Introduction

The Federal Constitution provides that no person shall be deprived of property, save in accordance with the law, and that no law may provide for compulsory acquisition or use of property without adequate compensation.

Although the right to private ownership and use of property is enshrined in the Federal Constitution as one of the fundamental liberties of a person, it recognizes that it should not be an absolute bar to the country’s need to acquire private property for the promotion of public interest and to spur economic development.

The government/ state authority will acquire land from private landowners for major infrastructure developments which will benefit the nation, such as public housing, highway expansion, LRT (light rapid transit) and MRT (mass rapid transit) projects.

In December 2023, the Malaysian Government revealed that the land acquisition process for the MRT 3 Circle Line project will commence in 2024, which is expected to be completed within a two-year timeline.

This article discusses the procedures applicable when a land is compulsorily acquired by the state authority.

Land Acquisition Act 1960

The principal statute on compulsory acquisition of land is the Land Acquisition Act 1960 (Act 486) (“LAA 1960”), which sets out the scope, requirements and procedures for the compulsory acquisition of land.

LAA 1960 ensures that no individual’s rights and/or property is compulsorily acquired save in accordance with the requirements and procedures set out in LAA 1960 and adequate compensation is paid.

Power of State Authority to Acquire Property

Section 3 of LAA 1960 stipulates that the State Authority is empowered to acquire any land which is needed for the following:

1. for any public purpose;
2. by any person or corporation for any purpose which in the opinion of the State Authority is beneficial to the economic development of Malaysia, to the public generally or any class of the public;
3. for the purpose of mining or for residential, agricultural, commercial, industrial or recreational purposes or any combination of such purposes; or
4. any combination of the purposes stated above.

The State Authority must act in a bona fide manner in the compulsory acquisition of a land. The acquired land must be used for the purposed authorised under LAA 1960 and not for collateral purpose.

Section 68A of the LAA 1960 allows for the acquired land to be disposed of by the either the State Authority, government, person or corporation for any other purpose other than that for which it was acquired.

Procedure for Land Acquisition under LAA 1960

1. Section 4(1) of LAA 1960: Form A

Whenever any land is likely to be acquired for any purpose under LAA 1960, the state authority shall first publish a notification (Form A) in the Gazette to notify the public.

2. Section 5 of LAA 1960: Form B

The State Director may by written authority (Form B) authorise any officer or person, together with servants and workmen, to enter upon the land for preliminary work specified in written authority.

3. Section 7 of LAA 1960: Form C

The Land Administrator shall prepare a plan and list of lands to be acquired, and to subsequently submit it to the State Authority in Form C.

4. Section 8 of LAA 1960: Form D

When the State Authority decides which land is to be acquired, the State Authority shall publish a declaration (Form D) in the Gazette.

The declaration shall be conclusive evidence that the scheduled land referred therein is needed for the purpose specified.

5. Section 9 of LAA 1960

The Land Administrator shall mark out the land intended for acquisition and register it under the relevant document of title.

6. Section 10 of LAA 1960: Form E

Land Administrator shall give public notice (Form E) to the occupier, registered proprietor, any person who has registered interest and/or any person whom the Land Administrator believes to have interest in the land, by stating the date and time of which the inquiry for the hearing of claims to compensation will be held.

Section 11(2) of LAA 1960 stipulates that the Land Administrator may also ask any party who has an interest in the land to submit evidence of their interest in Form F.

7. Section 12 of LAA 1960: Enquiry by the Land Administrator

An inquiry will be held and conducted by the Land Administrator to value the land and assess the amount of compensation payable to persons claiming interests in the land according to the consideration set out in the First Schedule (Principles Relating to the Determination of Compensation) of LAA 1960.

Parties claiming an interest in the land can readily appoint private valuers to present their claims for adequate compensation before the Land Administrator, by presenting evidence and/or private valuation report during the inquiry. All the evidence presented during the enquiry shall be recorded by the Land Administrator.

The evidence and case presented by the parties during the inquiry will be the foundation for the Land Administrator to determine the amount of the award.

Parties are not permitted to seek for legal representation to act on their behalf during the inquiry.

It is not uncommon for interested parties to miss the inquiry due to reasons often attributed to short notice or unsuccessful service of Form E. Nonetheless, the interested parties still retain their right to file an objection to the amount of compensation within the specified time limit if they are dissatisfied with the award.

8. Section 14 of LAA 1960: Form G

Upon the conclusion of the inquiry (regardless whether the interested parties have appeared), the Land Administrator will prepare written award in Form G.

9. Section 16 of LAA 1960: Form H

The Land Administrator will serve the written award (Form G) to any person who has an interest in such a land via Form H.

