Buying land together can be a smart investment, but it raises important questions about ownership, rights, and the potential challenges of shared property.
Q: Acquiring land is a major decision, whether for investment, building a home, or starting a business. So, when my husband, his brother, and his sister decided to jointly buy a plot for RM90,000, it sparked a lot of questions: How would ownership work? What would each of their rights be? And what are the potential impacts of sharing this investment?
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If you’re in a similar situation, let us walk you through the key considerations and steps to take when buying land jointly in Malaysia, along with some essential distinctions in legal management for Muslims and non-Muslims.
Can the Land Be Equally Divided into Three Portions After Full Payment?
The first question that came to most people’s minds was whether the land could be equally divided into three portions after full payment. The short answer is yes, land can be divided among co-owners, but the process is not as straightforward as it might seem. In Malaysia, the land division is governed by the National Land Code 1965, which provides a framework for land management and ownership.
The Process of Partitioning Land
Once the land has been fully paid for and you and the other co-owners wish to divide it, the process they will follow is known as partitioning. Partitioning is the act of legally dividing the land into separate titles, allowing each co-owner to have exclusive ownership over a specific portion of the land. Here’s a general overview on how the process works under the National Land Code:
a) Agreement Among Co-owners
Before any legal process can begin, you and the other co-owners must mutually agree to partition the land. This includes agreeing on how the land will be divided.
b) Application for Partition
Once the co-owners have agreed on how the land should be divided, an Application for Partition must be made to the relevant Land Office. This application will require detailed plans and a survey of the land, prepared by a licensed surveyor. The purpose of the survey is to establish the new boundaries for each portion of the land.
c) Approval from Land Office
The Land Office will review the application to ensure that the partition complies with zoning laws, minimum lot sizes, and other regulatory requirements. In some cases, partitioning may not be possible if it results in land sizes that fall below the minimum allowed by local regulations. For example, in certain agricultural areas, there may be restrictions on how small a plot of land can be.
d) Issuance of Separate Titles
Once the Land Office approves the partition, separate land titles will be issued for each new plot. Each co-owner will then hold individual ownership over their respective portion of the land.
Factors to Consider in Land Partition
Here are the essential points to consider regarding land division:
a) Land Classification
The first thing to check is the classification of the land. Different types of land, such as agricultural, residential, or commercial, have distinct regulations governing their division. If the land is classified as residential, it might be easier to divide it, but each case varies based on the specific title and location.
b) Subdivision Process
If the land can be divided, a formal subdivision process must be followed. This typically involves submitting an application to the relevant land office to approve the subdivision. The application must include a survey plan prepared by a licensed surveyor, detailing the proposed division.
c) Costs and Fees
Subdividing land is not without its costs. Fees for subdivision applications vary by state and land office. There may be additional charges for the surveyor’s services, which can range from a few hundred to several thousand ringgit, depending on the complexity of the survey.
d) Title Issues
After subdivision, each portion of land will be assigned a new title. The process can take time, and the subdivision must comply with local zoning and land use regulations.
Is It Possible to Include All Three of Their Names on the Land Title?
Another critical question that arose was whether all three names could be included on the land title (grant). The answer is yes; however, it comes with a few important considerations:
a) Joint Ownership
According to Section 343(1) of the National Land Code 1965, if two or more persons own land together, they are presumed that their shares therein shall be treated as equal, unless the land title explicitly states otherwise, and each owner shall be entitled to possession and enjoyment of the property as a whole.
b) Application for Title Transfer
An application for title transfer must be submitted to the local land office to include all three names on the land title. Essential documents include the original sale and purchase agreement, identification documents (such as MyKad for Malaysian citizens), and any approvals required from local authorities. If the property is subject to any encumbrances, such as a mortgage, you may also need to settle it before the title can be transferred.
c) Cost of Title Transfer
Several costs are associated with transferring the title that you should be aware of:
- Stamp Duty: This tax is levied on the transfer of property and is calculated based on the market value or the purchase price. The stamp duty rates in Malaysia range from 1% to 4%, depending on the property value. For instance, the first RM100,000 may incur a 1% charge, while properties valued higher may be taxed at higher rates for the excess.
- Legal Fees: Engaging a lawyer for the title transfer is highly recommended, as this professional can navigate the complexities of property law. Legal fees for such services varies depending on the complexity of the transaction and the purchase price or market value of the property.
- Registration Fees: The local land office may impose a nominal fee for registering the new title. This fee can vary by state but is generally quite reasonable compared to the other costs associated with property transactions.
The Differences of Land Division Between Muslim vs non-Muslim
In Malaysia, there is a notable distinction in the distribution of land for Muslims and non-Muslims, primarily due to the different legal frameworks governing Islamic law and civil law.
For Muslims, the division of property may be subject to Syariah law which follows Islamic principles, especially in cases involving inheritance. Inheritance is governed by Faraid. Faraid lays out a clear framework on how the deceased’s share is to be distributed among their heirs.
Under Faraid, the share of a deceased co-owner might be divided among multiple heirs, such as their children, parents, and spouse. This can sometimes result in the property being distributed into smaller portions. While this approach ensures that all eligible heirs receive their rightful share, it may lead to a more fragmented ownership of the land. However, in most cases, you can find ways to manage this division effectively such as having a Will.
For non-Muslims, the land division will follow the civil laws under the National Land Code 1965 and the Distribution Act 1958 (for cases without Will), unless otherwise specified.
In summary, it is possible to equally divide land among co-owners under Malaysian law, but the process involves several legal steps and considerations under the National Land Code 1965. The partition process requires the consent of all co-owners, adherence to local zoning laws, and approval from the Land Office.
While equal division is often the goal, factors such as the land’s physical characteristics, zoning restrictions, and valuation can complicate matters. Therefore, it is essential to approach land partitioning with a clear understanding of the legal framework and potential challenges. In some cases, selling the land and dividing the proceeds may be a more practical solution.
Best Regards,
Tsu Jean Yinn, Legal Associate, Melissa Lim & Associates