Compulsory Land Acquisition in Malaysia, Compensation and Disputes

Compulsory acquisition of land is the process by which the government acquires land from private landowners for a public purpose or for a purpose beneficial to Malaysia’s economic development. It is a drastic form of state intervention that results in the dispossession and eviction of landowners and other occupants from their properties.

The compulsory acquisition of land affects the constitutional rights of landowners. It is therefore essential for landowners to understand their rights to ensure that their land rights are protected and adequately compensated.

MahWengKwai & Associates advises and represents landowners in property conveyances and in land disputes, including compulsory land acquisition. This article describes the rights of landowners and provides insight into the land acquisition process under the Land Acquisition Act 1960, as well as the principles applied by the courts in compensation disputes.

Land Ownership in Malaysia

Land ownership in Peninsular Malaysia is protected by the Federal Constitution and governed by the National Land Code 1965. Malaysian land law is based on the Torrens System, where the register of land ownership is maintained by the government and guarantees an indefeasible title (or undefeatable title) to those owners listed in the register. There are three routes to land ownership, namely by dealings (e.g., by purchase and followed by transfer and registration at the relevant land registry), through inheritance (e.g., from a parent or testator) and by acquiring it through alienation (state land is “disposed” by way of alienation) from the state.

Federal Constitution

Land ownership is guaranteed under Article 13 of the Federal Constitution. However, this constitutional right is subject to the government’s right to acquire land for adequate compensation. Article 13(1) of the Federal Constitution provides that “no person shall be deprived of property save in accordance with law”, while Article 13(2) of the Federal Constitution states that “no law shall provide for the compulsory use or acquisition of property without adequate compensation”.

National Land Code 1965

The National Land Code 1965 recognises two types of land ownership, namely land held in perpetuity (freehold land) and land held for a term of years (leasehold land). Land ownership entails certain duties, including paying the annual quit rent to the state authority and complying with all express and implied conditions affecting the land. “Express conditions” are specially endorsed or expressed on the land title, while the “implied conditions” are those stated in section 115 (for agricultural land), section 116 (for building land) and section 117 (for industrial land) of the National Land Code 1965. Breaches of any of these conditions, if not remedied in time, can result in forfeiture of the land. The type of land (whether freehold or leasehold) and both the express and implied conditions are relevant to the land acquisition process, as the compensation awarded will depend on the character of the property acquired.

Land Acquisition Act 1960

The Land Acquisition Act was enacted in 1960 (later revised in 1992) to give practical effect to Article 13 of the Federal Constitution, which permits the State to acquire private property only in accordance with law and upon adequate compensation. The Act has been amended from time to time, including significant reforms introduced by the Land Acquisition (Amendment) Act 2016, which came into force in 2017, to refine procedure and expand the types of land interests that may be acquired. In broad terms, the Land Acquisition Act 1960 operates through a structured administrative process culminating in a compensation award, with disputes then determined by the High Court in land reference proceedings.

Administrative Stage (Pre-Acquisition)

Purpose

Land may be acquired by the State Authority under the Land Acquisition Act 1960 only for the purposes set out in section 3(1), which states:

3. (1) The State Authority may acquire any land which is needed:

(a) for any public purpose;

(b) for an economic development which is deemed to be beneficial to the public of Malaysia; or

The term “public purpose” under section 3(1)(a) is not defined in the Land Acquisition Act 1960. In S. Kulasingam & Anor v Commissioner of Lands, Federal Territory & Ors [1982] 1 MLJ 204, it was held:

“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”

An application for the acquisition of any land under section (1)(b) or (c) is made to the Land Administrator using Form 1 from the First Schedule of the Land Acquisition Rules 1998. The application must be supported by the project proposal, layout and acquisition plan, and a government valuation report of the land to be acquired.

Persons Interested

Only a “person interested” as defined in section 2 of the Land Acquisition Act 1960 can claim for and be paid compensation in respect of land compulsorily acquired. “Person interested” is defined to include “every person claiming an interest in compensation to be made on account of the acquisition of land”. While this covers the registered proprietor, it also includes beneficial owners and their trustees. Chargees (typically banks) and other registered security holders may claim the compensation payable to the owner or require that it be applied to the secured debt.

