Land Administration: Use, Conversion, Division and Partition

When it comes to land, there are matters that you should always take into consideration before buying or building on it. Most importantly, you should ascertain the category of land use that is endorsed on the land title before making such decisions. For instance, a factory is allowed to be built on industrial land but prohibited on agricultural land as it is to be used solely for agriculture cultivation. Hence, knowing the purpose of the land will enable you as a buyer or landowner to find the most suitable land that works best for what you are planning.

In the Malaysian context, land use is categorised into 3 types, such as agriculture, industrial, and building whereby it is regulated by the government through the use of the National Land Code. This legislation also controls changes in the use of land and its conditions of titles.

The National land code also provides methods towards land development i.e. commonly referred to as conversion, sub-division, partition, amalgamation, surrender, and re-alienation of land. In other words, landowners do not have the freedom to dispose of, or deal, or use their land however he/she likes since these rights are subjected to the various conditions and restrictions imposed on the land by the State. Therefore, a comprehension of land use is important as it helps prevent a costly and time-consuming misunderstanding when it boils down to where and what can be built on a piece of land. On a side note, understanding land use also helps you to grasp the patterns associated with land and urbanisation which can be a significant indicator of future uses for the land.

All alienated lands are divided into three (3) categories of land use, known respectively as “agriculture”, “building” and “industry”. All landowners are required to use the land in accordance with the category of land use and the express condition stipulated in the title. Failure to do so is a breach of condition of the land alienated where the State Authority can forfeit the land.

Section 52 of the National Land Code 1965 (Act 828)

General Background of Malaysian Land System

Government intervention in matters related to land is necessary especially when land is used as a business tool, resulting in a spectrum of objectives by both the individual and society. Malaysian land system is known to be based on the Torrens system where the Register is everything and land ownership is guaranteed to be indefeasible to anyone who is registered on the Register title. To put into perspective, when negotiating a deal, if a Register is provided by the seller, it is an indefeasible proof of ownership, a document showing all material facts of the ownership.

Nonetheless, the implementation of the Torrens system has its benefits. Firstly, it acts as a “mirror” since it is a reflection of all material facts of the proprietor’s title in the land, denoting all necessary and accurate information related to the land. Secondly, it acts as a “curtain” which indicates that there is no need to look behind or beyond the register when dealing with transactions. It simply means that the certificate of title contains all necessary information and is the main proof of ownership, hence, it is sufficient as a reference for a purchaser to obtain any needed information.

In West Malaysia, the National Land Code is the governing legislation that creates a uniform system of laws in relation to land, land tenure, registration of land title, etc. However, this does not apply to East Malaysia since the states (Sarawak and Sabah) are each governed by their own land laws, namely the Sarawak Land Code and the Sabah Land Ordinance.

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The 3 Main Types of Land Use

Land use is the characterisation of land – based on what it can be used for and what can be built on it. Additionally, it is also important for you, as a landowner or future landowner, to note the type of land use applicable to your land before planning a significant development. On the other hand, if you intend to use your land for purposes other than the category stated in your land title, then you are required to apply for land conversion and alter the category of land use. If you fail to do so, then it will result in the breach of condition of the land alienated and possibly the forfeiture of land to the State Authority. So, what exactly are the 3 main types of land use?

#1 Agriculture Land

Agricultural land, in the context of zoning, is basically lands that are permitted for the use of agricultural activities without taking into consideration its present use or suitability. As per the National Land Code, it is defined as “the cultivation of any crops (including trees cultivated for their produce), market gardening, and the breeding and keeping of livestock and fish.”

According to Knoema Data, the Malaysian agricultural sector started expanding in the era between 1950 to 1970 whereby various investment opportunities were provided in agricultural and rural development. This resulted in the rapid development of the sector for which the pattern of agricultural land use in 1965 to 1985 showed an increase of 122%. As of the year 2018, the agricultural land area in Malaysia has grown from 37,559 sq. km in the 1960s to 85,710 sq. km with an annual growth rate of 1.72%. In my opinion, such development may be in view of the globalisation and trade liberalisation which enables the deepening of agricultural land-use dynamics in favour of highly rewarding agricultural produce such as oil palm, exotic fruits, vegetables, etc.

#2 Industrial Land

It is often easy for some to confuse industrial land with commercial land since it is both used for non-residential properties. Nonetheless, in zoning classifications, commercial land covers most types of non-residential properties from shop lots and eatery to banks, sports centres, and so on. Contrarily, industrial land usually implies something messier such as a factory, that needs to be settled apart from residential zones.

Typically, when we talk about industrial land, we would think of factories, foundries, power plants, warehouses, jetties, railways, etc. Thus, the purpose of zoning industrial lands is to ensure the safety and protection of us, the citizens. As an example, heavy industrial zones tend to be secluded from other land uses due to the fact that large factory facilities produce noise, odour, risk of toxic emission, and even the possibility of fire and/or explosion hazards.

#3 Building Land

Building land, according to Section 116 of the National Land Code, is permitted to be used for purposes other than agriculture and industrial. Yeap, you are right. This indicates that building lands are used for purposes such as residential, commercial, entertainment, educational, medical, transportation, and many more.

If you are a person who wishes to realise your investment dream or increase your property portfolio, then building land is a great option. Since building land has a wider purpose of use as compared to the other 2 categories of land use, hence, it provides a chance for substantial profit potential. Furthermore, it also allows investors and developers to have the opportunity to really push the boundaries.

