Reshaping Ownership: The Path to Freehold Status
InsiderTAPS Sept 2023
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RESHAPING OWNERSHIP: THE PATH TO FREEHOLD STATUS
In the realm of land tenure, the distinction between lands with freehold tenure and leasehold tenure has profound implications for property ownership and the rights associated with it. While freehold land grants perpetual ownership, leasehold land only offers possession for a fixed term of up to a maximum of 99 years. For leasehold lands, the consequence is that the land will revert to the relevant State Authorities at the end of the leasehold tenure unless an application is made to extend the leasehold tenure.
In Malaysia, the conversion of land from its original freehold status to leasehold by the State Authority through subdivision and re-alienation processes has recently ignited significant interest and debate. The central question emerges: Does the State Authority, empowered by the National Land Code, possess the authority to alter the land tenure?
This was evidenced in the cases faced by property owners in Taman Bukit Maluri where their lands were converted into leasehold status at the time of subdivision for issuance of individual titles. Dissatisfied property owners in Taman Bukit Maluri had instituted legal action against the Federal Territories Director of Land and Mines Office to seek for the status of their lands to be converted back to its original freehold status.
The High Court in the landmark Taman Bukit Maluri case have ruled that the discretion of the State Authority is not unfettered and that the State Authority’s action of issuing leasehold titles instead of freehold titles to landowners is ultra vires to the National Land Code. The High Court had further taken the position that the State Authority’s action is in contravention of Article 13 of the Federal Constitution which stipulates that no individual shall be deprived of property except in accordance with the law. The judgment was grounded on the following reasons:
(a) The State Authority failed to take into account that the lands were surrendered, sub-divided and re-alienated into new lots based on a continuation of previous titles;
(b) The discretion of State Authority under the National Land Code to impose any conditions or other requirements as the State Authority thinks fit is not unfettered. Every legal power must have legal limits, otherwise there is dictatorship. In particular, it is a stringent requirement that discretion should be exercised for a proper purpose, and that it should not be exercised unreasonably. In other words, every discretion cannot be free from legal restraint; where it is wrongly exercised, it becomes the duty of the courts to intervene;
(c) When a power vested in it is exceeded, any act done in excess of the power is invalid as being ultra vires; and
(d) The act of the State Authority in reducing the status of the lands from freehold to leasehold is an interference with the right to property, as it had diminished the bundle of rights traditionally associated with freehold ownership.
Following the orders granted by the High Court in respect of the lands in Taman Bukit Maluri, the Federal Territories Director of Land and Mines Office has taken action to restore the status of the lands affected in Taman Bukit Maluri.
Similar circumstances have arisen for property owners in Sri Petaling in respect of seven (7) affected plots of land. Following from the judgement obtained from the landmark case for Taman Bukit Maluri, property owners of the affected lands in Sri Petaling can now initiate the process of reinstating the status of the lands to their original status of freehold.
The Federal Territories Director of Land and Mines Office has begun accepting applications for the conversion of the land status for the affected lands. For such conversion applications, property owners are required to pay a premium calculated using the formula set out below:
It appears that property owners may have the alternative option to convert their property to freehold status without payment of any premium by way of an application for a court order.
Many property owners with leasehold titles which are expiring would face the issue of having to extend the leasehold tenure and pay a rather exorbitant premium for the extension. The cases surrounding the Taman Bukit Maluri and Sri Petaling are a unique class of its own as these are not cases relating to the extension of leasehold but rather a conversion (or more accurately, reinstatement) of a leasehold land to a freehold land based on its specific circumstances. Property owners with leasehold titles which do not fall within such specific circumstances would unfortunately not be entitled to any such conversion and may continue to face challenges such as difficulty in obtaining financing and devaluation in the market value of the properties as the leasehold tenure decreases.
在马来西亚，州政局通过细分和重新分配过程将土地从其原始永久产权地位转为租赁地的举措最近引发了重大关注和争论。核心问题是：根据1965年马来西亚的国家土地法典(National Land Code 1965)赋予的权力，州政局是否拥有改变土地所有权的权力吗？
这一情况在吉隆坡甲洞武吉马鲁里花园 (Taman Bukit Maluri) 的房地产业主面临的案例中得到了证实, 他们的土地在细分至个别地契时被转换为租赁地。在该地不满的房地产业主已对联邦直辖区土地及矿物局总监提起了诉讼，寻求将地位转回原始永久产权地位的状态。
（c） 当赋予州政局的权力被超越时，超出权力范围的的任何行为都是无效的，因为它是违反法律（ultra vires）的; 以及
在斯里八打灵 (Sri Petaling)，涉及七块受影响土地的房地产业主也出现了类似情况。继武吉马鲁里案列获得的判决后，受影响土地的斯里八打灵房地产业主现在可以开始启动将土地地位恢复为原始永久产权地位的流程。
This article is authored by our Partner, Ms Hoong Wei En and Associate, Ms Ng Shu Pyng. The information in this article is intended only to provide general information and does not constitute any legal opinion or professional advice.