Lessees and tenants with a lease or tenancy for a term can claim compensation to the extent their leasehold interest is affected and compensable. However, a tenant at will who occupies the property on a month-to-month basis without a tenancy agreement is not entitled to compensation. The same goes for tenants holding over and squatters, who occupy the land without consent.

Persons with registered easements, rights of way or similar registered rights benefiting other land can, depending on the facts, be treated as “persons interested” if the acquisition removes or materially impairs that right.

Statutory Acquisition Process

The land acquisition process follows a series of statutory notices using the forms provided in the Second Schedule of the Land Acquisition Act 1960. These are summarised below:

Form A: Notice That Land is Likely to be Acquired – When the State Authority is satisfied that any land is likely to be acquired, a notification in Form A will be published in the Government Gazette (section 4).
Form B: Authority to Enter Survey – The State Director may, by Form B, authorise the entry onto the land to survey, conduct soil tests, mark the land boundaries or conduct other assessments to determine if the land is suitable for the purpose (section 5).
Form C: Schedule of Lands Affected by Acquisition – The Land Administrator will submit to the State Authority a list and plan of the lands to be acquired in Form C (section 7).
Form D: Declaration of Intended Acquisition – When the State Authority decides that the lands are needed, a declaration in Form D with a list of lands to be acquired will be published in the Government Gazette (section 8).
Form E: Intended Acquisition: Notice of Enquiry – The Land Administrator commences proceedings for the acquisition of the land by giving public notice in Form E and fixing a date of an enquiry for the hearing of claims to compensation (section 10).
Form F: Notice to Require Evidence in Writing – The Land Administrator may, by notice in Form F, furnish a statement in writing of information, including valuations, persons possessing interest in the land, and rents and profits received (section 11).
Form G: Written Award of Compensation – Upon conclusion of the enquiry, the Land Administrator will issue an award in Form G setting out the compensation awarded (section 14).
Form H: Notice of Award and Offer of Compensation – The Land Administrator will serve Form H on each person interested in the land, enclosing an extract of the award that states the amount of compensation determined (section 16). The notice also requires the recipient to indicate whether the compensation is accepted, accepted under protest, or rejected, using the prescribed response form.
Form I: Certificate of Urgency – Where land is required urgently for a public purpose or public utility, the State Director may issue a Certificate of Urgency in Form I directing the Land Administrator to take possession of the land even before the enquiry (section 19).
Form J: Notice to Vacate Building – If there is a building on the land that is possessed under a Certificate of Urgency, the Land Administrator will give notice in Form J to vacate the building and offer compensation in respect of the building (section 20).
Form K: Notice that Possession has been taken of Land – Formal possession of the land acquired is taken once the Land Administrator issues a notice in Form K to the owner and occupier of the land (section 22).
Form L: Notice to Deliver Up Document/s – The Land Administrator may issue a notice in Form L requiring the land title to be surrendered (section 24).
Form M: Reference to Court – The Land Administrator may, by application in Form M, refer to the High Court for determination, questions that may arise in the course of the enquiry, including competing interests in the land and the apportionment of compensation (section 36).
Form Q: Notice of Temporary Occupation or Use of Land – If the State Authority decides that the temporary occupation and use of any land is needed, the Land Administrator will give notice in Form Q and make such offer of compensation (section 58).

Land Administrator’s Enquiry

After receiving Form E, the landowner is required to attend an enquiry before the Land Administrator on the date, time and place stated in the notice. The landowner should consult a lawyer and appoint a valuer experienced in land acquisition as early as possible after Form D is issued. If this has not been done, it should be done immediately upon receiving Form E.

During the enquiry, the landowner and other interested parties will be asked to explain their interests and justify their compensation claims. The appointed valuer will usually be allowed to present and explain the valuation report, while lawyers may assist on legal issues that arise. Although the Land Administrator also considers the valuation prepared by the Valuation and Property Services Department (JPPH), that valuation is not disclosed to the landowner.

The land office enquiry concludes with a written award of compensation issued by the Land Administrator in Form G, pursuant to section 14 of the Land Acquisition Act 1960. The award identifies the persons entitled to compensation, the nature of their respective interests in the land, and the amount of compensation determined for each interest. A separate determination is made for each person whose interest has been established at the enquiry.

