By Professor Dr. Ismail Omar & Professor Dato’ Salleh Buang
The initiative to improve the scenario of waqf land in Malaysia needs to consider the legal framework that governs the land administration and development process. In general, the National Land Code 1965 had laid down the guidance on the way to undertake development of land, including waqf lands in the country. However, the Code needs to be reviewed to allow greater access for waqf land development with special reference to relevant clauses therein. The review will allow greater access in terms of simplification and harmonization of development procedures for improvement of waqf lands. More importantly, the review must highlight the constraints that restrict the smooth flow of waqf land supply onto the market for development purposes. Consequently, it will simplify and speed up the procedures to develop potential waqf lands. The way forward is a simplified procedure for waqf land within the amendment of the National Land Code 1965 towards a new pathway of waqf land in the country.
The Torrens system
The Torrens System, which was first introduced in Australia and then transferred to these shores towards the end of the 19th century, is certainly more than a century old, whilst the National Land Code 1965 itself, which had its roots in the Land Code of 1926 (enforced in 1928), is more than 70 years old. As the world moves on from the paper age to the digital age, the inevitable question is whether the old Torrens system is still relevant for the 21st century without any substantial change in the law. Moreover, is it still relevant in relation to waqf land development in Malaysia?
Torrens title is a system of land title where a register of land holdings maintained by the State guarantees an indefeasible title to those mentioned in the register. The system was formulated to combat the problem of uncertainty, complexity and cost associated with the old-system title, which depended on proof of an unbroken chain of title back to its origin root of title (the Deeds System).
The Torrens system was first introduced in South Australia by Sir Robert Richard Torrens, modelled after a method for recording owners‘ interest in ships that Torrens encountered in his work as an Australian customs administrator. When a vessel was sold, the seller surrendered the certificate for cancellation and a new Certificate was given to the new owner.
Introduced in Australia, it ultimately spread to many other jurisdictions, including New Zealand, Singapore, Hong Kong, Canada as well as several states in the United States of America. The first U.S Torrens system was enacted by Illinois in 1897. The Torrens registration system has several important principles – amongst which are the mirror, curtain and insurance principles. The mirror principle explains that the title register is just like a mirror that should reflect accurately and completely what appears on the title. The curtain principle indicates that the register is the sole source of information. Under the insurance principle, if the mirror (i.e. the register) failed to give a correct reflection of the title, then anyone who suffers loss must be indemnified.
A leading figure in the establishment of registration of the title system in England, Sir Charles Fortescue-Brickdale, had outlined six important features that must be found in a modern land registration system. These are the aspects of security when the rights are beyond challenge, simplicity where the laws are easily understood by the layman, accuracy where the register should provide accurate information, expedition where the registration process takes place without undue delay, cheapness as compared to other systems of registration like the Deeds system, and suitable to the circumstances in a way that the system conforms to the custom and conditions it is to operate.
Another feature is the completeness of record. The register of title must be an up-to-date record. In short, the Torrens system of registration is a system whereby a register of ownership of land is maintained based upon the parcel rather than the owner or the deeds of transfer. In short, the most important part of the system is its maintenance of records. Such maintenance is vital to avoid losing its values and utilities. This is significant, as so much money has been spent to develop and introduce its usage to relevant agencies and segments of the public. It has placed emphasis on the importance of maintenance and updating of registers. A system soon loses its values if the records and maps are not continually revised. He added that proper maintenance for a land register requires education, personnel, material resources and well-developed routines.
The significance of land registration is that it provides certainty of ownership, security of tenure, reduction in disputes over land and boundaries, improved conveyance, security for credit, stimulation of land market and monitoring of the land market. According to Dale and Laughlin, researchers on land information systems, it also facilitates land reform, management of state land, support land taxation and improvement rate of revenue collection, improvement in physical planning as well as recording of land resource information. If there is no certainty over land ownership, it could lead to conflicts, which ultimately need the matter to be resolved by the court. Land conflicts can bring about undesirable results – e.g. land remaining uncultivated or undeveloped, thereby resulting in the reduction of revenue that governments can potentially collect through land related taxes. Such revenue can be used to fund other government projects. Without security of tenure and ownership, transaction cost would be high and, hence limits the flow of land supply for development (I. Omar et. al. 2009). Without security of title to land or buildings, within the macroeconomic perspectives, it will be difficult to obtain investment funds and venture capital. The development of the land market is not by coincidence. It is a planned and concerted effort by the government in many ways, which may include the provision of legal security of ownership with clear identification of owners, and what is owned, establishment of mechanism for efficiently transferring rights in real estate and the provision of effective public access to land information. A sound economic policy supported by an efficient system of land tenure would indeed provide a better economic environment.