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Land Conversion and Its Processes

Generally, land use can be converted through the local state regulation with an additional premium. If a piece of land is used for purposes other than the category stated in the land title, an application for the conversion of land use is thus required (as per Section 124 of the National Land Code and the respective State Land Rules). An additional premium will also be charged by the State Authority for all approved applications. Fortunately, the process of land conversion is considered to be fairly simple and straightforward although the total duration for the whole process may vary from 18 to 24 months.

#1 Application of Land Conversion

As a landowner, you are to submit the application for land conversion to your respective State’s Land Office/ Land and Mines Office and comply with all the requirements.

#2 Documents Required for Application of Land Conversion

If you are based in Selangor, then you would also be required to prepare the following documents and submit them together with your application (varies from State to State). The original information can be found here.

• 2 copies of Borang Kaedah 44C (Jadual XVI);
• 3 copies of the development proposal;
• 6 copies of the key plan, site plan, and location plan;
• A copy of the land title;
• A copy of the land tax;
• Official search;
• Letters of consent from co-proprietors, chargees, caveat holders, lessees, etc. if these parties exist;
• Document of power of attorney if the application is made by a person under the power of attorney (registered in the High Court and Land Office);
• Memorandum of Articles of Association, Form 24 and Form 49 if the application is made by a company.

#3 Valuation of Land for Application of Land Conversion

Land valuation is usually carried out by the Valuation and Property Services Department (JPPH), who will thus advise the Land Administrator accordingly. This step is necessary since the law requires an additional premium to be charged whenever a change in the category of land use/ express condition is approved.

The additional premium charged is theoretically a percentage of the value difference between the new and existing use. Where a valuation is required, it will thus account for the market value of the new and existing use for the land. Nevertheless, the calculation for percentage rate and the basis of additional premiums are provided by respective State Land Rules. Besides, other factors such as the valuation date, the type of development that can be approved, the shape, size, and location of the land in question will also be taken into consideration for the valuation.

This step normally takes around 10 working days upon receipt of the application by the office, whereby the land valuation will then be reported back to the Land Office/ Land and Mines Office. Given that the application is submitted with the complete and correct documents required.

#4 Additional Premium Charged for Application of Land Conversion

Based on the Selangor Land Office, the additional premium charged is as listed below. Similarly, the numbers may vary from State to State.

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Other Land Development Methods

Besides land conversion, the National Land Code also provides alternative methods towards land development i.e. sub-division, partition, and amalgamation. Hence, as emphasised, you have to conform to the conditions prescribed in the land title issued to you as the landowner if you wish to develop your land.

#1 Subdivision of Land

The subdivision of land is a process whereby the alienated land held under the Registry/ Land Office title is subdivided into 2 or more portions through which each portion is to be held under separate titles by the same proprietor or same co-proprietors. Nonetheless, there are conditions taken into consideration for the approval of sub-division of land.

Based on Section 136 of the National Land Code, the conditions for approval of sub-division include:

• Sub-division does not contravene with any restriction in interest to which the land is subjected;
• Sub-division does not contradict any written law in force or plan approved by the State Authority;
• Any necessary approval of planning authority has been obtained;
• No item of land revenue is outstanding;
• Written consent of all individual/ bodies with registered interest has been obtained;
• The land complies with the min. area appropriate for the land to be sub-divided;
• The shape of each sub-divided portion (in the opinion of State Authority) will be suitable for the purposes for which it is intended to be used;
• There will be a satisfactory means of access to the sub-divided portions.

The right for the registered proprietor or co-proprietors to subdivide their land is not absolute. Non-compliance with any of the conditions set out above may trigger a rejection of the application for sub-division. Thus, if you wish to sub-divide your land, then an application must be made in the statutorily prescribed Form 9A (Section 137 of the National Land Code). There will also be charges for survey fees and land titles issuance fees if your application for subdivision is approved.

#2 Partition of Land

The partition of land is a process whereby the alienated land held under the Registry/ Land Office title by 2 or more co-proprietors may, by agreement between those co-proprietors and with the approval of the State Authority, be partitioned so as to vest in each of them, under a separate title, a portion of the land that is an area proportionate as nearly as possible to his/her undivided share in the land.

An application for partition of land can be made using Form9A (Section 142 of the National Land Code). Generally, the application for partition will be approved by the State Authority if each of the co-proprietors consents to the application. Nonetheless, co-proprietors with a majority share in the land may apply for approval to the partition of the said land even without consent from all proprietors.

#3 Amalgamation of Land

The amalgamation of land is a process whereby 2 or more contiguous lots of alienated land vested under a separate title, held by the same proprietor, are combined (amalgamated) into one and to be held by him/her under one single title.

The application for amalgamation can be made using Form 9C. As always, the sanction of the State Authority is required before any amalgamation can be approved under the following circumstances (Section 147 of National Land Code):

• Where the lots are to be amalgamated are all held under Land Office title and their combined area will exceed 4 hectares;
• Where the said lots are held partly under Registry title and partly under Land Office title;
• Where any dissimilarity exists between any of the said lots in any of the following respects:
  • the periods for which they are held;
  • the rates at which rent is payable;
  • the categories of land use, conditions, and restrictions in interest to which they are subjected.

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Final Words

The housing and property development sector has always been one of the major contributors to the continued growth of Malaysia economy. Furthermore, legislative development procedures (i.e. land conversion, sub-division, partition, amalgamation, etc.) have made it convenient for landowners due to its well documented and easily digestible rules and regulations. Thus, I personally feel that there is great potential for investment in lands as an asset.

Until then, take care.