Key changes to the laws of real property
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.
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).