Land policy that's no walk in park

New Sunday Times

by Aniza Damis and Elizabeth John

KUALA LUMPUR: Change leasehold land to freehold. Come and apply.

This unprecedented invitation from the Penang government to change the status of land titles, quickly earned it a legion of supporters.

And there's little surprise why, said National House Buyers Association secretary-general Chang Kim Loong.

Unlike leasehold land, freehold could be inherited, and owners would not need to worry about the lease expiring.

"When a leasehold property is nearing expiry, for instance, when there are only 30 years left, the lessee can't even use it to get a bank loan."

So the move is welcomed and leasehold landowners are happy.

But it'll be a while yet before this happens, say experts. Time during which Penang folk will have to wade through the legal mire, cough up a likely hefty premium while the state surmounts hurdles and a niggling sense of doubt on whether this is a good idea or even an achievable one.

For what the Penang government has in mind, the procedure that landowners will likely go through is "surrender and re-alienation".

This is governed by sections 204A to 204 E of the National Land Code.

Here, the landowner "surrenders" back his leasehold land to the state authority, with the assured expectation that it will re-alienate back to him, the same land, but as freehold.

The procedure isn't complicated but can be time-consuming, said land law expert Salleh Buang.

Chief Minister Lim Guan Eng spoke of having to first overcome some "legal hurdle" when he first announced the plan. This could possibly come in the form of section 76 (AA) of the Code.

Under the law, freehold land can be alienated to the federal government or a public authority or where the land is to be used for public purpose.

It can also be alienated when the state authority "is satisfied that there are special circumstances which render it appropriate to do so".

The question is, does the present situation fall under those "special circumstances"?

"I think it is a mixed question of law, politics and good governance," said Salleh, who is visiting professor at Universiti Teknologi Malaysia in Johor Baru. "In the long run, the public is the best judge of that."

A potentially massive problem the government might face in alienating residential land was when landowners surrendered their leasehold titles and the charge would not be carried forward to the banks, said senior lawyer Roger Tan.

This means the bank loses the title and has to re-execute or reapply for the right to hold the title.

"The banks will have to re-execute the charge when the new title comes out."

And, land with caveats on them, like when a property is pending completion of sale, or when it is involved in a contested will, cannot be converted.

"There are a lot of administrative matters to consider," said Tan, who is the Bar Council's former Conveyancing Committee chairman.

"It's a very clever political move. However, I wonder if the state has thought through the implications in terms of land management?" said urban governance and planning columnist Dr Goh Ban Lee.

There was probably a very good reason why the National Land Council and state representatives on this council decided to adopt the alienation of land in leasehold.

And this should be studied before changes are made.

Salleh said the state had to realise that it had limited land. It needed a sufficient bank for future development.

He cited, as an example, the Malacca government that was now facing difficulties because there wasn't any more state land for its future needs.

"It either has to reclaim land from the sea or acquire under the Land Acquisition Act and pay a heavy price for it."

To that, Chang added that the proposed move should only apply to residential land and on a case-by-case basis.

If industries were given freehold titles, he argued, there might come a time, when there would be a need for them to move away.

But if they owned the land outright, the government might be unable to force them out.

"This move might appease the people, but when it comes time to get the land for public purposes like roads and schools, the compensation that has to be paid will be very high," Chang said.

"Land is a state matter, and the state authority is the one that decides on what the special circumstances may be," said Tan.

"Even if they are wrong, nobody can sue them. The federal government can't step in.

"But, the moment the government decides to alienate a huge block of land, there will be no more meaning to 'special circumstances'."

Questions have been raised about whether the state can actually make this decision without the "ok" from the National Land Council.

Article 91(5) of the Constitution states that the "National Land Council could set up a national policy "for the promotion and control of the utilisation of land throughout the Federation for mining, agriculture, forestry and for any other purpose... and the federal and state governments shall follow the policy as formulated".

In addition to the National Land Council, under Article 95A(5) there were also national councils for local governments, with powers to set up national policy for local government.

"But, if the state refuses to comply with the policy, there's nothing the federal government can do, as there is no punishment in place," said Tan.

"The most they can do to express disapproval is to refuse to award grants to the state whenever it needs money for projects."

"If Penang follows through on this, leasehold landowners in other states may put pressure on their states to do the same," said Goh.

And in Penang, he added, landowners would be happy as long as the premium they would have to pay to convert the status of their land wasn't too high. But if the initiative went through without a hitch, said Salleh, it would be a feather in the state government's cap. If it doesn't, due to legal or other restrictions, it still wins. "It can tell its people: There, you see. We have tried but the law does not allow us at the moment. But we are not giving up."