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Malaysia – Is Your Land Title Worth The Paper It Is Printed On?

8 January, 2015

 

On 18 November 2014, Ishmael Lim Abdullah, whose land was acquired without his knowledge lost his appeal at the Federal Court when leave for his appeal was refused on grounds that it did not make the threshold for leave to be granted.

 
After spending close to MYR 100k in legal bills, he now has to vacate the land which he had been occupying for 40 years and get compensation for MYR 6k. The Court also awarded costs of MYR 5k each to respondents the Federal Land Commissioner and Gombak Land Office which failed to register the acquisition in the first place.

 
The ruling by the Federal Court has sent alarm bells to all land owners as it undermines the conclusiveness of the Register of Titles and transactions based on a search of the land register.

 
This client alert seeks to outline some of the salient points of the case below:

 
What Happened?

 

  • The Federal Government began a land acquisition process in 1973 which involved 14 plots of land including Ishmael’s.
  • The acquisition was for a Military College Project and was completed in 1974 when Borang K – notice that possession has been taken of land, was issued under Section 22 of the Land Acquisition Act 1960 (‘the Act’).
  • A sum of money was deposited by the Government to the courts and this amount included the compensation paid to the previous owner of the land i.e. Lim Cheng Kim (‘Lim’).
  • As the acquisition was not registered by the Gombak Land Office, Ishmael’s late father purchased the land from Lim in 1975 and did not realise that he was buying encumbered property. He made checks with the land office and it indicated that it was without any encumbrance. Apparently Lim also claimed to not be aware that the land had been acquired when she sold the land to Ishmael’s father.
  • In 1986, a new title was issued over the 14 plots of land including Ishmael’s. Upon acquisition, all the said lots became State Land which was re-alienated to the Federal Lands Commissioner. Whilst Borang D (a declaration of intended acquisition) was endorsed on the new title, it was not reflected in the previous title.
  • Ishmael’s name was registered as the owner of the land in 1992 when he inherited the same from his father. Even during this time, the acquisition was not registered. Ishmael then charged the land to the bank for a loan in 1993 and continued to live there with his family.
  • In 2002, following a meeting with a representative from the Gombak Land Office, Ishmael received a letter from the same informing him that his land had been acquired by the Government on 11.3.1974 for the Military College Project and that it belonged to the Federal Land Commissioner.
  • Despite diligently paying quit rent and assessment for his property, a Notice to Vacate and Demolish was issued to Ishmael in 2005. A few land searches were conducted between 1993 and 2005 which confirmed that he was the registered owner of the land. Ishmael then challenged the eviction notice by taking the Federal Land Commissioner and Gombak Land Office to court.

 
The High Court And Court Of Appeal Ruled:

 
1) When Borang K Was Issued, The Land Had Already Vested In The State Authority.

 

  • there was no necessity for the State Authority to take physical possession of the land as formal possession was sufficient;
  • the land is vested in the State Authority even though the name of the previous owner still appears on the Registered Document of Title
  • (RDT);
  • the previous owner no longer had good title to the land and as such was in no position to sell the land to Ishmael’s father. The transfer of the land to Ishmael’s father was therefore null and void. As the first transfer in 1975 is rendered ineffective, it follows therefore that the subsequent transfer in 1992 to Ishmael was also ineffective;
  • The mere fact that the land is not used for its original purpose during the acquisition did not make the acquisition null and void.

 
2) The Completion Of The Acquisition Process Did Not Depend On The Endorsement Of A Memorial On The Title.

 

  • the failure to endorse a memorial under section 23 of the Act did not render the vesting of the title on the State Authority ineffective;
  • It was merely a formality and noncompliance is not fatal to the acquisition process;
  • Once formal possession is taken, the acquisition remains valid and subsisting and it can’t be said to be incomplete merely because a memorial had not been endorsed on the RDT.

 
3) Payment Of Quit Rent And Assessment Diligently Does Not Mean That Title Is Indefeasible.

 

  • The mere fact that Ishmael had been paying quit rent and assessment diligently coupled with the ability to charge the land for a bank loan did not prove that Ishmael’s title is indefeasible.
  • The Federal Land Commissioner had acquired an indefeasible title when the land was re-alienated in 1986 and the same was registered as the new proprietor.

 
What Can You Do?

 
1) For Land Owners:

 

  • Please ensure that you furnish full and complete set of documents including a copy of Borang K which has been served on you (if any);
  • Disclose to potential buyers as to whether you are aware or have any knowledge that your land has been acquired or is subject to an acquisition process;
  • If there is a change of ownership, and the land office has not registered the same, please bring the matter up to the state government to make the necessary amendments;
  • Be aware that the mere fact that you’ve made payment for quit rent and assessment, it does not mean that your legal ownership of the land is recognised.

 
2) For purchasers and potential buyers:

 

  • Conduct due diligence by verifying and seeking confirmation from the relevant authorities on the status of the land. The land office must have an up to date status of the land ownership.
  • Do not enter into any form of transaction with a land owner unless you are absolutely sure that all the documents are in order and all checks have been made and you are satisfied enough to proceed further.

 

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For further information, please contact:

 

Ang Siak Keng, Partner, ZICOlaw

siak.keng.ang@zicolaw.com

 
Construction & Real Estate Law Firms in Malaysia

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