The award is treated as conclusive evidence of the land area acquired, the value assessed by the Land Administrator, and the apportionment of compensation, even if a landowner or other interested party did not attend the enquiry. The Land Administrator may also determine the costs incurred in the acquisition process, including valuation fees, and how those costs are to be apportioned.

After the award is made, the Land Administrator will serve Form H on each person interested in the land in accordance with section 16. Form H encloses an extract of the award stating the compensation offered and requires the recipient to indicate, using the prescribed response form, whether the compensation is accepted, accepted under protest, or rejected.

Reference to the High Court

Landowners who are dissatisfied with the award by the Land Administrator may commence land reference proceedings at the High Court with objections as to:

The measurement of land
The amount of the compensation
The persons to whom it is payable
The apportionment of the compensation

The following statutory notices from the Second Schedule of the Land Acquisition Act 1960 are relevant to land reference proceedings:

Form N: Application that an Objection be Referred to Court – Any person who has not accepted the award or accepted it under protest may make an objection in Form N together with the grounds for the objection (sections 37 and 38).
Form O: Reference to Court – The Land Administrator will, within six months, refer the objection to the High Court by Form O, together with the grounds of compensation and supporting documents, including the government’s valuation report (section 38(5)).
Form P: Notice of Hearing – The High Court will issue Form P to notify the applicant, the persons interested, and the Land Administrator of the hearing date for the land reference (section 43).

Land reference proceedings commence with a written application through Form N to the Land Administrator within the time limits prescribed by section 38 of the Act. Where the landowner is present or represented at the enquiry, the objection must be filed within six weeks from the date of the award in Form G. Where the landowner is not present, the objection must be filed within six weeks from service of Form H. The time limited to submit Form N can only be extended on an application to the High Court on the basis of special circumstances.

The landowner must state the grounds of the objection in Form N. It is important that the grounds are stated correctly and comprehensively, as the court hearing will be limited to them. Landowners are strongly encouraged to engage lawyers by this stage to avoid errors that may prejudice them in the land reference proceedings.

Land Reference Hearing

Once an objection is referred to the High Court, the matter proceeds as a land reference hearing under Part V of the Land Acquisition Act 1960 (sections 36 to 51). Where the objection concerns the amount of compensation, the High Court is constituted as a judge sitting with two assessors under section 40A of the Land Acquisition Act 1960. One assessor must be a valuation officer employed by the Government, and the other a registered private valuer appointed from the list submitted annually to the High Court.

The role of the assessors is significant. Under section 40C of the Land Acquisition Act 1960, each assessor must provide a written opinion on the various heads of compensation claimed, and the judge is required to record those opinions. Section 40D provides that the amount of compensation to be awarded is the amount decided by the two assessors, and where the assessors disagree with each other, the judge must elect to concur with the decision of one assessor. However, section 40D has been declared by the Federal Court in Semenyih Jaya Sdn Bhd v Pentadbir Tanah Daerah Hulu Langat [2017] 3 MLJ 561 as unconstitutional as it deprives the judge of judicial power. The result is that the opinion of the assessors are not binding on the judge. In the event the assessors disagree, the judge can elect to adopt either opinion. Still, the judge is at liberty to disagree with both assessors and come to his own conclusion.

Land reference proceedings are conducted in open court, and the usual civil procedure rules apply to the extent they are not inconsistent with the Land Acquisition Act 1960. However, the Act imposes strict procedural requirements through the Third Schedule, which sets out the evidential and filing rules for land reference cases.

The applicant’s valuer’s report must, on its own, establish a prima facie case. In other words, the landowner bears the burden of producing a valuation report that is properly supported and capable of justifying an increased award. The respondent’s valuer’s report (typically from JPPH) must then be sufficient to rebut the applicant’s valuation.

Valuation evidence is given through written reports, and oral evidence from valuers is typically confined to cross-examination and re-examination. For other witnesses, evidence is ordinarily adduced by affidavit, and the court retains the discretion to allow cross-examination of deponents if required.

The court will also manage the proceedings by giving directions on the order and timing of written and oral submissions.

Ultimately, the High Court’s decision must be recorded in writing and signed by the judge and assessors, in accordance with section 47 of the Land Acquisition Act 1960. Where the decision includes an award of compensation, the court is required to specify the breakdown of compensation under the recognised statutory heads, including market value and any additional awards such as severance, injurious affection, or relocation expenses, together with the grounds for allowing or rejecting each head of claim.

