Recent developments

The Parliament has approved the extension of discussions on the 23 Priority Bills, including the Land Bill. One of the reasons for this delay, according to the Parliament, is that they have not received feedback from the government on some outstanding issues in these Priority Bills. The Land Bill is expected to be completed and issued by the next Parliament sometime this year. The Land Bill is meant to clarify previously vague provisions, act as a bridge between the 1960 Agrarian Law and current conditions, and codify the key implementing regulations of the 1960 Agrarian Law in terms of land. The Land Bill is not meant to revoke the 1960 Agrarian Law.

Implications for Real Estate Developers

There are still some inconsistencies between certain provisions in the Land Bill and the prevailing regulations on land and/or location permits, e.g., on maximum land ownership size. While we hope that these inconsistencies are merely drafting errors given the rush to have this enacted in the past couple of years, real estate developers and/or plantation companies should pay attention to the land area limitations and also other new features (such as land courts) in the Land Bill. Once enacted, the Land Bill will prevail as a law against other lower level implementing regulations.

What the Land Bill Says

The following are some key provisions in the Land Bill.

Land Titles

  • The types of land provided under the Land Bill are the same as those under the 1960 Agrarian Law. Land titles comprise: (i) Right to Own (Hak Milik); (ii) Right to Cultivate (Hak Guna Usaha); (iii) Right to Build (Hak Guna Bangunan); (iv) Right to Use (Hak Pakai); and (v) Right to Lease for Buildings (Hak Sewa untuk Bangunan).
  • The Land Bill introduces the possibility for a Hak Guna Bangunan or a Hak Pakai title to be granted for an underground area where the area is not part of the land or is not owned by the owner of the land. Unfortunately, no further implementing provisions are provided. Currently there is only regional regulation that regulates the use of underground areas.
  • The Land Bill also clarifies the horizontal separation concept. It states that owners of the land, the space above the land and space below the land could be different.
  • One of the key differences that should be noted is that the Land Bill provides minimum and maximum sizes of land ownership under Hak Guna Usaha, Hak Guna Bangunan and Hak Pakai:
    1. Hak Guna Usaha:
      • The minimum size of a plot of land for which this title can be granted is 5 hectares.
      • For plantations, the maximum land ownership of a company or a group of affiliated companies is 10,000 hectares per province and 50,000 hectares nationwide.
      • For agriculture or fisheries, the maximum land ownership of a company or a group of affiliated companies is 50 hectares per province.
    2. Hak Guna Bangunan:
      • The maximum land ownership for housing is 200 hectares, for hotels is 100 hectares, and for industry is 200 hectares.
    3. Hak Pakai
      • For Hak Pakai with a time frame, for the purposes of constructing building and also for agriculture, plantation, farming and fisheries activities, the maximum size of land is 5 hectares.
  • The Land Bill also introduces a requirement to sign land lease agreements before a land notary, and provides an option to have a lease recorded in the relevant Hak Milik land certificate (although it does not mention who is eligible to apply for this recordation). The Land Bill implies that this is only applicable for a lease of Hak Milik land. The Land Bill also says that the building can be secured with a fiducia security.

Termination of a Land Title

  • The Land Bill provides a separate section for termination of a land title. A new matter that could trigger the termination of a land title is noncompliance with applicable zoning regulations.
  • When a land title is terminated, in certain cases, the previous land owner will have priority to apply for a new land title over the same land. If the previous land owner is not entitled to apply for a new land title, the previous land owner's civil rights over the buildings or fixtures on top of the land will be settled amicably. The Land Bill also provides that if a land title terminates, any rights over buildings, plants and fixtures on top of the land will not terminate.

Land Registration

  • To ensure legal certainty, the Government has an optimistic plan to conduct land registration of all land within Indonesia's territory within five years after the Land Bill is enacted as a law.
  • Land registration includes: (a) measurement, mapping, and bookkeeping of the land; (b) registration of the land title and the transfer of the rights; and, (c) issuance of the letter of proof for the applied rights.
  • In the absence of any written evidence of land ownership, a party (or its predecessors) who physically controls a plot of land continuously for 20 years or more can register its land ownership, provided that: (i) the control is done openly and on a good faith basis, and supported by trustworthy witnesses; and (ii) there are no objections from the customary community or others, before or during the announcement period
  • We also note that the draft Land Bill has not regulated the consequences of a civil review (Peninjauan Kembali). If a plot of land has been registered based on a final and binding court decision, it is not clear whether the ownership of the land can still be challenged by a civil review. We believe this is an important issue that needs to be addressed to ensure protection of the rightful owner of the land.

Rights and Obligations

  • A land title owner must utilize the land in accordance with the approved usage and comply with the obligations determined by the Government when the land title is granted. Owning a land title for speculation purposes that causes loss to the community is prohibited.
  • A land title owner is required to provide passage access to the surrounding community in accordance with the applicable norms. This obligation was not clear in the 1960 Agrarian Law, and was only found in a government regulation, which has lower status than a law. However, the Land Bill does not stipulate whether the passage access will be reflected in the land certificates, or the size of the passage access.

Land Disputes

  • The Land Bill introduces a new court for settlement of disputes related to land. The Land Court will be established in the district court located in the capital of each province in Indonesia.
  • Land disputes must be resolved within 180 days after the claim is registered at the Land Court. The only appeal process is cassation at the Supreme Court. The deadline for declaring a cassation appeal is 14 days after the date of the Land Court decision. The cassation decision must be issued within 60 days after the cassation request is registered by the Supreme Court.
       

Actions to Consider/Conclusion

Given one of the key intentions of the Land Bill is to accommodate recent and practical developments on land issues, while also avoiding inconsistencies with other land related regulations, we suspect that an updated and improved version of the Land Bill will be prepared before its enactment. We will issue another client alert if that happens

 

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