Contributed by property valuer Mary Lau
Should old buildings be replaced so that the entire skyline is uniformly made up of modern structures?
It is not all about aesthetics – there is a human element to it
In the article “Urban renewal law, but what about minority homeowners?” by the National House Buyers Association (HBA), it thwarts the Federal Territory (FT) Minister’s announcement on April 8th this year, that our government is planning new legislation to facilitate the redevelopment of old buildings in the capital.
The FT minister further explained that the urban regeneration could be defined as a comprehensive and integrated long-term programme to address issues of economic slowdown, physical deterioration, abandonment, as well as brownfields and non-economical areas.
On the surface, it makes sense to do away with buildings that are nearing the end of their physical lives. It could be difficult for owners to maintain and these structures could pose a danger.
However, the HBA calls the move unconstitutional and that the purported redevelopment or renewal law can be disguised as an “en-bloc strata forced sale” for the benefit of commercially minded developers. It ignores the minority, the elderly and impaired who may not want to relocate. Whether a building is dilapidated or unsafe is often subjective and not based on authoritative findings. HBA’s stand is that the acquisition must be consented to by all owners and not just based on a majority vote.
Can the government compulsorily acquire properties for this purpose? In West Malaysia, compulsory acquisition is guided by the Land Acquisition Act 1960 (LAA).
This is a powerful act and does not require consent from owners although affected persons can challenge the amount of compensation and the acquisition itself.
Under section 3(1), it states that the State Authority may acquire land which is needed
- for any public purpose;
- by any person or corporation for any purpose which in the opinion of the State Authority is beneficial to the economic development of Malaysia or any part thereof or to the public generally or any class of the public; or
- for the purpose of mining or for residential, agricultural, commercial, industrial or recreational purposes or any combination of such purposes.
The LAA does not elaborate on this broadly based definition.
In S. Kulasingam & Anor v Commissioner of Lands, Federal Territory & Ors (1982) MLJ 204, it was held that:
“The expression ‘public purpose’ is incapable of a precise definition. It is still best to employ a simple common sense test, that is, to see whether the purpose serves the general interest of the community.”
The narration above does not add much to clarity and is non-definitive.
Under provision (b), the authorities can acquire on behalf of anyone so long as it is beneficial to economic development. It would be an abuse if the party gaining the land use it for commercial profiting instead.
Given the provisions of Section 3(1), it would appear that the authorities can invoke Section 4 of the LAA to begin the process of acquisition if it deems that the redevelopment of old buildings is in line with those purposes. Section 4 is a notice of the intended acquisition but does not mean that the acquisition will definitely proceed.
But section 3(6) provides that if there is a development approval granted to the owner and the acquisition under (1), (b), or (c) is not for the purpose of public utility, the authority will not consider the application.
The purpose of acquisition for Section 3(1b,1c ) has to be for a public use. In the announcement, it was not indicated if the redevelopment of old buildings is intended for non-public utility. If it is, the LAA would not apply. On a similar note, both are statutory and either the government or private sector can implement the policies.
Acquisition of Ampang Park
In July of 2015, one of the oldest malls in Kuala Lumpur, the Ampang Park shopping centre, was gazetted for compulsory acquisition for a public purpose: the construction of the second MRT line. Ampang Park was a stratified property.
In 2016, 39 strata owners challenged the acquisition to the High Court and Court of Appeal and lost on both counts. On 30th June 2016, the application to overturn the approval of the mall’s demolition was dismissed by the High Court and on 18th January 2017, the Court of Appeal dismissed the judicial review application.
The owners were given the option to sign a mutual agreement with MRT Corp if they didn’t want to go down the road of compulsory acquisition. 100% consent was needed from 253 strata owners for the agreement to work. But it did not materialise.
The authorities proceeded with the acquisition of Ampang Park and on 31st December, 2017, the mall ceased operations. A sad day for patrons, owners and tenants who were there until the end.
Compulsory acquisition makes no distinction between old or new properties, strata or not. If the properties are needed for the purposes mentioned in Section 3, the authorities can proceed.
Statutory protection of listed buildings under the National Heritage Act (NHA) 2005, which was gazetted on 31st December 2005 and took effect 1st March 2006, prohibits any works without the approval of the Commissioner. Anyone who violates the prohibition faces prosecution.
In 2006, the historic 77-year-old Bok House at Jalan Ampang was demolished. It failed to make it to protection list and the authorities came under heavy fire for not gazetting it under the NHA.
Tropicana (formerly known as Dijaya Corp Bhd) acquired the land for RM 123 million in July 2008. In 2017, the construction of the luxury W Hotel was completed.
Buildings listed under the NHA are not spared from compulsory acquisition if they are required for a public purpose. It is not mentioned if the proposed legislation will be afforded this authority.
Willing buyer, willing seller
A friendlier route would be through the usual form of transaction, a private treaty sale. A sale of this nature is conducted in the open market on a “willing buyer, willing seller” basis. The two parties would agree to the terms and conditions of the sale before the sale completes.
The Row, located at Jalan Doraisamy, next to Sheraton Hotel in the city, was a revitalisation project that turned 22 pre-war shophouses built in the 1940s, into shops, cafés, and other commercial spaces.
A property consortium, Urbanspace, in a private treaty sale, took over the shoplots, formerly known as “The Asian Heritage Row” from a single entity. In July 2015, they launched the first phase with five shops open for business. Today, this mixed-use commercial development is home to stylish retail shops, cafés, bistros, restaurants, event spaces, and offices.
It is not easy to get consent from all owners. If an owner disagrees, the transaction would be stalled. Thus, came the proposed urban renewal legislation to facilitate this tedious and time-consuming process.
In my previous role as valuer and court assessor, I have handled a number of compulsory acquisition cases. It is a harsh and drastic action, though for the greater good of the public. It affects not only owners but tenants as well, who need to relocate and adjust – oftentimes it is not easy. The anguish of affected parties is not something that can be quantified. This should be a method of last resort where it is absolutely necessary.
Based on the announcement, if the new legislation gets passed, the consent of owners is required and only older properties will be affected – time will tell if 100% consent or majority is needed.
Whether the proposed legislation is needed or fair in getting consent from the majority, our government needs to carefully weigh and take into consideration the affected minority whose interests must not be suppressed.
About the contributor
Mary Lau graduated from the University of Reading, England, with a BSc Land Management (Valuation Specialisation) in 1991. In 2002, she was appointed High Court Assessor in Sarawak for compulsory acquisition and compensation cases and sat on the bench with the judge. She began her training with CH Williams and later held senior positions in valuation firms such as Henry Butcher, City Valuers and was a Director at Hasmi and Associates in 1999. She began her own setups in real estate investment and other ventures by 2007. She is a licenced valuer with the Board of Valuers in Malaysia.
This article is intended to convey general information only. It does not constitute advice for your specific needs. This article cannot disclose all of the risks and other factors necessary to evaluate a particular situation. Any interested party should study each situation carefully. You should seek and obtain independent professional advice for your specific needs and situation.
Read another contribution from Mary Lau, “Keeping the balance: The ying and yang of short term lets” here.
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