theSun Property July 2015

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ON FRIDAY JULY 24, 2015
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BYDATUK PRETAM SINGH
RECENTLY, the Negri
Sembilan government
announced that it will
control the price of houses
to be built within its state. Mentri
Besar Datuk Seri MohamadHasan
said this is one of the fundamental
keypoints of the new state housing
policy, which will be finalised soon.
“In this newpolicy, 15%of houses
built must be worth RM80,000 and
below, 15%must cost RM250,000
and below, another 20%must be
priced belowRM350,000, with 50%
left to the developer to sell at
whatever price they choose,” the
minister said.
He added that developers
will be required to reserve 50%
for bumiputra allocation in any
housing scheme, compared to
the previous requirement
of 30%.
With that, many have
asked if this means that the
state government has an
unfettered discretion to impose
any condition that the state
authoritymay think fit, since land is
a statematter?
POWER OF THE STATE
This power of the state authority
was first brought into question in
the leading Federal Court case of
Pengarah Tanah danGalian,
Wilayah Persekutuan v Sri Lempah
Enterprise Sdn Bhd [1979] 1 MLJ 135
FC. Below are the facts.
In this case, the applicant
companywas the registered
proprietor of a piece of land held in
perpetuity. The landwas in the
Federal Territory and the applicant
applied to the federal government
for sub-division of the land, plus
conversion to have the express
condition relating to the user of the
land amended, to allow the
applicant to put up a hotel for which
planning permission had been
granted. It also applied to surrender
part of the land to the government
for use as service roads, side and
back lanes. Thematter was referred
to the land executive committee and
subsequently the director of Lands
andMines, Federal Territory, who
informed the applicant that the
applicationwould be approved on
condition that on surrendering the
land, the applicant was to receive
back, in respect of the part to be
retained by him, not the title in
perpetuity but a lease of 99 years.
The state authority argued that
section 124(5)(c) is wide enough for
the land exco to impose such a
condition. The question arises
whether section 124(5)(c) is wide
enough to curtail the exercise of
those rights by the imposition of a
new condition, which has the effect
of changing the very character of
the grant the appellants nowhold.
There can be no doubt that per se, a
perpetuity title is more valuable
than a 99-year lease.
TUN SUFFIAN’S VIEW
“If the committee is right, it would
mean that it can unreasonably
impose a condition that is irrelevant
to the permitted development, such
as, to take an absurd example, that
the applicant shouldwear a beard
for the rest of his life or that he
should fly once around themoon.
Inmy judgment, the committee
must act reasonably andmay only
impose conditions relevant to the
permitted development and does
not have the drastic right tomake
the applicant give up the title in
perpetuity and receive in place of it
only a 99-year lease.”
He added: “The local planning
authority is empowered to grant
permission to develop land
‘subject to such conditions as they
think fit’. But this does not mean
that they have an uncontrolled
discretion to impose whatever
conditions they like”.
“Applying these principles to
the present case, it is plain, inmy
judgment, that the committee
does not have the power it claims
to have. The conditionwhich the
applicant objected to:
1) does not relate to the permitted
development;
2) is unreasonable; and
3) is used for an ulterior object,
the object being to bring
developed land into line with
newly alienated land as towhich,
we are told, since the lawonly
leases, not titles in perpetuity, are
granted. However desirable this
object may seem to the
committee, it has no power
under the law, to achieve it in the
way used here.”
LANDMARK OBSERVATIONS
Sitting with Tun Suffianwas
another imminent jurist, the late
Raja Azlan Shah AGCJ (Malaya)
whomade these landmark
observations.
“Every legal power must have
legal limits, otherwise there is
dictatorship. In particular, it is a
stringent requirement that a
discretion should be exercised for a
proper purpose, and that it should
not be exercised unreasonably. In
other words, every discretion
cannot be free from legal restraint,
where it is wrongly exercised, it
becomes the duty of the courts to
intervene. The courts are the only
defence of the liberty of the subject
against departmental aggression.
“In these days when government
departments and public authorities
have such great powers and
influence, this is amost important
safeguard for the ordinary citizen,
so that the courts can see that these
great powers and influence are
exercised in accordance with law. I
would once again emphasise what
has often been said before, that
public bodies must be compelled to
observe the law and it is essential
that bureaucracy should be kept in
its place.”
“For the above reasons,
it does not seem tome that the
decision of the land executive
committee can possibly be regarded
as reasonable or as anything other
than ultra vires. It had exceeded its
power and the decisionwas
therefore unlawful, as being an
unreasonable exercise of power not
related to the permitted
development and for an ulterior
purpose that no reasonable
authority, properly directing itself,
could have arrived at it. The
committee, like a trustee, holds
power on trust and acts validly only
when acting reasonably.”
PRICE CONTROL
The issue of price control of houses
is not new and has been discussed
previously in the highest courts of
law in the country. One such case is
the landmark case of Majlis
Perbandaran Pulau Pinang vs
Syarikat Berkerjasama Serbaguna
Sungai Gelugor [1999] 3 CLJ 65.
In this case, the dispute was
whether the Penang City Council
had the power to impose the
disputed condition that 30%of
low-cost houses have to be built and
sold at a cost not exceeding
RM25,000 per unit in accordance
with the council guidelines on
low-cost housing”.