10. Sections 19 and 20 of LAA 1960: Form I & J

In urgent cases, the State Authority can acquire land by giving notice via Form I pursuant to Section 19 of the LAA 1960 before compensation is awarded. A notice will then be given via Form J pursuant to Section 20 of the LAA 1960 to the occupants or owners of the land to vacate the land.

11. Section 22 of LAA 1960: Form K

Once a written award is served, the Land Administrator will take formal possession of the land by serving upon the occupier of the land a notice (Form K).

12. Section 24 of LAA 1960: Form L

Where the issue document of title to any scheduled land has not previously been delivered to him, the Land Administrator will serve a notice (Form L) to demand for the document to be delivered to the Land Administrator for the issuance of a new issue document of title.

Determination of Compensation

Premised upon the First Schedule (Principles Relating to the Determination of Compensation) of LAA 1960 and established precedents, the following factors are relevant in the determination of the amount of compensation (list is not exhaustive):

1. Fair market value of the land, on the basis of “willing seller and a willing buyer”. The following will also be taken into account:

a. size, shape, condition and location of the land;

b. the use to which the land will be put;

c. the development potential (if any) of the land; and

d. market conditions at the material date of the valuation.

2. Damage due to severance, which refers to the depreciation in value of the remaining lands as a consequence of the acquisition which has or will result in remaining land to end up on pieces by reason of severance caused by the acquired land.

3. Damage due to injurious affection, which may include but not limited to loss of earnings, reduced utility gained from use of remaining land, loss of access, etc.

4. Reasonable and incidental expenses incurred and arising from being compelled to change the place of residence or of business as a consequence of the acquisition in question.

Objection to the Award

Landowners who are dissatisfied with the Award (Form G) by the Land Administrator must object by way of a written application (Form N) to the Land Administrator. Form N shall be made within the prescribed time below:

a. If present at the inquiry, within 6 weeks from the date of Form G; or

b. If absent at the inquiry, within 6 weeks from the date of receipt of Form H, or within 6 months from the date of Form G, whichever period shall first expire.

Form N itself provides a limited selection of grounds which the landowner can object to:

a. The measurement of the land;

b. The amount of the compensation;

c. The persons to whom it is payable;

d. The apportionment of the compensation.

It is pertinent for landowners to state the grounds correctly and comprehensively as the land reference proceedings in the High Court will be limited to the grounds stipulated therein.

It is highly recommended and encouraged for landowners to engage lawyers at this stage to prevent avoidable and/or undesirable missteps which may affect and/or jeopardise the landowner’s case during the land reference proceedings in the High Court.

Reference to the High Court

Upon receiving the landowner’s objection in Form N, the Land Administrator must refer the matter to the High Court for determination.

Land reference proceedings at the High Court are governed by Part V (Sections 36 to 51) of LAA 1960.

The landowner will be required to file the valuation report and rebuttal report prepared by the appointed private valuer. The landowner may also file affidavits to annex any evidence to support his case.

Subsequently, the lawyers acting for the landowner will prepare the written submissions on the legal issues involve, for the purpose of the hearing.

The hearing will be heard by one (1) High Court Judge, assisted by two (2) independent assessors.

Generally, the High Court Judge will follow the recommendation of the 2 independent assessors. In the event there are two conflicting views by the independent assessors, the High Court Judge may opt to choose whichever opinion that is deemed more just and reasonable.

The High Court has the discretion to decide on the amount of compensation and can even depart from the findings of the 2 assessors in the event that the High Court Judge disagrees with the opinions of the 2 assessors.

Every decision of the High Court will be signed by the High Court Judge and the 2 assessors. Where the decision comprises an award of compensation it shall specify:

a. the amount awarded as market value of the land;

b. the amount, if any, deducted for any increase in the value of the owner’s other land;

c. the amounts, if any, respectively award for severance, injurious affection and reasonable expenses incidental to a change of the owner’s residence or place of business;

d. in respect of each amount, the grounds for awarding or deducting the said amounts.

Conclusion

Compulsory land acquisition is a highly specific, procedural and time-sensitive process whereby errors and delays may jeopardise and cause prejudice to the landowner’s case, which could lead to reduced compensation.

Knowledge and experience are essential to safeguarding the landowner’s rights and to ensure the landowner is adequately compensated for the compulsorily acquired land.

Our firm stands ready, with the expertise and specialised knowledge, to support and assist landowners for all matters pertaining to compulsory land acquisition.

About the authors

Chau Yen Shen
Senior Associate
Dispute Resolution
Harlim Hong & Quek
[email protected]

Chew Jin Heng
Associate
Dispute Resolution
Harlim Hong & Quek
[email protected]