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Definition and Legal Basis
Based on Article 28 paragraph (1) Law No. 5 of 1960 on Basic Provisions on Agrarian (“UUPA”), Right to Cultivate is the right to cultivate the land which is controlled by the state, in certain period of time, for farming, fisheries, or animal husbandry (“HGU”). Besides UUPA, other regulations which stipulate about HGU is Government Regulation Number 40 of 1996 on Right to Cultivate, Right to Build, and Right to Use over Land (“GR No. 40/1996”). Further stipulation about HGU is regulated in GR No. 40/1996.
Subject of HGU
Only (i) Indonesian citizen and (ii) legal entity which is established under Indonesian Law and domicile in Indonesia can own HGU. If the holder of HGU is not qualified as Indonesian citizen and as Indonesian legal entity which is domiciled in Indonesia, then in 1 (one) year period the holder of HGU shall release or transfer the HGU to the other party who is qualified. If the HGU is not released or transferred, the HGU shall expire and the status of land will become the state land.
Object of HGU
The land which can be granted with HGU is state land. HGU can only be granted over the land with minimum area of 5 (five) hectare. If the area of land which is proposed for HGU reaches 25 (twenty five) hectare or more, the utilization of HGU shall use the proper capital investment and good corporate governance in accordance with the development of times.
If the land granted by HGU is state land that constitutes the forest area, the granting of HGU can only be done after such land is released from its status as forest area.
The granting of HGU over the land which already has certain right can only be made after the completion of the release of such right in accordance with the the prevailing regulations.
If over the land which is granted by HGU, there is a plant or building which owned by other party that exist under a valid title, the new holder of HGU shall give compensation to the owner of the building and plant as mentioned.
The Granting of HGU
HGU is granted by Government Act, which is by the decree on granting of right by the Minister (which responsible in the land/agrarian matters) or appointed officials. HGU is existed since it is registered by Land Office in the book of land in accordance with the prevailing regulation.
Time Period of HGU
HGU can only be granted for maximum period of 25 (twenty five) years. For the company who needs more time, HGU can be granted for maximum period of 35 (thirty five) years. Based on the request of HGU holder and by considering the condition of its company, the time period can be extended with a maximum period of 25 (twenty five) year.
The extension and the renewal of HGU can be made by the request of the right holder with the condition as follows: (i) the land is cultivated in a good way in accordance with the condition, nature, and purpose of the granting of right, (ii) the conditions of granting of right is fulfilled by the holder of right, (iii) the holder of right is still qualified as the holder of right.
The Transfer of HGU
HGU can be transferred to other party by (i) sale and purchase, (ii) exchanges, (iii) capital participation, (iv) grants, and (v) inheritance.
The transferof HGU by sale and purchase shall be made through a deed made by the land conveyancing officer (“PPAT”). The sale and purchase that was conducted through the auction is proven by the Minutes of Auction. The transfer of HGU through inheritance shall be proven by testament or the statement of heir which was made by authorized instance.
Elimination of HGU
The causes of the elimination of HGU is regulated in Article 34 of UUPA and Article 17 paragraph (1) GR No. 40/1996. HGU becomes obliterated by the following causes:
a) The expiry of time period as stipulated in the decree of granting or decree of extension;
b) The right is cancelled by the authorized official before the expiry of its time period because:
1) The obligations of the right holder are not complied and/or the violation of the conditions as stipulated in Article 12, 13, and/or 14 of GR No. 40/1996;
2) The decision of court which has obtained absolute legal force;
c) Released voluntarily by the right holder before the expiry of its time period
d) Revoked by the Law Number 20 of 1961;
e) Abandoned;
f) The land becomes obliterated;
g) The holder of HGU is no longer qualified to own HGU as stipulated in Article 30 paragraph (2) of UUPA.
The Encumbrance of HGU
HGU can be used as loan guarantee through the encumbrance by mortgages right (hak tanggungan). The mortgage right shall be eliminated automatically by the obliteration of HGU.
The Registration of HGU
Every granting, transfer, and elimination of HGU shall be registered to ensure the legal certainty. The registration includes: (i) the mapping measurement and the bookkeeping of land, (ii) registration of rights of land and transfer of such rights, (iii) the granting of letters which proves the right.
Right and Obligation of HGU Holder
Right of HGU holder is to cultivate its land in accordance with the area of land and time period that has been given.
