Legal Aspects of the Right of Management and Its Regulations

Following the enactment of the Job Creation Law and its implementing regulations, the legal framework governing the Right of Management (Hak Pengelolaan or HPL) in Indonesia has undergone significant updates. Understanding these latest provisions is essential for businesses, investors, and government entities navigating Indonesian real estate law and land utilization.

Legal Basis

The Right of Management (“HPL“) is regulated under several laws and regulations, including:

1. Law Number 6 of 2023 on the Stipulation of Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation as Law (“Job Creation Law“);
2. Government Regulation Number 18 of 2021 on the Right of Management, Land Rights, Condominium Units, and Land Registration (“GR 18/2021“);
3. Minister Regulation of Agrarian Affairs and Spatial Planning/Head of the National Land Agency of the Republic of Indonesia Number 18 of 2021 concerning Procedures for the Determination of the Right of Management and Land Rights (“MR of ATR/BPN 18/2021“).

Definition

Based on the Job Creation Law, GR 18/2021, and MR of ATR/BPN 18/2021, HPL is defined as the right of control by the State, the authority to exercise which is partially delegated to the holder of such right.

HPL Subjects

Based on Article 137 of the Job Creation Law, HPL may be granted to the following parties:

1. Central Government Agencies;
   For Central Government Agencies whose main duties and functions are not directly related to land management, HPL may be granted upon the approval of the minister administering government affairs in the field of finance.
2. Regional Governments;
3. Land Bank Agency;
4. State-Owned Enterprises/Regional-Owned Enterprises;
   Subsidiaries of State-Owned Enterprises and Regional-Owned Enterprises are also included as one of the HPL subjects.
5. State/Regional-Owned Legal Entities;
6. Legal Entities designated by the Central Government that receive special assignments as stipulated by a presidential regulation; or
7. Customary Law Communities, for HPL originating from customary land.

Read More: Differences of Right of Management under the Old and New Law

The HPL holders as mentioned above certainly have obligations, prohibitions, and rights as HPL holder. The obligations of HPL holders are as follows:

1. To carry out development or cultivate the land in accordance with the purpose of the grant of the right no later than 2 (two) years after the right is granted;
2. To maintain the land, preserve its fertility, prevent damage, and preserve the environment;
3. To maintain the conservation function of river border areas and other conservation functions;
4. To prepare a spatial utilization plan in accordance with the land carrying capacity and integrated with the Spatial Plan (“RTR“);
5. To release the HPL, in part or in whole, if ownership rights are granted or if it is used for the public interest; and
6. To submit an annual report regarding the use and utilization of the HPL land.

The obligations of HPL, as follows:

1. To impose tariffs and/or annual mandatory fees in accordance with the provisions of laws and regulations concerning tariffs for the utilization of HPL land;
2. To use and utilize the land in accordance with the designation and requirements as stipulated in the decision; and
3. To carry out land utilization cooperation with other parties by granting land rights in the form of the Right to Cultivate, Right to Build, or Right of Use.

HPL holders are also prohibited to:

1. Closing or enclosing a yard or parcel of land from public traffic access, public access, or waterways;
2. Damaging natural resources or environmental sustainability;
3. Abandoning the land; and/or
4. Constructing permanent buildings that reduce the conservation function of embankments, border areas, or other conservation functions where the HPL area includes river border areas or other conservation functions.

HPL Objects

HPL may only originate from 2 (two) types of land, namely state land and customary land, based on a land utilization agreement with the HPL holder. State land as referred to above may originate from:

1. Land stipulated by Law or Government Determination. State land which has been stipulated by Law or Government Regulation originating from:
   1. Abolition of private landholdings;
   2. Nationalization of Dutch-owned companies;
   3. Acquisition of land for wartime control purposes;
   4. Granting of new rights over land originating from the conversion of western land rights;
   5. Swapraja or former swapraja, concessions or leases of former swapraja land;
   6. Control of immovable property owned by individual Dutch citizens or confirmation of the status of houses/land owned by legal entities whose directors/management have abandoned them;
   7. Revocation of Land Rights and objects located thereon;
   8. Control of State Land; and/or
   9. Resulting from natural disasters.
2. Reclaimed land. Land resulting from activities carried out by individuals, legal entities, or the central/regional government in order to increase the benefits of land resources from an environmental and socio-economic perspective through land filling, land drying, or drainage;
3. Accretion land. Land that is naturally formed as a result of sedimentation in rivers, lakes, coastal areas, and/or emergent islands;
4. Land from the relinquishment or transfer of rights. Land that has been relinquished or transferred to the state by the holder of an HPL or Land Rights to become state land;
5. Land originating from the release of forest areas. Land originating from State Forest areas whose status has been released from the State forest area;
6. Abandoned land. Land that has been determined as abandoned land based on a decision of the Minister responsible for government affairs in the field of agrarian/land affairs and spatial planning (“Minister”);
7. Land Rights whose term has expired and for which no extension and/or renewal has been applied for. Land whose term has expired, originating from Right to Cultivate, Right to Build, and Right of Use whose rights have expired and for which no extension and/or renewal has been requested;
8. Land Rights whose term has expired and which cannot be extended and/or renewed due to Central Government policy. Land subject to government policies, including being used and/or planned for public interest, revision of the RTR, or not meeting the requirements for extension or renewal; and
9. Land that has been State Land from the beginning. Land that has never been granted any Land Rights.