Through the titling system, land would become an asset that can be tradable as well as raising capital and revenue. Since nobody wants to pay unnecessary charges, such records are usually rather reliable and thus provide a valuable means of checking land registers. This is, in fact, a reason for introducing a land tax when a title registration system has been established in a country. According to 1990 Nobel Prize winner Professor North, institutions affect society by way of guiding and facilitating their decisions and economic activities. This means that institutions set down rules, showing the right path ahead for the society to perform in their economic performances. As the economic environment is dynamic, institutional changes can shape the direction in which society sets its targets, otherwise known as key performance indicators (KPIs). The National Land Code (1965) came into force on 1 January 1966, becoming the primary land law regulating land administration and development in Peninsular Malaysia. On the one hand, the Code regulates land-related activities in the country (including waqf land); on the other hand, it provides guidelines to facilitate such activities.
There are rules and restrictions imposed by the National Land Code (1965) which control and/or guide the land development in the country including waqf lands. These restrictions and guidance are progressively being amended to cater for social, political and economic changes in the country.
The national land code and waqf
Peninsular Malaysia has a long history in land law and land administration. Before the English traders‘ arrival in the Malay States, the local land law was grounded on Malay custom (customary law), which was later heavily influenced by Islamic law. The influence of Islamic law into the local land law was clear as mentioned by Maxwell C.J in Sahrip v. Mitchell & Anor (1870):
“It is a well-known Malay custom in Malacca that the Sultan owns all the land in the kingdom and every citizen has the right to open up and cultivate dead land as his own but subject to paying one-tenth as dues (tax) to the Sultan”
The Deeds System was introduced by the British into the Straits Settlements – Penang, Malacca and Singapore. The Torrens system was introduced into Selangor and subsequently into the other Malay States since the end of the 19th century. The National Land Code 1965 was modeled on the earlier Land Code 1926 (which came into force in 1928) and came into effect in Peninsular Malaysia on January 1, 1966. The Code does not apply to Sabah and Sarawak, since these eastern states have their own respective Land Codes. Under the Code, all land (unless it has been alienated) shall vest in the State Authority. If the State chooses to dispose of State land, it can do so by way of ―alienation or ―otherwise than by alienation.
If the State Authority chooses to dispose of land by way of alienation, it can do so either ―in perpetuity (in commercial language, known as ―freehold) or ―for a term of years not exceeding 99 years (in commercial language, known as ―leasehold). Whilst the law is clear, past practice by State Authorities, however, lacks transparency. Unless there are restrictions expressed on the land title, owners of alienated land are permitted to enter into ―dealings – e.g. transfers, leases and tenancies, charges and liens. They must however use the prescribed forms, followed by registration at the relevant land registry, in order to achieve indefeasibility of title. Indefeasibility is deferred, not immediate. The Code also contains provisions for ―restraints against dealings – consisting of caveats and prohibitory orders. The system of caveats contained in the Code is unfortunately not free of some inherent weakness and ambiguity. The Torrens system in Peninsular Malaysia, of which the National Land Code is the primary (not the sole) legislation, is not exclusive. It is still open-ended, and the Malaysian courts continue to recognize and apply English common law and equity, principles of customary law and Islamic law.
There are also provisions in the Code, which control land development in the country. In Peninsular Malaysia, alienated land is classified as either agricultural land, building land or industrial land. An owner of agricultural land who wishes to develop it into a housing estate or a township must seek development approval from the relevant State Authority, as well as planning approval from the relevant Local Authority.
There are also provisions in the Code restricting foreigners from buying lands categorized as agriculture‘ and building‘, but industrial lands can be acquired by them without approval from the State Authority. Since it came into force in January 1966, the Code had been amended for more than 30 times. Under an amendment exercise in 2008 (Act A1333) a new Part One (C), section 5D, was added to facilitate the implementation of the e- land administration system. It is a forerunner to implementing a full electronic conveyancing system in the country, something that had been successfully done in several foreign jurisdictions more than a decade ago.
