Finance & Projects
Jakarta
Client Alert
August 2012
Implementing Regulation of New Land
Acquisition Law Finally Issued
After more than 6 months being prepared, early this month, Presidential
Regulation No. 71 of 2012 on Land Procurement Process for Public
Interest Projects - the much-awaited implementing regulation of the New
Land Acquisition Law which was enacted in January 2012 - was finally
issued.
Any ongoing land acquisition for public interest projects - which includes
any land acquisition process that has been stipulated in land acquisition
planning documents until the release of land title stage and/or land
acquisition process in which the compensation has been deposited in the
court - will still need to be completed following the old regulatory regime
(Presidential Regulation No. 36/2005) until 31 December 2014. The
transitional provisions of the Presidential Regulation however provide that
land in an ongoing land acquisition process which has not been acquired
by 31 December 2014 can be further procured following the procedures set
out in the Presidential Regulation. These transitional provisions in the
Presidential Regulation seem to indicate that the new land acquisition
regulatory regime is only applicable for new land acquisition processes or
land acquisition processes in the preparation stage where the land
acquisition planning documents are still being processed.
Specific Provisions of the Presidential Regulation
The Presidential Regulation implements the New Acquisition Law through
among other the following provisions:
1. Maximum Period for Land Acquisition
Although some investors have commented that that overall time period
provided for in the Presidential Regulation is still far too long, the land
acquisition period in the Presidential Regulation should be clear and
certain enough for investors to estimate the time required to complete the
land acquisition process.
If there are no objections or appeal requests, the land acquisition process
will take around 319 working days. If there is an objection or appeal
request, the Presidential Regulation sets a maximum of 583 working days
from the date the Governor receives the land acquisition plan documents
until land certification/registration process.
The land title itself is extinguished upon the granting of the compensation
or the deposit of the compensation in the court or upon completion of land
title release.
Finance & Projects
The Presidential Regulation also allows commencement of construction
above the procured land after delivery of the procured land to the institution
that needs the land without waiting for the land certificate to be issued.
In Attachment A, we provide the timeline details.
2. Clarification on Officials Responsible For Each Land Acquisition Stage
Land acquisition can be divided into four stages, i.e., planning, preparation,
execution and land delivery. The Presidential Regulation provides specific
delegation to relevant officials for the implementation of each stage above:
•
Planning - The acquiring institution (e.g., the government institution, stateowned enterprise with special assignment from the Government) will be
responsible for preparing the land acquisition plan documents which must
be submitted to the relevant Governor.
•
Preparation - Preparation is conducted by the relevant Governor through
a preparation team which consists of the relevant mayor/regent, relevant
units in the province, the acquiring institution, and other relevant
institutions. The Governor is allowed to delegate these preparation tasks
and authority to the relevant mayor/regent.
•
Execution - The execution of land acquisition falls within the authority of
the Head of BPN (National Land Agency) - which is implemented through
the head of the BPN regional office, or the head of the land office, which
will act as the head of land acquisition ("Head of Land Acquisition"). The
Head of Land Acquisition will form a land acquisition team and lead the
negotiation with the affected landowners.
•
Delivery - The delivery of the procured land to the acquiring institution
will be conducted by the Head of Land Acquisition.
3. Details on Land "Ownership" Evidence
The New Land Acquisition Law extends the type of parties who can receive
compensation in a land acquisition process by including among others:
indigenous people, people who control state land in good faith, owners of
buildings, and trustees of waqaf land. The Presidential Regulation provides
further details of types of documents and conditions that prove the
"ownership" or entitlement over the land.
Investors should be aware that if there is not sufficient land entitlement
evidence, the Presidential Regulation allows the person claiming to own
the land to provide supporting evidence in the form of written statements
from a minimum of two local people that have no family relationship until
the second degree with the person claiming to own the land confirming that
the person is the real owner or is a person who is entitled to the relevant
land. Implementation of this non-family relationship test could be
problematic since any non-family person controlled by the person claiming
to own the land can just simply issue these statements.
4. Appointment of Public Appraiser
The Presidential Regulation allows not only a land appraiser licensed by
the Ministry of Finance and BPN to be appointed to appraise the fair
compensation amount of the land but also a public appraiser licensed by
the Ministry of Finance.