Application Procedure

An HPL application shall be submitted by the applicant to the Land Office in accordance with the location of the relevant land. All required documents that are photocopies must be legalized by the authorized official. The application shall be addressed to the Minister, the Head of the Regional Office, or the Head of the Land Office, depending on the area of the land to be granted based on the Conformity of Spatial Utilization Activities or the basis for the acquisition of the land. Applications for HPL may also be submitted through the electronic system provided by the Minister.

The attachments to the HPL application as referred to above consist of:

1. List and Map of Land Acquisition;
2. HPL or Land Rights Application Form;
3. Planning Document on the Designation, Use, and Utilization of Land for the purpose of the application for the HPL or Land Rights;
4. Cover Letter for the Submission of the Application Documents;
5. Statement Letter of Physical Possession of the Land Parcel; and
6. List of Completeness of the Application Requirements.

If the application documents are declared complete, the HPL applicant shall be provided with an acknowledgment of receipt of the required documents and a payment order for the non-tax state revenue fee (“PNBP”), and if the applicant has paid the PNBP, the next stage of the application process is the land examination. Nevertheless, if deficiencies are found, the Head of the Land Office shall notify the HPL applicant to complete the deficiencies.

Read More: Condominium on the Land with Right to Build over the Land with Right of Management

Occurrence of HPL

An HPL is determined by a Ministerial Decree, which may be issued electronically.  An HPL must be registered with the land office, and the HPL takes effect upon registration with the land office.  As proof of ownership of the HPL, the HPL holder is granted a certificate.

Encumbrance, Transfer, and Release of HPL

In terms of encumbrance, HPL cannot be used as collateral for debt by being encumbered with a Mortgage Right. Furthermore, regarding transfer, HPL cannot be transferred or assigned to another party. HPL may only be released if it is granted as Right of Ownership, released for public interest, or as otherwise provided under the laws and regulations. In the event that the HPL being released constitutes State/Regional Property, the release and cancellation of the HPL shall be carried out in accordance with the applicable laws and regulations. The release of HPL shall be made by and before the authorized official and reported to the Minister.

Termination of HPL

The termination of HPL may occur due to:

1. The right being revoked by the Minister due to:
   1. Administrative defects; or
   2. A court decision having obtained permanent legal force;
2. Voluntary relinquishment by the right holder;
3. Relinquishment for the public interest;
4. Revocation pursuant to Law;
5. Granting of Ownership Rights;
6. Designation as Abandoned Land; or
7. Designation as Destroyed Land.

The termination and expiration of HPL over state land shall result in the land becoming state land or being subject to the provisions of the court’s ruling. The conversion into state land is carried out through the reorganization of land use, utilization, and ownership under the authority of the Minister. The expiry of the HPL over customary land results in the land reverting to the control of the indigenous community.

The regulation of HPL has undergone very significant developments since the enactment of the Job Creation Law, GR 18/2021, and MR of ATR/BPN 18/2021. These three regulations introduced various reforms that demonstrate the Government’s efforts to provide clearer and more detailed legal certainty regarding HPL. Therefore, an understanding of the latest provisions concerning the HPL is of great importance for the Government, business actors, and the public who have an interest in land utilization.

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Author Inez Karina Worotikan

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Sources:

• Law Number 6 of 2023 concerning the Stipulation of Government Regulation in Lieu of Law Number 2 of 2022 concerning Job Creation as Law
• Government Regulation Number 18 of 2021 concerning Management Rights, Land Rights, Conominium Units, and Land Registration
• Minister Regulation of Agrarian Affairs and Spatial Planning/Head of the National Land Agency Number 18 of 2021 concerning Procedures for the Determination of Management Rights and Land Rights

This article has been updated to reflect the latest regulations under Law No. 6 of 2023 on Job Creation and Government Regulation No. 18 of 2021, replacing the previous framework under Government Regulation No. 40 of 1996.