Indonesia Real Estate Law – The Control of Farmland Possession

Wheat fieldBackground

Determination of maximum and minimum area of farmland previously regulated within Government Regulation in Lieu of Law Number 56 of 1960 regarding the Determination Area of Farmland (“Perpu 56/1960”). Perpu 56/1960 is designated as implementation provision for Article 17 Law Number 5 of 1960 regarding Basic Agrarian Principle. Furthermore, government has also issued Government Regulation Number 224 of 1961 regarding the Implementation of Land Distribution and Land Compensation (“PP 224/1960”), which is in principle regulated the granting of compensation for land that is taken over by the government because it exceeds the maximum land ownership in Perpu 56/1960.

To control farmland possession and ownership by individually or legal entity, and to implement the provision of Perpu 56/1960 and PP 224/1960, Therefore, the Minister of Agrarian and Spatial/Head of State Land Agency (“Minister”) then issued the Minister of Agrarian and Spatial/Head of the National Land Agency Regulation Number 18 of 2016 on Control of Farmland Possession (“Perka BPN No. 18/2016”).

Restriction of Farmland Possession

The purposes of Perka BPN No. 18/2016 are to reduce social gap, , levelling social welfare and to ensure food security.

The restriction provision of farmland possession within Perka BPN No. 18/2016 are apply for:

  1. individually; and
  2. legal entity.

These are the  classification of the restriction farmland possession for the individually owner of farmland:

  1. not dense, for maximum land 20 (twenty) hectare;
  2. less dense, for maximum land 12 (twelve) hectare;
  3. fairly dense, for maximum land 9 (nine) hectare; or
  4. very dense, for maximum land 6 (six) hectare.

On the other hand, restriction ownership of farmland by the legal entity is under the authorization letter of granting rights.

Individually owned farmland can transfer ownership to another party with requirements:

  1. the other party must be domiciled in 1 (one) district where the land is located, proven by the local identity card; and
  2. the land must be used and utilized for farming.

Any transfer of farmland rights which is violating the above requirements, cannot be registered to land office.

Obligation of the Farmland’s Owner

If the owner of farmland resides outside the district where the farmland is located, then no later than 6 (six) months since the date of right acquisition, farmland owner should:

  1. transfer the right of his/her land to other party where the party is domicile inside the district where the farmland is located; or
  2. move in to the district where the farmland is located.

However, the obligation to transfer the right of land like above mentioned, shall not apply if:

  1. the owner of farmland domiciled in the district directly border with the district where the farmland is located;
  2. the owner of farmland domiciled outside the district where the land is located because they carry the state duty;
  3. the owner of farmland domiciled outside the district where the land is located because of religious duty;
  4. civil servant, army officer and/or equal as them; or
  5. under other provision stipulated by Minister.

If the owner of farmland does not fulfill his obligation to transfer the right or move in to the district where the land is located as mentioned above, then the owner’s right will be abolished, and the farmland will be controlled directly by the State. Therefore, the farmland owner will get compensation by the State in accordance with the prevailing laws and regulations.

The individual of farmland owner is obliged to:

  1. cultivate and utilize the farmland effectively as intended, no later than 6 (six) months since the issuance date certificate of right of land; and
  2. if the individual owner could not cultivate and utilize the farmland, then the owner of farmland could make a written agreement with other party to cultivate and utilize the farmland according to its purposes. The other party engaged under the agreement could be granted right to use over the right of ownership by the owner, and also can be encumbered with mortgage right.

Farmland owned by legal entity is obliged to:

  1. cultivate and utilize the farmland effectively in accordance with its purpose no later than 6 (six) months since the issuance date certificate of right of land; and
  2. if the legal entity owner could not cultivate and utilize the farmland, the owner of farmland could make a written agreement with other party to cultivate and utilize the farmland in accordance with its purposes.

Supervision By the Head of Land Office

To control farmland possession, the Head of Land Office has authorities and obligations to:

  1. supervise the implementation of Perka BPN No. 18/2016;
  2. conduct an inventory to the farmland ownership which exceeding the limitation of the farmland possession;
  3. conduct an inventory to the farmland ownership where the owner is domiciled outside the district where the farmland is located; and
  4. report the supervision result to Minister for every 6 (six) months.

If the Head of Land Office find the violation of farmland ownership accordance with the provision of Perka BPN No. 18/2016, then the farmland will stipulated as the landreform/agrarian reform object, and then will be distributed to farmer in accordance with the prevailing laws and regulations.

Alam Setya Muchtar

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Indonesia Real Estate Law – The Control of Farmland Possession
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