THE land laws of Peninsular Malaysia are governed by the National Land Code, 1965 (now revised edition – 2020 and known as Act 828) and has been in force since January 1, 1966. Section 40 of the National Land Code 1965 states that all state land belongs to the state authority.
When state land is disposed of by the state authority to an individual in perpetuity for an indefinite period, this land is now granted a freehold title.
When the state land is disposed of by the state authority to an individual for a term of years, by virtual of law, not exceeding 99 years, this land is now granted a leasehold title. Upon expiry of the period of the lease, the land should be reverted to the state authority. The owner will then have to either apply for a renewal of the lease before its expiry or apply for a fresh alienation if the lease has expired. These will involve the payment of a premium, which would be close to buying the land all over again or perhaps, with political intervention, at a nominal fee, as in the case of PJ Old Town Section 1 leasehold lands that had expired but were renewed for a new tenure of 99 years at a premium fee of RM1,000 with certain reasonable conditions attached.
HBA objects to proposed new chapter
The idea of a scheme that would allow private corporations to “lease” out freehold land that they own for housing development, or the Private Lease Scheme (PLS), was first mooted in 2012 by Iskandar Investment Bhd, a strategic developer of Medini, Johor, as reported in the media. At that time, there were no laws regulating PLS.
It was on October 21, 2018, that the Lands & Mines Department in Putrajaya intended to introduce a new chapter titled Private Lease Scheme (Sijil Pajakan Persendirian) to our National Land Code (NLC). PLS was purported to facilitate inter-alia:
“The purpose of introducing the Private Lease Scheme (PLS) in our legislations is to allow the freehold land owner (lessor) an opportunity to develop land which they otherwise wouldn’t or couldn’t have develop; without parting with the ownership of the land.
This is of particular benefit to private landowners who need to retain ownership of their land and make it available for development, without being actively involved in the maintenance of the building.”
The National House Buyers Association (HBA) does not support the malicious introduction of a new Chapter to the NLC or to the Strata Titles Act on the PLS concept as it offers no proprietary rights for the buyers. The current NLC does not allow for leases to be created for more than one person – the PLS will be counter to this provision.
The PLS will also result in land ownership in perpetuity as private landowners will now have a monopoly on merely leasing aka renting out their land where condominiums or apartments are built, or even landed houses, and they will have the absolute right after 66 years or 99 years not to renew or continue with the lease. Property owners, especially house owners (inclusive of strata property owners), under PLS will be renters in perpetuity. PLS will also contribute towards ever-increasing house prices, which is against Dasar Perumahan Negara 2.0 to ensure affordability to Malaysians and not merely profits for housing developers and ability to own houses by foreigners.
There are some adverse effects that the proposed PLS could bring. Firstly, it could potentially create a generation of homeless people – a lease expires after the maximum 66 years or 99 years with no reasonable expectation to have the lease tenure extended with a reasonable fee – house owners will live at the whim and fancy of the developer/land proprietors. Unlike the government, the private developers/proprietors are not accountable and would not have any moral obligations to the people.
PLS could also be confusing to the public as they could have difficulties in distinguishing between leasehold and private lease. Most are naïve and don’t know the differences. We also have to bear in mind that the value as collateral in comparison with leasehold/freehold lands. This prevents wealth from being circulated on from one generation to another. Housing developers, in joint ventures with land proprietors, being lessee is incapable of passing any ownership (legal or beneficial as recognised under the National Land Code and Strata Titles Act) in the land itself to purchasers who are deemed sub lessee.
Why the introduction of PLS?
The introduction of the PLS appears to be motivated by the effort to prevent foreigners from possessing too much land in Johor. However, if the PLS concept is introduced in the NLC, it would then apply throughout Peninsular Malaysia and universally to the public, regardless of residency or citizenship status.
According to research, if the PLS becomes a trend, it will reduce the supply of property ownership in the market and thereafter push up the already unaffordable house prices even further; then, there will be a mad rush by rich barons to buy up lands of freehold status.
Do you not know that the entire property landscape will be changed forever from sale of property with titled ownership to that of a long-term rental or lease of property for a tenure? Freehold land will then become the most sort after commodity.
Scarcity of land in HK, Singapore
Although land leasing with relatively short lease periods is popular in jurisdictions facing shortage of land, such as Hong Kong and Singapore, Malaysia has an abundance of land. The government should not paddle to the need of Medini, Iskandar and those in Johor Baru, and must consider the overall ramification across our country. PLS will create lots of confusion to the commissioner of buildings (COB), banks and the property market.
Since lease has no sense of ownership and security, house buyers will continue to be hoodwinked into buying leases. We have to bear in mind that the values of lease will diminish with each expiring lease tenure. PLS property depreciates and becomes worthless in the long run. The house buyers lose everything and become homeless after struggling to pay off full market price with interest and risk. If the common properties and facilities are not maintained in serviceable conditions, market prices will drop exponentially after the 60th year and become zero at the end of the 99 years whilst land proprietors gain everything with enhanced land value and do nothing. Example of properties that are affected are those that are currently up for resale, public auction and refinancing cases.
PLS a disadvantage for future generations
This PLS issue may open up a new can of worms as owners of freehold land status will now hold on to their ownership forever for the benefit of their future generations, like the feudal system of land ownership and under the colonial days where lands are granted by lease and license to cultivate.
Should we not be moving away from our colonised days? If this issue of PLS is made a reality, cash rich land barons and property developers will quickly snap up all freehold lands and adopt the same modus operandi, whereupon the prices will escalate and house prices will continue to remain as tenants in perpetuity rather than home owners.
Naïve and innocent buyers will not know the repercussions. There is no ownership security anymore for our next generation of buyers. Our current generation cannot allow the creation of a monster that will affect our children and our children’s children.
HBA’s disagreement on the PLS inclusion to the NLC were among the few recommendations that we discussed with the Council of Eminent Persons on 17.5.2018 at the briefing with former finance minister Tun Daim Zainuddin, former Bank Negara governor Tan Sri Zeti Akhtar Aziz, former Petronas CEO Tan Sri Hassan Merican and representatives of mogul Tan Sri Robert Kwok and Tan Sri Oh Siew Nam.
The way forward
Unfortunately, the die has been cast for certain developments in Johor who had used PLS though the laws are not in place. To minimise the damages done, there should be special legislations for certain gazette international economic zones like Medini, Johor, with proper safeguards for the buyers with its land ownership restrictions. It cannot be allowed to be applied nationwide as it would open the flood gates of rampage.
Datuk Chang Kim Loong is secretary-general of the National House Buyers Association, a non-governmental and non-profit organisation manned wholly volunteers
