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Misplaced generosity
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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