Questions of Fact and Law

Although land reference proceedings are often viewed as valuation disputes, they frequently involve preliminary questions of fact and law, which should be determined by the High Court judge before the assessors are invited to determine the amount of compensation. This is important because the assessors’ role is confined to valuation issues and the heads of compensation, whereas the judge retains responsibility for legal and procedural issues, which determine the correct basis on which compensation should be assessed.

Section 40A of the Land Acquisition Act 1960 provides that the High Court ordinarily consists of a judge sitting alone, and two assessors are only appointed where the objection relates to the amount of compensation. Consistent with this, the High Court in Le Hazen Resources Sdn Bhd v Land Administrator of Federal Territory Kuala Lumpur [2012] 9 MLJ 671 held that legal issues in land reference proceedings are to be decided by the judge sitting alone.

Where suitable questions of law, construction, or preliminary issues arise, the parties may apply for these issues to be determined in advance through interlocutory applications under the Rules of Court 2012, including under Order 14A rule 1 (determination of questions of law or construction) and Order 33 rule 2 (trial of issues before or after the main hearing).

In our experience, it is often beneficial for the landowner’s lawyers to identify and isolate such issues early, particularly where the dispute turns on matters such as the correct land use category, the legal effect of restrictions in interest, admissibility of evidence, or whether a particular head of compensation is legally claimable. This ensures that the valuation evidence is assessed on the correct legal footing and may reduce unnecessary costs and delay.

A further advantage is that if the High Court’s determination on such legal issues is unfavourable, it may be appealed to the Court of Appeal as a question of law, without being caught by section 40D(3) of the Act, which restricts appeals against a decision of the court on compensation. Once these preliminary issues are resolved, the assessors can then proceed to determine the appropriate compensation on the correct basis.

Assessment of Compensation

Compensation is to be assessed in accordance with the principles set out in the First Schedule of the Land Acquisition Act 1960. The objective is to place the dispossessed landowner, so far as money can do so, in the same position as if the land had not been acquired. This principle has long been recognised in Malaysian law and reflects the constitutional requirement of “adequate compensation” under Article 13 of the Federal Constitution.

Market Value

Under paragraph 2(a) of the First Schedule, the primary measure of compensation is the market value of the acquired land.

Market value is commonly understood as the price that would be paid by a willing purchaser to a willing seller, acting at arm’s length and without compulsion, in the open market. The assessment is objective and must reflect the condition and characteristics of the land at the valuation date.

In determining market value, relevant considerations typically include:

the size, shape, location and physical condition of the land;
the category of land use and restrictions in interest appearing on the title;
the existing use of the land;
the realistic development potential of the land (where supported by planning and market evidence); and
prevailing market conditions at the material date.

Comparable sales transactions at or around the valuation date are central to the valuation exercise. A properly reasoned report by a registered valuer, supported by credible comparables and planning evidence, is often decisive in a compensation dispute.

The valuation date for assessing market value is the date of publication of the Section 8 declaration in the State Government Gazette. The valuation must reflect the market conditions and attributes of the land as at that date, and not subsequent changes.

Compensation is not limited to market value alone. Paragraph 2 of the First Schedule recognises additional heads of compensation in certain circumstances.

Severance Damage – Paragraph 2(c)

Where only part of a larger parcel is acquired, compensation may be awarded for severance damage. This refers to the depreciation in value of the remaining land caused by the severing of the acquired portion from the retained land.

For example, if the acquisition results in reduced access, irregular shape, loss of frontage, or diminished development potential of the remaining land, the reduction in value may be compensable.

Injurious Affection – Paragraph 2(d)

In addition to severance, paragraph 2(d) allows compensation where the acquisition injuriously affects the remaining unacquired portions of the property or other adjoining property of the person interested, whether movable or immovable.

This may arise where, although only part of the land is taken, the acquisition adversely impacts the value or utility of adjoining retained land or business operations conducted on the property. Claims for injurious affection must be supported by evidence showing actual or likely diminution in value directly attributable to the acquisition.

