Overview of Malaysian Land Law
Primarily, Malaysia adopts the Torrens title system as its underlying land registration system wherein the land registration and dealings are governed by the register of land holdings created and maintained by the respective states. In other words, the general rule is that the land registry serves as the conclusive evidence of ownership of a person who is recorded as the proprietor (owner) in respect of the land/property. The concept is often referred to as ‘indefeasibility’ of title. Be that as it may, there are exceptions to the general rule and there are circumstances in which Malaysian land law are also influenced by other factors such as the native customary law and Islamic principles[i].
Another unique feature of the Malaysian land law legal landscape is that the title registration system is governed by 4 different legislations applicable exclusively to Peninsular Malaysia, Sarawak, and Sabah respectively, namely - the National Land Code, 1965 (Act 56) (applicable to Peninsular Malaysia and Federal Territory of Labuan), the National Land Code (Penang and Malacca Titles) Act 1963 (Act 518) (applicable to Penang and Malacca), the Sarawak Land Code (Chapter 81) (1958 Edition) (applicable to the State of Sarawak), and the Sabah Land Ordinance (Cap 68) (applicable to the State of Sabah, and which does not provide any indefeasibility of title).
This article will focus on the land registry system in Peninsular Malaysia as enacted in the National Land Code, 1965 (“NLC”).
How to ‘Read’/Interpret the Title?
In the process of acquiring a piece of land, the first step is always to get hold of a copy of the title of the land, which will contain the basic information in relation to the land. Nevertheless, understanding and deciphering the information contained in the title may not be a straightforward task for a lay person with no legal background.
In this article, we will examine a few basic concepts in relation to the title and we hope this will in turn assist you to ‘read’ and ‘interpret’ the title easily in the future.
Before we proceed further, it is important to first understand the difference between:
Documents of title in respect of alienated land, with or without building, issued pursuant to Section 90 or Section 178 of the NLC; and
Documents of strata title issued pursuant to Section 16 of the Strata Titles Act, 1985 in respect of any parcel or provisional block (for e.g.: in respect of a condominium parcel, or a landed house within a gated and guarded housing development).
We are focusing on documents of title (and NOT documents of strata title) in this article.
This article will seek to discuss the following topics:
Final Title vs Qualified Title
Registry Title vs Land Office Title
Categories of Land Use
Express Conditions vs Implied Conditions
Restrictions In Interest
Malay Reserve Lands
Different Types of Documents of Title
A. Final Title vs Qualified Title
Final Title (Hakmilik Kekal) is issued after a final survey of the land area has been carried out by the Director of Survey and Mapping/JUPEM[ii] pursuant to Section 396 of the NLC. It is issued pursuant to Section 90 of the NLC.
Qualified Title (Hakmilik Sementara) is issued in advance of survey. It is issued pursuant to Section 178 of the NLC. After the completion of survey by JUPEM, a Final Title will be issued in continuation of the Qualified Title pursuant to Section 189 and Section 192 of the NLC. Once the certified plan is issued by JUPEM, the process of registration will take about 6 months.
The land area as well as the boundaries and boundary marks stated in the Qualified Title is provisional and may differ after a final survey has been carried out by JUPEM. Hence, in a sale and purchase transaction where the total purchase price is dependent on the land area (for e.g.: base unit price per square foot or per acre or per hectare), the Purchaser should take this into consideration. The Purchaser may also want to engage his own land surveyor to conduct a proper demarcation and survey of the land, especially when it involves vacant land with large land area.
The Purchaser may also want to carry out his own survey to ascertain whether there is a ingress and egress to the land. This is particularly important if the Purchaser intends to develop the land in the future.
For the Final Title, there is usually a reference to the certified plan (“CP”) in the title under ‘No. Pelan Diperakui’. The same information will also be reflected on the land search result. The Purchaser can purchase a certified plan from JUPEM using the reference number given. Reference to the certified plan number is also indicative of the title being a Final Title.
The Qualified Title confers on the proprietor the same rights in respect as those conferred by the Final Title save that the land shall not be capable of being sub-divided or partitioned, or included in any amalgamation, nor shall any building thereon be capable of subdivision, unless otherwise provided.
To expedite the registration and issuance of Final Title, the Purchaser may check with JUPEM from time to time and once the certified plan has been issued, the Purchaser may purchase a copy of the certified plan, write in to the land office to get the Final Title registered and issued.