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Client Alert August 2012
Finance & Projects
The appraiser must be appointed through a competitive process following
government procurement procedures within 30 working days, but if this
process cannot be implemented, the Presidential Regulation seems to
accommodate direct appointment of a public appraiser by the Head of
Land Acquisition.
5. Mortgage Land Issue
For banks, it is important to note that the Presidential Regulation allows
land title extinguishment following the deposit of the relevant compensation
in the court even if the land is still subject to a mortgage. This means that if
the land title is relinquished for public interest projects, the bank will
automatically lose its mortgage right.
Although the Presidential Regulation stipulates that the landowner may
only withdraw the compensation from the court upon receiving approvals
from the creditors, banks may want to include in their loan documentation
additional protection clauses (e.g., covenant, undertaking, event of default
or payment acceleration clauses) due to the existence of the above
provisions.
6. Small Area Land Acquisition
For procurement of less than one hectare of land, the Presidential
Regulation allows the acquiring institution to procure the land directly from
the landowners through a sale and purchase mechanism or through an
exchange of land or through any other agreed mechanism. These
provisions seem to suggest that the acquiring institution does not need to
follow the procedures set out in the Presidential Regulation for the
acquisition of a small area of land. However, if the land acquisition is
conducted directly by the acquiring institution, the Presidential Regulation
does not provide further clarification on whether the compulsory land title
extinguishment mechanism will apply in case the landowners refuse to sell
the land.
7. Land Acquisition by State-Owned Enterprises with "Special
Assignment"
It is unfortunate that the Presidential Regulation does not provide any
further implementing provisions on land procurement by state-owned
enterprises that receive a special assignment from the Government.
The New Land Acquisition Law opens the possibility for state-owned
enterprises who receive a special assignment from the Government to
procure land for public interest projects using the procedures provided
under the New Land Acquisition Law.
However, it is not clear from the New Land Acquisition Law what
constitutes "assignment from the Government". For example, the most
frequently asked question for procurement of land for power projects is
whether PLN can procure land for power projects (e.g., for transmission
network construction) by using the New Land Acquisition Law when the
assignment from the Government is for PLN to cooperate with private
investors for that development.
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Client Alert August 2012
Finance & Projects
www.hhp.co.id
For further information please
contact:
Timur Sukirno
Partner
Tel: +62 21 515 4910
[email protected]
Luke Devine
Foreign Legal Consultant
+62 21 515 4909
[email protected]
Kirana D Sastrawijaya
Senior Associate
+62 21 515 4916
[email protected]
Nindya Novianty
Associate
+62 21 515 4901
[email protected]
Closing
The New Land Acquisition Law is an important milestone in accelerating
infrastructure development in Indonesia as this Law vests the Government
with powers to extinguish land title after a series of steps and appeal
processes have been completed.
It is expected that the issuance of the Presidential Regulation which
provides a clear process with clear deadlines for the steps involved in land
acquisition process will significantly help turn a number of infrastructure
projects from plan to reality. However, full details of how the new land law
regime will be implemented will not be known for up to three months
pending issuance of the technical guidelines for the land acquisition steps
which are mandated by the Presidential Regulation to be issued within
three months after the Presidential Regulation is in force.
Hadiputranto, Hadinoto & Partners is planning to host a client seminar on
this Presidential Regulation. Please contact Anny Gunadi at
[email protected] for further information on this seminar.
Hadiputranto, Hadinoto & Partners
The Indonesia Stock Exchange
Building,
Tower II, 21st Floor
Sudirman Central Business District
Jl. Jenderal Sudirman Kav. 52-53
Jakarta 12190, Indonesia
Tel: +62 21 515 5090/91/92/93
Fax: +62 21 515 4840/45/50/55
This publication is intended to provide clients with information on recent legal developments and issues of significant interest. It should not be regarded as
legal advice or opinion.
©2012 Hadiputranto, Hadinoto & Partners. All rights reserved. Hadiputranto, Hadinoto & Partners is a member of Baker & McKenzie International, a Swiss
Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a
“partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm.
This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.
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Client Alert August 2012
ATTACHMENT A
TIMELINE OF LAND ACQUISITION FOR PUBLIC INTEREST PROJECTS UNDER THE NEW LAND ACQUISITION LAW
Submission of
Planning
Document to
the Governor
Institution submit
to Head of Land
Acquisition re:
Execution
104
118
118
Notification
72
to Community
Review Team
20
90
nd
2 Public
Consultation
10
Forming
Preparation
Team
60
30
Public
Consultation
Preliminary
Data
Collection
Supreme
Court
Supreme
Court
74
Adm.