Waqf land within the national land code 1965
The main source of law for waqf is List II State List, 9th. Schedule Federal Constitution in dealing with waqf land law. Moreover, Article 74(1)(2) Federal Constitution empowers the Parliament and State Authority to regulate rules on waqf. This leads to the power of the States to administer waqf using enactments and syariah Courts. With reference to NLC 1965, waqf land matters are governed and administered by Land Offices or State Land and Mine Offices. Unfortunately, the AG Chambers is of the opinion that the NLC 1965 is not applicable for administering waqf land in the country. The NLC 1965 is too general on waqf administration as stipulated under Section 4(2)(e). In other words, since the NLC 1965 covers the general part of waqf matters, it is not specifically recognised to administer waqf land. In this context, Sections 52, 76, 115, 116, 117, 120,195,197,200, 215, 216, 415, 416C, and 420 are viewed as contradictory to the sharia and waqf fundamentals.
Section 415 and 416 C
This section refers to the land registration including waqf land by way of statutory vesting (Form 30A and 30B). Circular JKPTG(P) explains the process and procedures of statutory vesting.
Sections 195, 197 and 200
Under these sections, waqf land may be registered under the name of Religious Council as a trustee using surrender and realienation procedures using form 12A and B.
Sections 420 (1) and (2) NLC
Section 420(1) stipulated that any statutory vesting is enforceable with registration using High Court order under Section 50 (including Syarie Court under Section 421A.
Form 14 A (Section 215 and 216 ) NLC
This section refers to waqf land transfer using Form 14A under Sections 215 and 216. Unfortunately, the Attorney General‘s Chambers is of the opinion that the NLC does not cover waqf land. As such, the statutory vesting under Section 215 and 216 takes the Religious Council the proprietor and not the sole trustee of the waqf land.
The NLC may alienate waqf land up to 99 years lease. Upon expiry of the lease term, the land must be reverted to the State Authority for another renewal but without any guarantee that the lease will be renewed. Table 1.0 above shows constraining factors affecting the development of waqf land in the country. The legal and administrative frameworks consist of the need to review the Code leading to lacking in terms of proper registration of waqf land and inadequate rules. Additionally, problems in administering land tenure, planning and difficulty in controlling the charges and payments to the authority further dampened the good governance and state-of-the-art of waqf land management and administration.
Methodology and discussion
Based on Policy Framework for Sustainable Real Estate Markets in Europe – Principles and guidance for the development of a country‘s real estate sector, United Nations, Geneva, 2010, considering the legal frameworks discussed in the section 5.0, there are implications on the nature of land administration and management of waqf land in the country.
Firstly, the discouraging drives to create waqf for the wealth accumulation of the people. This constraining factor will hinder the development of waqf from being able to flourish and upgrade the Islamic wealth management.
Secondly, sections 52, 115, 116, 117 and 120 NLC are in conflicting interest with syariah law whereby the waqf possession is in the hands of the Religious Councils due the fact that it should be as trustee to look after the waqf land only.
Thirdly, Sections 215, 216, 195, 196, 197 and 200 are viewed as contradictory to the syarie law due to the fact that waqf land by its very nature has to be in perpetuity and restricted from being transferred, dealings or inheritance. However, the lease of the waqf interest in land is transferable as practiced in many Islamic waqf land development and management such as waqf Seetee Aisyah in Pulau Pinang.
There is much to be done to bring about the transformation and the strengthening of the land administration system and the furtherance of the national development agenda. We have to look, for example, into the areas of electronic and online land registration, land dealings, the imposition of green technology and green leases, market sustainability, greater transparency in the land alienation process, harmonized land rights, greater use of ICT and on-line delivery systems, etc. The ultimate objective is the passage of a new green and Islamic National Land Code, underscoring the need for a sustainable and efficient rule on land administration.
The human element in land administration, the professional―Waqf Land Administrators, must also be well equipped with the latest hard skills and soft skills to carry out their heavy and complex duties. Finally, there is an urgent need for the establishment of a National Institute of Land Policy (NILP), whose primary role is to advise both the Federal (JAWHAR and Yayasan Waqaf Malaysia) and State governments (Religious Councils) in matters of land policies and land administration issues especially related to waqf, and in order to do that credibly, the Institute must have the people and the funds to carry out comprehensive research and consultancy on land matters.
PROFESSOR DR ISMAIL OMAR is the President of Land Professional Association of Malaysia (PERTAMA) since 2014 and lecturer in real estate management at Universiti Tun Hussein Onn Malaysia.
PROFESSOR DATO’ SALLEH BUANG is a legal practitioner and former academician at Universiti Teknologi Malaysia. He is a regular contributor to Utusan Malaysia, Berita Harian and Sinar.