In 1913, the British Colony in Malaya introduced the Malay Reserve Land (MRL) Law to our homeland, long before Merdeka Day, 31st of August 1957. Since then, it has formed a remarkable legal regime affecting our national land law until today.
MRL was first established by the British in the Federated Malay States of Perak, Selangor, Negeri Sembilan, and Pahang, with the simple purpose of preventing the lands in those states held by the Malays from being disposed of by any means to the non-Malays. Their intention is that the lands held by the Malays be controlled by the Malays themselves in future and not others.
It is the purpose of the MRL Law then enacted to regulate the declaration, revocation and alteration of the boundaries of such lands. The relevant MRL Laws that still exist today via the respective states’ Enactments are described as follows:-
Malay Reservation Enactment (FMS Cap 142) (reviewed and was republished in 1935 from the Malay Reservation Enactment 1933, which replaces the Malay Reservation Enactment 1913), governing the Federated Malay States;
Malay Reservation Enactment Kelantan 1930, governing the state of Kelantan;
Malay Reservation Enactment Kedah 1931, governing the state of Kedah;
Malay Reservation Enactment Perlis 1935, governing the state of Perlis;
Malay Reservation Enactment Johor 1936, governing the state of Johor; and
Malay Reservation Enactment Terengganu 1941, governing the state of Terengganu.
It is noted that the British Colony, however, did not enact any Malay Reservation Enactment for Penang, Singapore and Malacca.
In 1957, the Federal Constitution of Malaysia played a vital role then in preserving the applicability of these MRL Laws until today via Article 89(1), which states that any land in state which immediately before the Merdeka Day was a Malay reservation in accordance with the state enactment may continue as a Malay reservation.
3 Basic Legal Principles:
Any dealings, be it transfer, lease or charge of MRL must only be in favour of a person who is Malay.
“Malay” is generally defined to mean a person who
(1) professing the Muslim religion,
(2) habitually speaking the Malay language and
(3) belonging to the Malayan race.
In another words, any dealings (transfer, lease and charge) of MRL in favour of non-Malay is prohibited and shall therefore, be null and void.
Likewise, any document or agreement purporting to vest in non-Malay any right or interest in any MRL shall be void. So strict is the prohibition that even an attempt at such act by a Malay is threatened by the Enactments with forfeiture of his land, which “shall thereafter vest in the Sultan absolutely”.
Any dealings, be it transfer, lease or charge of MRL must only be in favour of any institution qualify as “Malay” under the Enactments.
Such principle was recently reaffirmed by the Court of Appeal in the case Jamaluddin Bin Jaafar v Affin Bank Bhd (2016) which held that the charge created by Jamaluddin in favour of Affin Bank Bhdwas null and void on the ground thatAffin Bank Bhd was not qualified as “Malay” due to it not being listed in the Second Schedule of the Malay Reservation Enactment Kedah 1931.This would mean majority of the Malay in Kedah will be unable to secure a loan in order to assist them in financing the purchase of a house as it was reported that over 75-80% of the land in Kedah is MRL.
Proceeding from the above, Affin Bank Bhd now brought the case to the Federal Court and its decision is still pending.
Notwithstanding that, the Kedah State Government was steadfast in amending the state’s law on 12th of January 2017, and declared all financial institutions/banks established under Malaysian law are now qualified as “Malay” under the Kedah’s Malay Reservation Enactment, this means the MRL in Kedah can now charge to any banks as security.
This is indeed a timely response of the Kedah State Government in rectifying the law to suit the current legal needs of its people.
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Moving forward, it will be interesting to see how the Federal Court will come to a decision on this issue. It is hoped that the ruling of the Federal Court will provide clarity, once and for all, not only to the owners of MRL and financial institutions/banks in Kedah but most importantly, throughout Malaysia, whether MRL owned by Malay can be charged to any party who are non-Malay.
Any dealings, be it transfer, lease or charge of MRL in favour of a person or institution who is non-Malay is exceptionally allowed provided that, prior to the declaration of MRL, the land was owned by non-Malay.
This is an exception to the 1st and 2nd principles.
The basis of such exception is provided under certain states’ Enactments as well as Article 89(4) of the Federal Constitution of Malaysia that, the state authority is not permitted to declare as MRL any land, which at the time of its declaration, is owned by a person who is not a Malay. Such declaration if at all was being made, is erroneous. In such situation, the declared MRL is not prohibited from being transferred, leased or charged to any non-Malay.
However, it is to be noted that once such non-Malay owner of the MRL transfers, leases or charges the land to Malay, then the new Malay owner cannot transfer, lease or charge the land to any other non-Malay. This was confirmed by the Federal Court in Tan Hong Chit v Lim Kin Wan (1964) and High Court in Syarikat Macey Bhd. v Nightingale Allied Services (1995).
In view of the vibrancy of dealings involving MRL in this modern era which are mostly commercial in nature among the Malays, such as sale and purchase or property development, perhaps it would be prudent to remove such legal restriction on MRL in being able to be charged to any party, especially banks and other financial institutions which have the capacity to provide loans to assist the dealings of such land.
About the author:
This article was written by Chia Swee Yik, Partner of this Firm (+6016 2148 218, firstname.lastname@example.org) (assisted by legal intern, Kong Chee Wah), who has provided advice on the financial institution in respect of validity of charge to be created on MRL. Feel free to contact him if you have any queries.