Key changes to the laws of real prop­erty

The Sun (Malaysia) - - SUNBIZ -

THE Na­tional Land Code 1965 (NLC) and the Strata Ti­tles Act 1985 gov­ern real prop­erty in Penin­su­lar Malaysia. Real prop­erty com­prises land and any­thing af­fixed or built upon it. Mat­ters of land own­er­ship are also sub­ject to the Fed­eral Con­sti­tu­tion (FC) and the Land Ac­qui­si­tion Act 1959 (LAA). On Sept 9, 2016, the Na­tional Land Code (Amend­ment) Act 2016 (Act A1516) (NLC(A) 2016), the Land Ac­qui­si­tion (Amend­ment) Act 2016 (Act A1517) (LAA(A) 2016) and the Strata Ti­tles (Amend­ment) Act 2016 (Act 1518) (STA(A) 2016) (col­lec­tively, the “Amended Acts”) were pub­lished in the Fed­eral Gazette but each has yet to come into force.

We will ad­dress the key changes un­der the Amended Acts in two ar­ti­cles. This first ar­ti­cle sum­marises the main changes un­der the NLC(A) 2016 and the LAA(A) 2016.

Na­tional Land Code (Amend­ment) Act 2016 (a) Land use

The in­tense wave of de­vel­op­ment in ur­ban cities in Malaysia re­sulted in the scarcity of “pre­mium” land for de­vel­op­ment. Con­se­quently, prop­erty de­vel­op­ers of­fered mixed-use de­vel­op­ment projects which in­te­grated res­i­den­tial, com­mer­cial and other uses, whether po­si­tioned within a sin­gle build­ing, a block of build­ings or in en­tire neigh­bour­hoods on a sin­gle lot of land.

The amended Sec­tion 122(d) of the NLC seeks to clar­ify that more than one land use for any build­ing may be per­mit­ted by the state au­thor­ity. This amend­ment also ad­dresses the use of un­der­ground land, which may dif­fer from the use of the same plot of land above ground.

(b) For­eign re­stric­tion for in­dus­trial land

Prior to the amend­ment of Sec­tion 433B(1) of the NLC, non-cit­i­zens of Malaysia and for­eign com­pa­nies were re­stricted from deal­ing with land un­der the cat­e­gory of “agri­cul­ture” or “build­ing” save with the ap­proval of the state au­thor­ity. The amended Sec­tions 433B, 433E and 433H of the NLC now extend this re­stric­tion to lands un­der the cat­e­gory of “in­dus­try”.This amend­ment ap­pears to be in­con­sis­tent with the gov­ern­ment’s long stand­ing po­si­tion of al­low­ing 100% for­eign own­er­ship in man­u­fac­tur­ing com­pa­nies, and is a step back­wards in the gov­ern­ment’s re­cent ef­forts to lib­er­alise the Malaysian econ­omy.

(c) Ex­ten­sion of lease­hold pe­ri­ods

The NLC(A) 2016 in­tro­duces the pro­ce­dure for an ap­pli­ca­tion to extend lease­hold pe­ri­ods. Un­der the new Sec­tion 90A of the NLC, a land owner is al­lowed to make an ap­pli­ca­tion to the state au­thor­ity for the term to be ex­tended at any time be­fore its ex­piry, but the ap­proval is sub­ject to the dis­cre­tion of the State Au­thor­ity. It is not pre­scribed how the state au­thor­ity will or must ex­er­cise its dis­cre­tion.

Ac­cord­ingly, one would as­sume that this dis­cre­tion must be ex­er­cised rea­son­ably, and not in­dis­crim­i­nately. Land Ac­qui­si­tion (Amend­ment) Act 2016 (d) Ac­qui­si­tion of un­der­ground land

Prior to the LAA(A) 2016, the laws only ex­pressly ad­dressed com­pul­sory ac­qui­si­tion of land on the earth’s sur­face. The LAA(A) 2016 ex­pands the am­bit of the law to in­clude com­pul­sory ac­qui­si­tion of sub-di­vided build­ings (parcels or pro­vi­sional blocks) and un­der­ground land. Un­der the amended Sec­tion 92D of the NLC, the depth of alien­ated un­der­ground land must be en­dorsed as an express con­di­tion to the ti­tle. These amend­ments should fa­cil­i­tate the MRT project and the com­mer­cial­i­sa­tion of un­der­ground land, which was pre­vi­ously an un­tapped re­source.

Con­clu­sion

The NLC(A) 2016 and LAA(A) 2016 aim to ra­tio­nalise real prop­erty laws to ad­dress Malaysia’s cur­rent needs in land de­vel­op­ment. How­ever, the ef­fec­tive­ness of these new laws will de­pend on the steps un­der­taken by the rel­e­vant au­thor­i­ties to ex­e­cute the changes, such as the au­thor­i­ties’ re­sponse on ap­pli­ca­tion for the ex­ten­sion of the lease­hold pe­ri­ods, and the im­ple­men­ta­tion of the alien­ation of un­der­ground land.

The sec­ond and fi­nal ar­ti­cle of this se­ries will touch on the other re­cent amend­ments to the laws af­fect­ing real prop­erty, i.e. key changes un­der STA(A) 2016.

Con­trib­uted by Choo Yuen Phing and Kee Yoke Yew of Christo­pher & Lee Ong (www.christo­pher­leeong.com).

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