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09/10/2004 NST-PROP By Salleh Buang

The law regulating landlords and tenants in Peninsular Malaysia is not too difficult to learn, or too complicated to comprehend.

The National Land Code 1965, which is the premier legislation on land matters in Peninsular Malaysia, represents the governing law. However, the Code only contains a handful of provisions on leases and tenancies.

For example, sections 221 to 239 in Part 15 of the Code spells out the powers of a landowner to grant a lease (which is for a period of more than three years), a tenancy (not exceeding three years) and to stipulate various covenants, terms and conditions in the lease or tenancy. The Code also prescribes the circumstances giving rise to the forfeiture or surrender of a lease.

Under the Code, a lease requires the execution of a prescribed instrument by the parties, followed by its registration at the relevant land office. Upon registration, the lessee will obtain an interest in the land, with his name appearing on the title.

Unlike this formal compliance with the law that is required for a lease, a tenancy can be drawn up simply and quickly. It can be done orally, though it is preferable that the parties record their agreement in writing. Also, it is not necessary for a solicitor to draw up the agreement.

Since the law describes a tenancy as “exempt from registration”, an agreement in writing will enable both parties to know exactly their rights and duties towards each other without need for formalities. However, a comprehensive written document will remove doubts and minimise disputes.

The Code does not set out a complete set of rules or a code of conduct for the parties. Therefore, one has to fall back on general contract law, specifically the Malaysian Contracts Act, for much of the law governing landlords and tenants.

Some specific issues are spelt out in certain statutes, such as the Specific Relief Act, while the conveyancing lawyers who draw up these standard documents usually spell out the rights and obligations of the lessors and lessees (or landlords and tenants) for their clients.

Potential landlords and tenants should take note that since “freedom of contract” is still the norm when drawing up a lease or tenancy agreement, they should have their own lawyers to advise them. It is not advisable to rely on lawyers retained by the other party.

In this article, I want to focus on one particular issue where ignorance of the law on the part of the landlord produced a lot of heartache and misery for him. It serves as a reminder that sometimes, it does not pay to be kind to others; that kindness shown can bring grief in return.

I believe that the following scenario may be quite familiar to many of us, especially if we live in the rural areas.

My father, being a kind soul, had in the past allowed a distant relative to occupy a portion of our family plot (at the rear of the property), and pay a nominal sum as ground rent.

Since that portion of land was not needed for any urgent use, the tenant confidently “expected” to be able to stay there for an indefinite period of time. He therefore built his house there.

Over the years, the tenant spent some more money improving and expanding the house. Such “expenditure” was usually made with my father’s acquiescence. The law treats such conduct as “encouragement”, even if it is not in any expressed or overt form.

Thus, while my father may not have shown or displayed any active encouragement, he did not stop the tenant from carrying out expansion work on his house. My father’s silence (or failure to prevent his distant relative from doing any repairs or improvement to the house) can also be regarded as passive encouragement.

Thus, the tenant first spent some money building his house on the land, and over a period of time, continued to spend more to enlarge the house. As the years went on, the house became larger, as his family grew larger.

Then, the day came when my father decided to retake the land. He asked the tenant to leave. The question is: Can he do so, after all these years, and if so, how? After all, my father is still the undisputed owner of the land, while the tenant is, after all, just an ordinary tenant.

While the Code is silent on the matter, the judiciary has a large body of case laws on the subject. The court said the tenant in this case was not just an ordinary tenant. The tenancy between my father and his tenant is called a “tenancy coupled with equity” and it came into being as a result of 3Es:

• Expenditure (by the tenant), as a result of

• Encouragement (express or implied) by the landlord; giving rise to an

• Expectation (that the tenant will be allowed to stay on the land for as long as he likes).

In other words, the tenant has a secured tenancy, but not one that is guaranteed forever. He can still be asked to leave by the landlord, but on two conditions: One, there must be reasonable notice given to vacate the land; and two, he must be reasonably compensated for vacating the land.

Hopefully, the two parties can agree to a reasonable timeframe (to vacate the land) and a reasonable sum (as compensation to demolish the house and relocate it elsewhere). If the parties cannot agree, the matter will have to be determined by the court.

This of course means more legal expenses and more heartache. All because in the beginning, my father thought it was only proper to be kind to the less fortunate.

Do take note, however, that this scenario is conditional upon one factor: That all these years, the tenant had in fact been paying ground rent, irrespective of the amount. If the tenant had not been paying anything, the court cannot protect him and therefore, evicting him will not be a problem.


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