B. Registry Title vs Land Office Title
Important Note to the Purchaser:
Freehold lands are held under Geran or Geran Mukim titles. Freehold lands connote that the land is alienated for perpetuity and therefore the land ownership is perpetual. Leasehold lands are held under Pajakan Negeri or Pajakan Mukim titles. The number of years of the lease will be indicated on the titles. Most commonly, the lease is valid for 99 years and the expiry date of the lease will be indicated on the titles. Owners of leasehold lands may apply to the State Authority for further extension of the tenure of lease subject to payment of premium. Different premium rates and formulas apply which will be determined by the category of land use, the remaining lease period, and the state in which the land is located.
It is important to note that the register document of title duly registered is kept at the land office which shall be conclusive evidence of that title to the land described therein, the ownership particulars, the conditions, restrictions in interests of the land (Section 89 of the NLC). Issue document of title is an exact copy of the register document of title signed by Registrar or the Land Administrator, as the case may be. The document of title kept by the owners are issue documents of title.
C. Categories of Land Use
Section 52 of the NLC prescribes for 3 different categories of land use – ‘Agriculture’, ‘Industrial’ and ‘Building’. Residential or commercial development will fall under “Building”. The category of land use will be endorsed on the documents of title.
The category ‘agriculture’ includes the cultivation of any crop (including trees cultivated for the purpose of their produce), market gardening, the breeding and keeping of honey-bees, livestock and reptiles, and aquaculture.
The proprietor (owner) of any alienated land may apply to the State Authority under Section 124 of the NLC to alter the category of land use to which the land is for the time being subject to a particular imposition of category thereon. The owner has to pay a premium imposed by the State Authority for such conversion of category of land use. Different rates of premium will be applicable depending on the category of land use intended to be converted to.
Important Note to the Purchaser:
There are some alienated lands which titles do not indicate a particular category of land use. At the column marked “Category of Land Use”, it is stated as “Nil”. These are usually titles which have been issued some time ago when the town or village zoning plan remain unclear. This type of land is valuable as the owner can use it for any purpose or a combination of purposes. However, the State Government has begun to notice this and in recent years, attempts have been made to rectify the situation. For instance, the Pahang State Government has issued Pahang Land (Amendment) (No.4) Rules 2019 which came into operation on 1.1.2020, and effectively adjusted the rates of annual rent. In particular, the amended land rules stated that lands with no category and no specific conditions indicated shall be charged two times the highest rate of rent payable in state. The end result is that the owner is slapped with a quit rent bill which may even be higher than the market value of the land. In such instance, the owner has no choice but to apply for conversion of the category of land use from “Nil” to a fixed category of land use to reduce the holding cost of land.
Speaking of payment of quit rent/annual rent (Cukai Tanah), the Purchaser is advised to procure the latest copy of the quit rent bill/receipt so that the Purchaser knows how much quit rent he will be paying after acquisition of the land. Quit rent is charged and billed once a year and may be revised to a higher amount from time to time by the state authority.
Local councils may also impose assessment rates (Cukai Pintu) on the lands. Assessment is charged and billed twice a year (January and July). There are some lands wherein the local council has yet to impose assessment rate. In situation where no assessment bill has been received, the prudent way is to write to the local council to seek their written confirmation on whether any assessment is imposed on the land. Such written confirmation will usually be valid for 1 to 2 years and a nominal fee may be imposed for issuance of such confirmation.
It is important for the Purchaser to ensure that all arrears of quit rent and assessment of the land are fully settled prior to the completion of the sale and purchase transaction.
D. Express Conditions vs Implied Conditions
The State Authority may subject the alienated land to any express conditions and restrictions in interests conformable to law as it may think fit pursuant to Section 120 of the NLC.
The Express Condition(s) will be stated in the documents of title under the heading “Express Condition (Syarat-syarat nyata)”. If it is indicated as “Nil (Tiada)” then no express condition applies.
For ‘Agricultural’ land, the express conditions may indicate a particular crop to be cultivated on the land, or a prohibition of any particular crop as set out in Section 121 of the NLC. For e.g., a common express condition is “Tanaman Jangka Panjang (Dusun)” which mean Long Term Cultivation (Orchard). In some cases, specific type of crop to be cultivated from the land will be mentioned in the express conditions, for e.g. rubber, palm oil, coconut, padi, nipah, sagu, fruits or vegetable.
Certain state government allows application for additional conditions to be imposed on agricultural land, for e.g. in Pahang: telecommunication tower, trade used vehicle, trade exhibition, workshop, food stall, fruit stall, advertisement hoarding, cultural activities, platform ramp for collecting palm oil, sport facilities, tourism, commercial agriculture, swiftlets, store, general business, food stall/restaurant.