Attachment II of Head of National Land Office of Republic Indonesia Regulation Number 1 of 2010 stipulate about the requirements which must be fulfilled by the holder of HGU if he/she wants to register the HGU, this also has been stipulated in Article 12 paragraph (1) of GR No. 40/1996, which is:
a) Pay the revenue to the state;
b) Perform the farming, plantation, fisheries, and/or animal husbandry in accordance with the purpose and conditions as stipulated in its decree of grating of right;
c) Cultivate the HGU land in a good way in accordance with the business eligibility based on criteria which is stipulated by the technical instance;
d) Build and maintain the environment facility and land facility which is existed within the environment of HGU area;
e) Maintain the fertility of the land, and prevent the damages of natural resources and to keep the sustainability of the capacity of living environment in accordance with the prevailing law and regulations;
f) Submit the annual written report regarding the use of HGU;
g) To give back the land which has been granted by HGU to the state after the HGU is obliterated;
h) To deliver the certificate of obliterated HGU to the Head of Land Office.
Under Article 35 paragraph (1) of Law Number 5 of 1960 on the Principle Provisions of Agrarian (“Agrarian Law”), it is stated as follows:
“Right to Build is right to establish and to have buildings over land that is not his own, with a maximum period of 30 years.”
Right to build (“HGB”) may be extended with a maximum period of 20 years as a request from right’s holder and bearing in mind the need and state of buildings. Subject who can be the holder of HGB is an Indonesian citizen or legal entity that is established under Indonesian law and domiciled in Indonesia. Legal entity is an institution that is given a status as legal entity, such as the Limited Liability Company, Cooperative, the Association of Unit Owners and Occupants of the Condominium, and the Foundation.
According to the Government Regulation of Republic of Indonesia Number 40 of 1996 on Right to Cultivate, Right to Build, and Right of Use Over Land (“GR No. 40/1996”), the granting of HGB over a right of ownership is performed by the holder of right of ownership through a deed made by Land Conveyancing Officer (“Pejabat Pembuat Akta Tanah/ PPAT”). The granting of HGB over a Right of Ownership is made by an agreement between the holder of Right of Ownership and the prospective holder of HGB which is stated in the deed that is made by PPAT. The granting of HGB over a right of ownership shall be registered at the Land Office (Kantor Pertanahan). The period of HGB that is issued over the right of ownership is maximum 30 (thirty) years and may be renewed with the new provision of HGB based on the agreement that is implemented on the deed which is made by PPAT and the respective right to build shall be registered in the local land office (kantor pertanahan setempat).
Under Article 41 of Agrarian Law, it is stated as follows:
“Right of Use is the right to use and/or collect the results of the land that is directly controlled by the State or land owned by others, who gives the authority and duties which is specified in the decision by the competent official or in an agreement with the owner of the land, which is not a lease agreement or the agreement to cultivate a land, all things that are not contrary to the spirit and provisions of this law.”
The granting of Right of Use over Right of Ownership is performed by the holder of Right of Ownership through a deed made by Land Conveyancing Officer (“Pejabat Pembuat Akta Tanah/ PPAT”). The granting of right of use over the right of ownership shall be registered on the land book in the Land Office. The right of use over the right of ownership also binds the third party since it is registered. The period of the right of use over the right of ownership is maximum 25 (twenty five) years and it can not be extended. Right of use over the right of ownership may be renewed with the new provision of right of use based on an agreement between the holder of right of use and the holder of right of ownership, as implemented on the deed which is made by PPAT and shall be registered on the local land office.
Alsha Alexandra Kartika
According to Article 41 of Law Number 5 of 1960 on the Basic Principles of Land (“Land Law”), Right of Use means right to use and collect the production over State Land or land which is owned by private parties. As stipulated in Article 42 of Land Law, Right of Use can be granted to:
Indonesian citizens;
foreigners domiciled in Indonesia;
Indonesian companies established based on Indonesian law and domiciled in Indonesia; and
foreign companies having its representative office in Indonesia.
Further, as stipulated in Government Regulation Number 40 of 1996 on Right of Cultivation, Right to Build, and Right of Use Over Land (“Government Regulation 40”), Right of Use can be granted over a land with land status of:
state land;
land under Right of Management (hak pengelolaan);
land under Right of Ownership (hak milik).
