Land Acquisition Act 1960: What Factory Owners Get When Land Is Acquired

Key Takeaways

• The Land Acquisition Act 1960 (Act 486) lets a State Authority take land for a public purpose, for a person or corporation whose project it considers beneficial to the economy, or for mining, residential, agricultural, commercial, industrial or recreational use (section 3).
• The process runs on gazetted forms: Form A (land likely to be needed), Form D (declaration that it is needed), Form E (notice of enquiry), Form G and H (award), and Form K (formal possession, after which the land vests in the State).
• Compensation is mainly market value at the date of the Form A notification (if Form D follows within 12 months) or otherwise at the Form D date, plus severance, injurious affection and relocation costs for a business. You can never be awarded more than you claimed, so put a full written claim in at the enquiry.
• If you disagree with the award, file Form N with the Land Administrator within six weeks of the award (or of receiving Form H if you were absent). Since the 2016 amendment, awards of RM5,000 or less are final and late payment charges are 5% a year.
• Buyers of factories near new road, rail or utility alignments should check the title for an acquisition note under section 9 before signing.

This guide explains the law for factory and warehouse owners, tenants and buyers. It is general information, not legal or valuation advice: speak to a lawyer and a registered valuer about your own case.

What is the Land Acquisition Act 1960?

The Land Acquisition Act 1960 is the federal law that sets out how land in Peninsular Malaysia is compulsorily acquired and how the owners and other interested persons are compensated. The State Authority (the state government) makes the decision and the Land Administrator at the district land office runs the enquiry, makes the award and takes possession. In Selangor that means the district land office for the lot, for example Klang, Petaling or Kuala Langat. The official reprint is published by the Federal Department of Lands and Mines (JKPTG).

The three purposes in section 3

Section 3(1) allows the State Authority to acquire land that is needed:

For 3(1)(b) and (c), the party that wants the land applies to the Land Administrator with a project proposal, a layout and acquisition plan, a valuation report and the prescribed fee and deposit. The JKPTG standard operating procedure sets that deposit at 125% of the estimated market value, half paid with the application and the rest when the applicant accepts the State's conditions.

How does land acquisition work, step by step?

Each step leaves a paper trail, so you always know where your case stands.

Two time limits protect owners. A Form A notice lapses after 12 months without a Form D (section 4(3)), and a Form D declaration lapses for any land on which no award is made within two years of gazettement (section 8(4)). The 2016 amendment carves out land already taken under a Certificate of Urgency from that two-year lapse. If the State withdraws before taking possession, section 35 requires it to pay your costs and any damage caused.

How is compensation calculated for a factory or industrial land?

The rules are in the First Schedule of the Act. They matter more for a factory than for a house, because the building, the business and any land left over can each change the number.

Market value and the valuation date

Market value is taken at the date the Form A notification was gazetted, as long as a Form D followed within 12 months. Otherwise it is taken at the Form D date. The valuer may use any suitable method, with regard to recent sales of similar land nearby and particular weight on the last sale of your own lot within two years before that date. Sales after the valuation date are ignored. For leasehold land the remaining lease term counts, but the chance of the lease being renewed does not. The land use category and express conditions on the title are taken into account, and where the lot is in a local plan, the land use shown in the development plan applies (section 9A).

You can check what similar industrial land has changed hands for on our JPPH-based industrial transaction pages, and our guide on how to value a factory in Malaysia explains the comparison, income and cost methods valuers use.

What is added to market value

Paragraph 2 of the First Schedule lists the only matters that count:

• Market value of the land acquired.
• Severance: damage from cutting the acquired part off your remaining land, for example a factory that loses its loading yard or second access.
• Injurious affection: other damage to your remaining property, movable or immovable.
• Reasonable expenses if you are forced to move your place of business.
• Any clear and enforceable undertaking to build roads, drains, walls or fences for the land you keep, which is weighed against your claim.
• A deduction for any increase in value of your other land from the project.

In Semenyih Jaya Sdn Bhd v Pentadbir Tanah Daerah Hulu Langat (2017), the Federal Court also held that loss from the extinguishment of a business run on the land can be compensated as part of market value.

What is ignored

• The urgency of the project and your unwillingness to sell.
• Improvements made within two years before the Form D date, unless made in good faith and not in anticipation of acquisition, and any outlay after the Form D date beyond necessary repairs.
• Any increase in value from a use that is illegal or could be stopped by a court.
• The value of any building that the land use category or a title condition does not permit. A factory built on land that is not approved for industry, or without the approvals it needs, can lose the value of the building.
• Anything above the amount you claimed. Paragraph 4 caps your award at your own claim, and if you make no claim without good reason, at the Land Administrator's award.

What should a factory owner do after receiving Form E?