Court
Verification
and
Correction
17 (3+14)
14
Location
Stipulation
by Governor
(2 yr + 1 yr)
Location
Announcement
44 (30+14)
Inventory &
Identification
and
Announcement
74
60 (30+30)
Stipulation
of
Appraiser
and
Valuation
Temporary
Location Plan
List
PLANNING
Acquisition
planning
documents
prepared by
the institution
who needs
the land
("Institution")
PREPARATION
District Court
30
by Head of BPN
- SOONEST : 141 WD
- LONGEST : 289 WD
- SOONEST : 141 WD
- LONGEST : 257 WD
- SOONEST : 282 WD
- LONGEST : 546 WD
- SOONEST : 319WD
- LONGEST : 583 WD
7
Negotiation Compensation
Payment
(on type and
amount of and Land Title
Release
compensation)
- When
compensation
is paid or
deposited in
the Court, by
law the land
ownership is
released
EXECUTION
by Governor and can be delegated to Regent/Mayor
7
30
Land
Certification/
Registration
LAND
DELIVERY
From Head
of Land
Acquisition
to Institution
Explanation :
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
14)
15)
16)
The Institution prepares the land acquisition planning documents.
The Institution submits the land acquisition planning documents to the Governor.
The Governor forms a preparation team within 10 working days after receiving the land acquisition planning documents.
The preparation team notifies the development plan to the surrounding community within 20 working days after the receipt of the land acquisition planning documents by the
Governor.
The preparation team conducts preliminary data collection within 30 working days after the notification to the community.
The chairman of the preparation team signs a temporary location plan list as the results of the preliminary data collection.
The preparation team conducts public consultation within 60 working days after the date of signing of the temporary location plan list, and outlines the results in minutes of
agreement.
If there is any objection from the relevant community, the preparation team holds 2nd public consultation within 30 working days after the date of the minutes of agreement.
If there is still objection from the relevant community, the Institution reports such objection to the Governor through the preparation team. The Governor will establish a review
team and issue a letter of acceptance or rejection of the objection within 14 working days after the receipt of the objection based on recommendation from the review team.
The Governor issues location stipulation within 14 working days after the receipt of the application by the Institution. The location stipulation shall be valid for two years and can be
extended for one year.
If there is any objection to the location stipulation, the relevant party may submit a claim to the Administrative Court within 30 working days after the issue of the location
stipulation. The Administrative Court issues a decision within 30 working days after the receipt of the claim.
The relevant party may appeal the Administrative Court's decision to the Supreme Court within 14 working days. The Supreme Court issues a decision within 30 working days
after the receipt of the appeal.
The Governor and Institution announce the location stipulation at the latest 3 working days after the issue of the location stipulation. The announcement shall be conducted for at
least 14 working days.
The Institution applies for execution of land acquisition to the head of the BPN regional office/the head of the land office ("Head of Land Acquisition")
The Head of Land Acquisition conducts inventory and identification of the land and affected parties within 30 working days. The results shall be announced for a period of at least
14 working days.
The relevant party may submit any objection to Head of Land Acquisition within 14 working days after the announcement. The Head of Land Acquisition conducts verification
and correction within 14 working days after the receipt of the objection.
The Head of Land Acquisition conducts procurement of an appraiser within 30 working days and the appraiser conducts appraisal within 30 working days after its stipulation by
the Head of Land Acquisition.
Negotiation on the form and amount of compensation with the relevant party shall be conducted within 30 working days after the appraisal result being obtained by the Head of
Land Acquisition. The results of the negotiation shall be outlined in minutes of agreement.
If an agreement of the form and amount of compensation cannot be reached, the relevant party may submit an objection to the District Court within 14 working days after the
signing of the minutes of agreement. The District Court issues a decision within 30 working days after the receipt of the objection.
A party who objects to the District Court's decision may submit an appeal to the Supreme Court within 14 working days. The Supreme Court issues a decision within 30
working days after the receipt of the appeal.
The Institution, based on validation of the Head of Land Acquisition, provides monetary compensation within 7 working days after the stipulation of the form and amount of
compensation.
The Head of Land Acquisition delivers the land acquisition results to the Institution within 7 working days after the land title release.
The Institution conducts land registration/certification within 30 working days after the delivery of the land acquisition results