What Types of Land Ownership May Company Obtain In Indonesia?

(123RF)

By:

Team of Hukumindo

Previously, the Hukumindo.com platform has talk about "How To Buy Land In Indonesia?" you may read also "Principles of Buying Land in Indonesia", and on this occasion we will discuss about What Types of Land Ownership May Company Obtain In Indonesia?

In this article, we assumed that you as a foreign investor have established a company in Indonesia. It is also assumed that you as a foreign investor have understood the basic principles of buying land in Indonesia. And also assumed that you understand how to buy land in Indonesia. In general, not all types of land ownership in Indonesia can be gain by companies. Only certain types of land ownership are allowed. Make sure the land you have purchased is certified according to the company's needs at the relevant National Land Agency office. 

Governing Law

This law was officially named Law No. 5 of 1960 concerning Basic Regulations on Agrarian Principles, which regulates the rights to land, water and air. It also includes basic rules and provisions for control, ownership, use or utilization of national agrarian resources in Indonesia, land registration, criminal provisions and transitional provisions.[1] If we look at Law No. 5 of 1960 in a limited way, in fact the Agrarian Law regulates land law in a narrow sense.[2] Through Law No. 5 of 1960, regulates matters of land use. The land rights regulated in the law include land ownership rights, cultivation rights, building use rights, use rights, lease rights, land clearing rights, and rights to collect forest products.[3] 

Regarding the title of the article here, the law that regulates and relates to the types of land ownership that can be obtained by companies in Indonesia is Law No. 5 of 1960 concerning Basic Regulations on Agrarian Principles. Derived legal rules that are directly related to Law No. 5 of 1960 is Government Regulation No. 24 of 1997 concerning Land Registration and its amendments.

Types of Land Ownership

To understand the types of land ownership in Indonesia, we must first understand land rights. What are land rights? According to Law No. 5 of 1960 concerning Basic Regulations on Agrarian Principles: "The rights to land as referred to in paragraph (1) of this article authorize the use of the land in question, as well as the body of the earth and water and the space above it, only as necessary for interests directly related to the use of the land within the limits according to This Act and other higher legal regulations". 

In the opinion of the author, 'land rights' are simply a 'power' granted by law to a specific area of land to be used as long as it does not contrary with the law. This means that when a company owns land rights in Indonesia, it has the power to use it for investment and/or economic purposes in general. 

According to Law No. 5 of 1960 concerning Basic Regulations on Agrarian Principles, especially Article 16, Land rights include: [4]

1. Right of ownership;
2. Cultivation rights;
3. Building rights;
4. Right to use;
5. Lease rights;
6. Land clearing rights;
7. The right to collect forest products;
8. Other rights that are not included in the rights mentioned above which will be stipulated by law as well as rights of a temporary nature as mentioned in Article 53.

1. What is meant by right of ownership? According to Article 20 paragraph (1) Law No. 5 of 1960 concerning Basic Regulations on Agrarian Principles: "Right of Ownership are hereditary, strongest and most complete rights that can be owned by people on land, taking into account the provisions in Article 6". Only Indonesian citizens can have right of ownership. 

2. What is meant by cultivation rights? According to Article 28 paragraph (1) Law No. 5 of 1960 concerning Basic Regulations on Agrarian Principles: "Cultivation rights are rights to cultivate land which is directly controlled by the State, within the period as referred to in Article 29, for agricultural, fishery or animal husbandry companies.". Cultivation rights are granted for a period of 25-35 years. 

3. What is meant by building rights? According to Article 35 paragraph (1) Law No. 5 of 1960 concerning Basic Regulations on Agrarian Principles: "Building Rights is the right to construct and own buildings on land that is not he/her's own, with a maximum period of 30 years." Can be extended for a period of 20 years. 

4. What is meant by right to use? According to Article 41 paragraph (1) Law No. 5 of 1960 concerning Basic Regulations on Agrarian Principles: "Right to Use is the right to use and/or collect proceeds from land directly controlled by the State or land owned by another person, which gives the authority and obligations specified in the decision to grant it by the official authorized to give it or in an agreement with the land owner, which is not a lease agreement, rent or land management agreement, everything as long as it does not conflict with the spirit and provisions of this law".

5. What is meant by lease rights? According to Article 44 paragraph (1) Law No. 5 of 1960 concerning Basic Regulations on Agrarian Principles: "A person or a legal entity has the right to lease land, if he has the right to use land owned by another person for building purposes, by paying the owner a sum of money as rent." The mechanism for paying the rent can be done at a certain time or at a certain time of period, before or after the land is used.

Regarding the last two types of land rights (Land clearing rights and The right to collect forest products),  is not close-related to this article, so it will not be discussed further. While regarding 'Other Rights' that are not included in the rights mentioned above which will be stipulated by law as well as rights of a temporary nature as mentioned in Article 53 of Law No. 5 of 1960 concerning Basic Regulations on Agrarian Principles will be further subject to discussion. 

What Types of Land Ownership Can Company Obtain In Indonesia?

So, last question, what types of Land Ownership can company obtain in Indonesia? To answer this question, we still have to refer to Law No. 5 of 1960 concerning Basic Regulations on Agrarian Principles, especially to article number 16 as mentioned above. 

If we examine further, it is possible that when a company is established in Indonesia, it will be allowed to obtain land rights of the following types: 

1. Cultivation Rights (Hak Guna Usaha/HGU);
2. Building Rights (Hak Guna Bangunan/HGB);
3. Lease Rights (Hak Sewa).

These are land rights that are 'commonly' used in Indonesia by companies. Make sure your company's land ownership rights in Indonesia are in accordance with applicable law. And if you have any issue with this topic, contact us, feel free in 24 hours, we will be glad to help you.

*) For further information please contact:

Mahmud Kusuma Advocate

Law Office

Jakarta - Indonesia.

E-mail: mahmudkusuma22@gmail.com

________________

References:

1. "Ulasan UU Pokok Agraria (UU No 5 Tahun 1960)", www.rumah.com., Diakses pada tanggal 6 November 2021, https://www.rumah.com/panduan-properti/kenali-uu-no-5-tahun-1960-lebih-dekat-18542

2. Ibid.

3. Ibid.

4. Law No. 5 of 1960 concerning Basic Regulations on Agrarian Principles.