For ‘Building’ and ‘Industrial’ lands, the express conditions may indicate the type, design, height and structure of any building to be erected on the land, or the use or uses to which any building is to be put as prescribed in Section 122 of the NLC. For e.g., an ‘Industrial’ land may contain an express condition that it is for “Perindustrian Berat” (Heavy Industry) and a ‘Building’ land may contain an express condition which says “Tapak ini hendaklah digunakan hanya untuk tapak perdagangan sahaja” (this site has to be used as commercial site only).
There are different implied conditions depending on each category of land use of the land, as summarised in the table below:
E. Restrictions In Interest
Section 5 of the NLC defines ‘restriction in interest’ as any limitation imposed by the State Authority on any of the powers conferred on a proprietor by Part Nine of the NLC, or on any of his powers of dealing under Division IV of the NLC, and any like limitation imposed under any previous land law.
The most common restriction in interest is “Tanah ini tidak boleh dipindahmilik, dipajak atau digadai selain mendapat kebenaran Pihak Berkuasa Negeri.”, which means the land cannot be transferred, leased or charged unless the consent from the State Authority is obtained. In other words, prior to the transfer of the land from the owner to the Purchaser, prior to the charge of the land by the Purchaser in favour of the Purchaser’s Financier, or prior to the lease of the land from the owner to the lessee, the State Authority’s Consent has to be obtained. Each land office has its own requirements in connection with the application for State Consent and in some states, one is required to submit for e-consent online followed by manual submission of application (and both have to be done within a stipulated time frame). The procedure could be cumbersome and tricky sometimes for a lay person. For example, the application for State Consent submitted to Gombak Land Office has to be accompanied with an official land search result which is conducted not more than 7 working days prior to the date of submission while for Hulu Langat Land Office, the official land search result has to be conducted not more than 1 month prior to the date of submission. It is best to engage a legal firm to attend to this.
F. Malay Reserve Lands
If you notice a “Tanah Simpanan Melayu” (Malay Reserve Land) on the issue document of title/land search result, it means that the land is subject to the Malay Reservations Enactment (as applicable to the Federal Territory of Kuala Lumpur) (FMS Cap 142) (“Enactment”) which has been adopted by respective state in Peninsular Malaysia with modifications through legal notification.
"Malay", pursuant to the interpretation provided in the Enactment, means a person belonging to any Malayan race who habitually speaks the Malay language or any Malayan language and professes the Moslem religion.
If a land is a Malay Reserve Land, then it cannot be sold, leased, charged or otherwise disposed of (other than by Temporary Occupation Licence for a period not exceeding one year) to any person not being a Malay, save as provided in the Enactment.
Section 9 of the Enactment expressly declares any power of attorney granted to any non-Malay to sell, charge or otherwise deal with or occupy or manage any Malay Reserve Land belonging to a Malay to be null and void.
Pursuant to Clause 19 of the Enactment, all dealings or disposals whatsoever and all attempts to deal in or dispose of a Malay Reserve Land contrary to the provisions of the Enactment shall be null and void.
Conclusion
The legal process involved in the acquisition and conclusion of a property in Peninsular Malaysia rightfully commences prior to the execution of the formal sale and purchase agreement. The conduct of land search at the relevant land office, the analysis of the title, procurement of the relevant documents to ascertain the veracity of information, solvency of parties, etc are important steps to ensure a seamless conclusion of the transaction. Post-signing of the sale and purchase agreement is equally important, especially in monitoring the progress of the application for state consent, compliance with the strict timeline in procuring and providing various documents to avoid any delay. The process will take between 1 to 6 months to conclude depending on the mode of settlement of the purchase price, the background of the lands and parties, the efficiency of the parties (including land offices, stamp offices, financiers), etc. To avert oneself from being bog down with these tasks, the parties are always advised to engage legal firms to represent them, and preferably an efficient and competent one at that.
[i] Section 4 of the National Land Code, 1965 has expressly mentioned that the Act shall not affect the provisions in relation to any law for the time being in force relating to Malay reservations or Malay holdings, mining, sultanate lands, wakaf or bait-ul-mal, or contained in the Terengganu Settlement Enactment, 1356, Padi Cultivators (Control of Rent and Security of Tenure) Ordinance, 1955, the Kelantan Land Settlement Ordinance, 1955, Land (Group Settlement Areas) Act, 1960, the Perlis Land Settlement Enactment, 1966 or any law for the time being in force relating to exemptions from the payment of land revenue.
[ii] Department of Survey and Mapping, Malaysia /Jabatan Ukur dan Pemetaan Malaysia (JUPEM). The official website address is https://www.jupem.gov.my. Lilian Lee
Senior Associate
Real Estate