1. Diarise the enquiry date. It cannot be held earlier than 21 days after the notice is published.
2. Appoint a registered valuer early. Their report should cover land, building, severance, injurious affection and business relocation.
3. Collect documents: title, approved building plans, CCC or CF, planning permission, business licence, tenancy agreements, recent accounts if business loss is claimed, and quotes for moving machinery.
4. Lodge a full written claim and attend or be represented. Your claim sets the ceiling of what you can ever receive.
5. Tell your bank and tenants. A chargee and registered tenants have their own interests in the award.
6. Decide on the award quickly. You may accept it, or accept payment under protest and still object.

If you will need to move operations, start the search for a replacement factory or land at the same time. Our plot ratio guide helps you check how much floor area a replacement lot will allow.

Can I object to the compensation award?

Yes. Under section 37 a person interested who made a claim in time and did not accept the award, or accepted it under protest, can object to the measurement of the land, the amount of compensation, the persons to whom it is payable or the apportionment. The objection is a written application in Form N to the Land Administrator, who refers it to the High Court (section 38).

Courts may extend these periods only in special circumstances. Under the 2016 amendment, an award of RM5,000 or less is final and cannot be objected to. The party for whom the land is acquired can also object when the award exceeds RM30,000, and in that case only 75% is paid first while 25% is withheld until the court decides. Since Semenyih Jaya, the judge, not the two assessors, decides the amount; assessors give their opinion.

When is compensation paid and what if it is late?

The Land Administrator must pay the award as soon as Form H has been served on everyone, unless no one is able to receive it, the payee refuses, or there is a dispute over title or apportionment, in which case the money is deposited in court (section 29). If payment is late, late payment charges run from the due date, which is the earlier of the date possession is taken or three months after Form H is served. The 2016 amendment cut the rate from 8% to 5% a year, and the JKPTG SOP applies 5% to withheld sums too.

In urgent public cases the State Director may issue a Certificate of Urgency 15 days after Form E is given, letting the Land Administrator take possession before an award. Occupiers of a building must get a Form J notice of up to 60 days to vacate, with an offer for the building. Separately, the amended Part VII allows temporary occupation of land for up to three years, with compensation.

What about tenants, banks and part of a lot?

A tenant at will is not a "person interested" and cannot claim. A lessee, chargee or tenant with a real interest is named in the Form E notice and can claim their share. When only part of a lot is taken, the land office revises the quit rent and issues a title in continuation for the remainder (sections 25 and 26). For a tenant running a factory, read the lease: many leases end automatically on acquisition and say who gets the compensation.

Buying a factory near a new road, rail line or port project

Search the title before you sign. A Form D acquisition note under section 9 appears on the register document of title, and a Form A notice is published in the state gazette for the locality. Large alignments such as the ECRL cargo link to Port Klang via Kapar are the kind of project where buyers should ask the seller and the land office directly. Budget the transfer correctly with our legal fees and stamp duty calculator.

Frequently Asked Questions

What is section 4 of the Land Acquisition Act 1960?

Section 4 lets the State Authority publish a Form A notification in the gazette when land in a locality is likely to be needed. It allows officers to enter and survey. It is a warning, not an acquisition: it lapses if no Form D declaration is gazetted within 12 months, although a fresh notice can be issued.

What is section 8 of the Land Acquisition Act 1960?

Section 8 is the declaration in Form D that specific lots are needed. It is conclusive evidence that the land is needed for that purpose, and a note is then entered on the title. It lapses for any lot on which no award is made within two years of gazettement, except where possession was taken under a Certificate of Urgency.

How is land acquisition compensation calculated in Malaysia?

The Land Administrator assesses market value at the Form A or Form D date, using comparable sales nearby, then adds severance, injurious affection and business relocation costs under the First Schedule. Improvements made in anticipation of acquisition, illegal uses and buildings not permitted on the land are ignored. You cannot receive more than you claimed.

Can the government take my factory land in Malaysia?

Yes, if the State Authority decides the land is needed for one of the purposes in section 3, including projects by a company that it considers beneficial to the economy. You cannot refuse, but you are entitled to compensation, to be heard at the enquiry and to object to the award in court.

How long do I have to object to a land acquisition award?

Six weeks from the award if you attended the enquiry. If you did not, six weeks from receiving Form H or six months from the award, whichever comes first. File Form N with the Land Administrator stating every ground, because new grounds need the court's leave.

Has the Land Acquisition Act 1960 been amended?

Yes. The Land Acquisition (Amendment) Act 2016 (Act A1517) lowered the late payment rate to 5%, made awards of RM5,000 or less final, raised the withholding threshold to RM30,000 and rewrote temporary occupation for up to three years. In 2017 the Federal Court struck down section 40D, so the judge now decides compensation.

Can a factory tenant claim compensation?

A tenant at will cannot. A tenant or lessee with a real interest in the land can claim at the enquiry, and the award is apportioned among the owner, the bank and other interested persons. Check your tenancy agreement for an acquisition clause.

FactoryHub is dedicated to helping every client find the right factory or warehouse. If your factory is affected by an acquisition and you need a replacement site in Klang, Port Klang or the rest of Selangor, call Peter Tan (REN 12771) at 016-666 6872 or Jason Low (PEA 1478) at 012-288 1834.