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©New Sunday Times (Used by permission)
by Aniza Damis and Elizabeth John

• Smart move but Penang folk want details
• State's past policies on leasing and selling land

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."

Smart move but Penang folk want details

GEORGE TOWN: Many property owners in Penang are looking forward to the state government's new land policy.

Talk has been going around that the state has been brave in coming out with the proposal, let alone implementing it, seeing as how the state faces land scarcity.

But questions are being raised as to how much it will cost landowners to convert property to freehold status.

The million-dollar question has yet to be answered by the state government and even Chief Minister Lim Guan Eng has failed to shed any light on the matter. Lim has so far only announced how the state plans to implement the move.

He recently said landowners would have to surrender their land first and then apply for re-alienation.

He added that there was no provision in the National Land Code for the leasing of land to be extended and that all applications for extension or conversion would be considered as new applications.

Even the chief minister has failed to provide details on just how much land is now listed as leasehold or freehold and how the move was going to affect the state's land bank.

Under the new policy, leasehold residential and commercial land titles will be converted into freehold, while the leasing of industrial land would be extended to 99 years compared with the present 60 years.

It is understood that the matter was raised at Friday's state executive council meeting, with all state executive councillors agreeing in principle to adopt the new policy.

Deputy chief minister Mohammad Fairus Khairuddin said details of what were discussed during the meeting were private and confidential.

Meanwhile, a source close to the state government said the mechanism, drawn up by the state Land and Mines Department, was already in place and that Lim and the others were studying its viability.

The source said the present system was not fair as it benefited the rich and powerful.

"Imagine low-income earners having to pay for a flat with their hard-earned money and have the title for only 30 years or a little longer.

"On the other hand, the rich who change their cars ever so often get to stay on freehold land."

Lim had said the state needed time to study the legal aspects to ensure the move would not contravene provisions under the National Land Code.

State's past policies on leasing and selling land

IN colonial times, large tracts of land were alienated as leases and these were 999-year leases, explains Dr Goh Ban Lee.

The government decided to change the 999-year lease into freehold, probably when it adopted the new land administrative system under the National Land Code in the 1960s.

At the time, a special category of land was created in Penang and it was called "First Grade" land or titles.

Owners of such land have a bigger bundle of rights to the use of the land than owners of ordinary freehold land.

Land carrying these special titles does not have a category of land use such as "agriculture" or "industry", making it unnecessary for an owner to covert the land use, if he wants to do something different with it.

However, since it adopted the National Land Code in the 1960s, the state had followed the federal government's policy of alienating land in leasehold, said Goh, a former councillor and retired Universiti Sains Malaysia lecturer.

As a general rule, industrial land is leased for 60 years and residential land for 99 years.

He said land alienated in the Bayan industrial estate and the Bayan Baru township in the 1970s follows this system.

And until lately, the state government had largely adopted the policies established by the National Land Council.

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