Posted: February 17th, 2022
The British Colony in Malaya introduced the Malay Reserve Land (MRL) Law to our country in 1913, more than a decade before the nation celebrated Merdeka Day on the 31st of August, 1957. Since then, it has evolved into an intriguing legal framework that continues to impact our current national land law. The British established the first MRLs in the Federated Malay States of Perak, Selangor, Negeri Sembilan, and Pahang with the sole purpose of preventing non-Malays from disposing of property in those states that belonged to Malays in any way, shape, or form. MRLs are still in existence today. In the long run, they hoped that the Malays would administer their territory without the need for external aid.
Upon its promulgation in 1957, the Federal Constitution of Malaysia played a critical role in ensuring that these MRL Laws would continue to be applicable until today. Under Article 89(1), any land in the state immediately before the Merdeka Day was a Malay reservation following state legislation may continue to be a Malay reservation until its expiration or termination.
Three fundamental legal principles applied to land transactions:
1. One must only transact with a Malay individual regarding MRL transactions, such as transfer, lease, or charge.
Generally speaking, a “Malay” is described as someone who i. practices Islam as a religious belief, ii. communicates mostly in the Malay language, and iii. is a member of the Malayan race.
Any transactions involving the transfer, lease, or charge of MRL favouring non-Malaysians are forbidden and will be declared null and invalid. In the same way, any contract or arrangement claiming to vest any right or interest in any MRL in a non-Malay will be null and invalid. The restriction is so strong that even the attempted commission of such an act by a Malay is punishable by confiscating his property, which “shall afterwards reside in the Sultan entirely,” according to the Enactments of Malaysia.
2. Any transactions involving MRL, whether a transfer, lease, or charge, must only favour institutions that qualify as “Malay” under the Enactments.
A recent decision by the Court of Appeal in the case of Jamaluddin Bin Jaafar v Affin Bank Bhd (2016) reaffirmed this principle by ruling that the charge created by Jamaluddin in favour of Affin Bank Bhdwas null and void because Affin Bank Bhd was not qualified as “Malay” because it was not listed in the Second Schedule of the Malay Reservation Enactment Kedah 1931.
The law would imply that the vast majority of Malay people in Kedah would be unable to get a loan to help them fund the purchase of a home since it has been claimed that around 75-80 percent of the land in Kedah is MRL. Following up on the above, Affin Bank Bhd filed a complaint with the Federal Court, presently considering its verdict. But, despite this, on the 12th of January 2017, the Kedah State Government was steadfast in amending the state’s law, declaring that all financial institutions/banks established under Malaysian law are now qualified as “Malay” under the Kedah’s Malay Reservation Enactment, which means that the MRL in Kedah can now charge any banks as security. The case is an excellent example of the Kedah State Government responding promptly to the present legal demands of its citizens by amending the legislation.
3. Any transactions, whether a transfer, lease, or charge of MRL in favour of a person or entity that is not Malaysian, are permitted under extraordinary circumstances, provided that the property was held by a non-Malay previous to the declaration of MRL.
There is an exception to the first and second principles in this case. Article 89(4) of the Federal Constitution of Malaysia provides the foundation for this exemption, which stipulates that state authority is not entitled to declare as MRL any land held by a person who is not a Malaysian at the time of the declaration of MRL. Any pronouncement of this kind would be erroneous, if any at all. In such a case, it is not illegal for the proclaimed MRL to be transferred, leased, or charged to any non-Malay.
However, the law; should be emphasized that once a non-Malay owner of the MRL sells, leases, or charges the property to a Malay, the new Malay owner is prohibited from transferring, leasing, or charging the land to any other non-Malay owner in the future. According to the Federal Court in Tan Hong Chit v Lim Kin Wan and the High Court in Syarikat Macey Bhd. v Nightingale Allied Services Bhd. v Nightingale Allied Services Bhd. v Nightingale Allied Services Bhd.
Dealings involving real estate are involved. It seems unlikely that the bulk of Malay Reserve Lands will be developed because they are mostly located in rural settings, is because the land is largely undulating and unsuited for the intended development, resulting in environmental hazards.
Restrictions. As previously indicated, non-Malays are not authorized to buy, lease, rent, or otherwise acquire Malay Reserve Land or participate in its development, covering people who are not citizens of the United States. The approval and discharge of the Majlis Mesyuarat Kerajaan Negeri and the land office, which are both required, must first be obtained by those seeking to do so.
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