also recognises and protects
co-ownership of land (co-proprietorship). Co-owners who mutually agree
to have their own separate documents of titles to their own “portions”
can ask for partition. Likewise, an owner who owns several pieces of
properties adjoining each other can ask for amalgamation.
Possession is not the same as ownership, despite the saying that
“possession is nine-tenths of the law.” The NLC does not recognise the
common law concept of “adverse possession,” something which is alien to
the Torrens system.
As a result, if you occupy somebody’s land without his permission, you
are a “squatter” and you remain so, no matter how long your illegal
occupation might have been. According to established case law, a
squatter “has no rights in law or in equity.” The principle applies
equally whether you squat on state land or alienated land - the
difference being that squatting on state land is a crime (for which you
can be fined or sent to prison), while squatting on private land only
gives rise to the tort of trespass (which will make you liable in
damages).
Strange as it may seem, squatters of state land have, in the past, been
“rewarded” by the authorities. Some were given temporary occupation
licences (TOLs), whilst others were even more fortunate - they were
given land titles in due time. Such benevolent actions by some State
Authorities, prompted perhaps by political motives and possibly by
humanitarian reasons, however, do not (and cannot) change or affect the
letter of the law. Squatting on State land remains illegal under the
NLC, and if the authorities see it fit, criminal prosecutions can be
taken (though this has been very rare in the past).
Under the NLC, an owner of an agricultural land is allowed to build
only one dwelling house (being his home) on that land, provided that it
does not occupy more than one-fifth of the whole area of the land or
two hectares, whichever is the lesser.
In many cases, however, the law does not reflect the reality on the
ground. Family members have a tendency to stay close together, and when
a piece of agricultural land in the kampung is large enough, in time
other members of the same family tend to build their own dwelling
houses on the same land. Whilst this state of affairs is clearly in
breach of section 115 NLC, action has seldom (if ever) been taken
against the registered landowner.
The NLC is a general law applicable to all alienated land in Peninsular
Malaysia. Besides, the NLC, there is a specific law governing Malay
holdings known as the Malay Reservation Enactment (one uniform
legislation covering Perak, Pahang, Selangor and Negeri Sembilan and
five separate legislations covering the remaining five states of Johor,
Terengganu, Kelantan, Kedah and Perlis).
While in most of these Malay States, the term used is “Malay
Reservation,” other terms or expressions exist as well - such as Malay
Agricultural Holding (for Kuala Lumpur’s own Kampung Baru), and Malay
Holding (in Terengganu). In Kelantan, only “natives of Kelantan” can
own Malay reserve land. The basic objective of these laws is to
restrict any form of “dealings” affecting these land by non-Malays.
Quite recently we heard of a proposal to allow leases of up to 30 years
to non-Malays; but to-date, nothing further has been heard of it. Apart
from this, certain State Authorities make it a policy (which they
implement when approving development projects) of insisting that a
certain percentage of the houses being built by the developer can be
sold only to Bumiputra buyers. When sold, these properties will
virtually for all purposes remain regarded as Malay reservation lands
although the term “Malay reservation” does not appear endorsed on the
land titles.