Disturbance and Removal Expenses – Paragraph 2(e)

Where the acquisition compels a landowner to change his residence or place of business, paragraph 2(e) provides for compensation of the reasonable expenses incidental to such change.

This may include:

removal and relocation costs;
reinstatement expenses;
reasonable costs directly resulting from the disruption of business operations; and
other proven expenses that are a direct consequence of the compulsory acquisition.

Such claims must be reasonable, causally linked to the acquisition, and supported by documentary evidence. The Act does not provide for automatic reimbursement of all losses; the claim must fall within recognised compensable principles.

Practical Perspective

In practice, compensation disputes often depend not only on the market value of the land, but on whether additional heads such as severance, injurious affection, or disturbance are properly made out. A successful claim requires careful identification of the relevant statutory head under the First Schedule and proper evidential support through valuation and documentary proof.

Right of Appeal

The Land Acquisition Act 1960 significantly restricts appeals arising from land reference proceedings. In particular, sections 40D(3) and 49 limit appeals where the decision of the High Court comprises an award of compensation. Section 49(1) provides that any person interested may appeal to the Court of Appeal and to the Federal Court. However, the proviso states that where the decision comprises an award of compensation, there shall be no appeal therefrom.

The Federal Court in Calamas Sdn Bhd v Pentadbir Tanah Batang Padang [2018] Supp MLJ 256 held in clear terms that where the appeal concerns the amount of compensation awarded by the High Court, such an appeal is barred. In that case, the complaints revolved around valuation methodology and quantum, and the appeal was dismissed.

The position was revisited in Semenyih Jaya Sdn Bhd v Pentadbir Tanah Daerah Hulu Langat [2017] 3 MLJ 561, where the Federal Court clarified that the statutory bar is not an absolute bar on all appeals, but is limited to appeals on issues of fact relating to the quantum of compensation. An appeal is permissible where it raises a genuine question of law, as opposed to a disagreement on valuation merits.

More recently, in Pentadbir Tanah Daerah Johor v Nusantara Daya Sdn Bhd [2021] 4 MLJ 570, the Federal Court reaffirmed that the phrase “question of law” must be construed narrowly. In that case, although the appeal was framed as raising questions of law, the court held that the complaints were in substance challenges to the High Court’s valuation adjustments and assessment of market value. As the appeal ultimately concerned the adequacy of compensation, it was barred and dismissed.

The law is therefore now settled:

There is no appeal against the High Court’s decision on the amount of compensation itself.
An appeal will only lie where there is a genuine error of law, such as a misinterpretation of statutory provisions, an incorrect legal classification of land use, a breach of natural justice, or a failure to comply with mandatory statutory requirements.
A party cannot circumvent the statutory bar by dressing up a valuation disagreement as a legal question.

Where a true question of law is established, the appellate court may set aside the decision and remit the matter for rehearing before a differently constituted High Court. Appeals in land reference matters are therefore highly technical and require careful identification of appealable legal issues.

At MahWengKwai & Associates, we have successfully pursued such appeals as early as 2013, including overturning High Court decisions on the legal classification of land use in Tan Wei Mia & 3 Others v Pentadbir Tanah Daerah Gombak [2013], as well as in subsequent cases involving breaches of natural justice and failures by the High Court and assessors to give adequate reasons as required by the Land Acquisition Act 1960. While the right of appeal is restricted, it remains an important safeguard where compensation has been assessed on an erroneous legal basis.

Conclusion

Compulsory acquisition is one of the most significant exercises of government power over private property. While the Land Acquisition Act 1960 provides a structured framework to ensure compensation is paid, the process is technical, time-sensitive and evidence-driven. The outcome often depends not only on valuation opinions, but on the proper identification of legal issues, procedural compliance and strategic conduct at each stage of the proceedings.

Landowners and affected parties should seek advice early, ideally before or immediately upon receipt of the notice of enquiry. Early preparation of valuation evidence and careful consideration of legal issues can make a material difference to the compensation ultimately awarded.

MahWengKwai & Associates regularly advises and represents landowners, developers and other interested parties in compulsory acquisition matters, including High Court land references and appeals. We work closely with valuers, technical experts, and experienced valuers to ensure that our clients’ interests are fully protected and that they receive fair and adequate compensation under the law.

By Raymond Mah

REQUEST A FREE CONSULTATION →

Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.