Property Transactions Requiring State Consent

• Law Firm: MahWengKwai & Associates
• Subject Matter: Real Estate and Construction, Real Estate
• Author: Mr Raymond Mah and Marilyn Teh
• Published date: 17 February 2023

When you own a property, the general position is that you can do what you want with it. While the right to own land is guaranteed by law, there are exceptions in which State Authority consent is required before transactions or dealings can be carried out. In this article, we explain the situations in which restrictions in interest are endorsed on the title of the property or imposed by law. We also discuss when and how consent can be applied for and obtained.

State Consent

Section 92 of the National Land Code 1965 ("NLC") gives indefeasible rights to the registered owner of a property. These rights include the right to transfer, charge, lease, surrender and other dealings permitted under Division IV of the NLC.

However, Section 76 of the NLC provides that the State Authority has the power to impose conditions and restrictions in interest on lands and properties as the State Authority deems fit. A restriction in interest ("Sekatan Kepentingan") is defined in section 5 of the NLC as a limitation that has been imposed by the State Authority to deal with the land. The owner of land with a restriction in interest is not allowed to carry out any dealings on the land without first obtaining written approval from the State Authority.

Restrictions on the Title

A "restriction in interest" ("sekatan kepentingan") is usually endorsed on the title of the property. Examples include:

a) Tanah yang diberi milik ini tidak boleh dipindahmilik, dipajak atau digadai melainkan dengan kebenaran pihak berkuasa negeri;

b) Tanah ini tidak boleh dipindahmilik, dipajak, dicagar dan digadai melainkan dengan kebenaran Jawatankuasa Kerja Tanah Wilayah Persekutuan Kuala Lumpur;

c) Tanah ini boleh dipindahmilik, dipajak atau digadai setelah mendapat kebenaran pihak berkuasa negeri.

A common misconception is that state authority consent is required only for properties that are under leasehold title. While it is true that leasehold lands always require State Authority's consent, some lands under freehold title may also have restrictions in interest that require consent in order to deal with the land.

For a property with a restriction in interest endorsed on the title, a landowner will have to apply for State Authority's consent before dealing with the property. Common land dealings requiring State Authority's consent are:

1. Transfer of ownership; and
2. Charge the property to a financial institution (e.g. for a bank loan).

Transfer of Ownership

When a sale and purchase transaction involves a...