The society agreed at its AGM
that the selling price of a two-
bedroom flat, measuring an average
of 500 sq ft, shall not exceed
RM32,000 and a three-bedroom flat,
measuring an average of 650 sq ft,
shall not exceed RM45,000.
In a dilemma due to the ceiling
price stipulated in the guidelines on
low-cost housing, the developers
sought the intervention of the
courts as theywere of the view that
the council had no such power to
impose such conditions relating to
prices of houses.
The case, described as a
“veritable legal porcupine bristling
with interesting and complex points
of law” went on appeal to the
Federal Court. It was a landmark
case in the field of Planning Law and
Judicial Review in this country and
counsel on both sides put up very
convincing arguments for six days.
At the end, Edgar Joseph Jr FCJ
(Federal Court judge) made no
apologies for the acres of paper and
streams of ink devoted to the
preparation of the unanimous
judgment by the Federal Court.
He held that it was axiomatic that
local authorities are creatures of
statute and their qualities and
powers can only be derived by
reference towhat is expressed or
implicit in the statutes under which
they function (see for example, Lord
Wilberforce in Bromley L.B.C. v.
G.L.C. [1983] 1 AC 768, 813).
The statutory scheme of the
Local Government Act confers
upon local authorities a distinct
political function, towhich the
courts, by application of ordinary
principles of statutory construction
should give effect.
“Taken at its full face value, the
above provisions would appear to
confer unlimited power on the
planning authority to impose any
condition it wishes, for example,
because it considers the condition
to be in the interest of the housing
policy of the state government. But,
thematter must be probed further.”
On probing deeper, the Federal
Court concluded that the whole of
the decision of Majlis Perbandaran
Pulau Pinang was wholly null, void
and of no effect and stated that the
Majlis had no power to impose
conditions relating to prices at
which the houses have to be sold by
the developer.
NEXT ISSUE
The next questionwas: Can
developers be forced to give
discounts as part of the planning
approval process?
In CaymanDevelopment (K)
Sdn Bhd vsMohd Saad Bin Long
[1999] MLJU 290, Caymanwas a
housing developer whowanted to
develop a piece of land in the
Mukimof AlorMerah, Alor Star,
into a low-cost housing scheme and
the state authority of Kedah
imposed a condition. It stated:
“Menjual rumah-rumah yang
dibina dengan harga kurang lima
peratus daripada $25,000 ($23,750 –
bumiputra discount).
[Translation: “To sell the built
houses with 5%discount off $25,000
($23,750).”]
When the developer sold the
houses without the stipulated
discount, the purchasers sued the
developer to enforce the discount
as imposed by the state authority
of Kedah.
At the High Court, Hishamuddin
J. (as his lordship then), held that the
state authority had no power to fix
the requirements regarding the
price of each of the units to be sold
to the public, as well as the discount
of 5% as these are not the kind of
requirements envisaged by the
National Land Code.
Hishamuddin then held:
“I have no doubt whatsoever of
the good intention of the state
authority, and that in prescribing
the price and the discount, it
certainly had inmind the interest of
the low income section of the
general public, whowould
constitute the potential buyers of
the low-cost units. Yet, with the
greatest respect, I do not think that
Parliament, in enacting subsection
(5)(c), had inmind to confer on the
state authority such a wide power,
so as to empower it to even fix the
price of the low-cost units for the
purpose of sale to potential buyers,
let alone to prescribe any discount.”
“Such requirements, as imposed,
are commercial in nature. The state
authority, being a regulatory body
onmatters pertaining to land, in
determining the nature of the
requirements to impose (if any)
when approving a conversion,
should avoid entering into the
commercial arena. Instead, it should
only confine itself tomatters
directly pertaining to the usage of
the land and the imposition of rent
and premium (consequential to
the conversion).”
All these cases illustrate the
point that both the state authority
andMajlis have no unfettered
power to impose any condition
relating to prices of houses and
discounts as these are considered
to be commercial aspects that they
should avoid entering into. Being
mere regulatory bodies, they should
only confine themselves to
regulatorymatters such as
prescribing the usage of land and
the imposition of rent and premium
consequential to the conversion (of
usage of the land). Furthermore, any
imposition of penalty on developers
for failing to complywith unlawful
conditions may itself be unlawful.
All these cases remain
unchallenged and continue to be
good precedents as there have not
been any legislative amendments to
overturn these decisions. No doubt
that the intention of the state
authoritymay be noble but the law,
as it stands, only allows the state
authority to impose conditions
“relating to the permitted
development only” and not in
relation to price of houses and
discounts that ought to be given.
Datuk PretamSingh
Darshan Singh, a
lawyer by profession,
has previously worked
as Senior Federal
Counsel, Deputy
Public Prosecutor with
the Attorney-General’s
Chambers and legal
advisor to several
government departments and agencies.
He is currently the partner in a legal firm
while simultaneously serving as President
of the Tribunal for Home Buyers’ Claims.
Leveraging his vast knowledge and
decades of experience and knowledge,
he contributes articles to local and
international journals, besides delivering
lectures and talks in relevant forums.
Price, price, price
>Does the state government have the power to set the
prices of houses at which a developer can sell?