Property ownership by foreigners is specifically stipulated in Government Regulation Number 41 of 1996 on Property Ownership by Foreigner Domiciled in Indonesia (“Government Regulation 41”). Article 2 of Government Regulation 41 states the type of houses which are allowed to be owned by foreigners:
houses built over state land;
houses built based on an agreement with the holder of Right of Ownership. The agreement shall be made before Land Conveyancing Officer (Pejabat Pembuat Akta Tanah);
condominium built under Right of Use over state land .
The Term of Right of Use
It is stipulated in Article 45 of Government Regulation 40 that the term of the Right of Use over state land is 25 (twenty five) years which can be extended for another 20 (twenty) years. The Government Regulation 40 has set out some requirements before the term of Right of Use can be extended:
The land is used according to the land use;
Conditions of grant of right have been properly fulfilled by right holder;
The right holder fulfills the requirements as the right holder as set out in the Government Regulation 40.
Further, for the extension of Right of Use, Article 47 of Government Regulation 40 states that the extension application must be submitted at the latest 2 (two) years before its expiration date.
Moreover, the Government Regulation 41 has set out different term for Right of Use for the houses that built based on an agreement with the holder of Right of Ownership, the term of agreement must not exceed 25 (twenty five) years which the agreement can be extended with another 25 (twenty five) years. However, the extension for another 25 (twenty five) years shall be made in a separate agreement between the foreigner and the holder of Right of Ownership. Further, the extension can be made provided that the foreigner is domiciled in Indonesia or for the case of foreign company, having its representative in Indonesia.
If the foreigner who owns the house that is built with Right of Use over state land or based on an agreement with right holder is not domiciled anymore in Indonesia, within 1 (one) year, the foreigner has to assign his right to other parties which fulfill the requirements to own the land. In the event the foreigner refuses to assign his right to other parties, the house which is built over state land will be controlled by state to be auctioned. As for the house built based on an agreement with the right holder, the house will be owned by the right holder.
Jerry Shalmont
Background
Nowadays, there are various kind of companies established in Indonesia. In term of construction, these companies require a building located on a land. Therefore, according to Law Number 5 of 1960 on the Principle Provisions of Agrarian, there are several rights over land. One of these rights over land is the right to build which can be defined as the right to establish and own a building on a land. The Government Regulation Number 40 of 1996 develops and improves this right to build. The right to build can be given or imposed on state land, land submitted to the right of management, and land submitted to the right of ownership. The right to build can also be used as collateral for loans pledged with mortgage rights.
Allocation of Right to Build
According to the Article 19 of the Government Regulation Number 40 of 1996 describes that right to build is given to Indonesian citizen and legal entities established under Indonesian law and domiciled in Indonesia. The right to build isn’t given to foreigners and foreign entities, so according to article 39 of the Government Regulation Number 40 of 1996 for foreigners and foreign entities, they only have the right to use. The right to build can be granted for a period of 30 years and can be extended for another 20 years. The right to build is given by a decision of the Minister or by an officer appointed upon the recommendation of the management right holders, and have been registered in the book of land in the land office.
Obligations of Holders of Right to Build
The holder of the right to build has to:
to pay money of which amount and terms of payment are specified in the decision , use the land in accordance with its allocation and requirements as stipulated in the decisions and its agreements;
preserve both land and existing building and preserving the environment;
surrender the land back to the State, the holder of Right to Manage or holder of Right of Ownership after the Right to Build is expired;
deliver the certificate of Right to Build which has expired to the Head of the Land Office.
Assignment of the Right to Build
In article 34 Government Regulation Number 40 of 1996, it is mentioned that the Right to Build can be transferred to another party, through a sale and purchase, exchange, capital investment, grants, and inheritance.
Expiration of the Right to Build.
The Right to Build expires if its term ends, is terminated before the term has expired if any requirement is not fulfilled, released voluntarily by the holders of their rights before the the term has expired, is revoked for public purposes, if the land is abandoned or destroyed.
Isrilitha Pratami Puteri
According to the Regulation issued by State Minister for Public Works Number 28/PRT/M/2006 Year 2006 (“Minister Regulation”), it is allowed for the representative of foreign construction legal entities (“Foreign Entities”) to conduct their business in Indonesia after fulfilling some requirements.