Law 2/2012 in English: when the State acquires land for public use

When a road, a port or a government tourism area needs your land: what the State must pay, who gets paid, and how much room the 2023 amendment left to argue.

Law 2/2012, the articles a property holder meets, in order

A road, a dam, a port — or, since 2023, a government tourism area — can need your land. Law 2/2012 decides when the State can take it, what it must pay, who gets paid, and how much room there is to argue. The 2023 job-creation law amended it in ways that matter: what counts as a public purpose, and whether the amount can be negotiated.

What can be taken, and for what

Land acquisition is providing land by giving fair and proper compensation to the entitled party (Law 2/2012 art. 1(2)). What is acquired and valued is land, airspace and underground space, buildings, plants, things related to the land, or anything else that can be valued (Law 2/2012 art. 1(4)). Public interest covers defense, roads and toll roads, railways, dams and irrigation, ports and airports, energy and telecoms networks, hospitals and other listed public works (Law 2/2012 art. 10, as amended by Law 6/2023), and since the amendment that includes tourism areas initiated and/or controlled by central or regional government or state- or region-owned companies (Law 2/2012 art. 10(v), as amended by Law 6/2023). In Bali that last item is the one to notice.

The entitled party must release the land once compensation is given or a final court judgment is made (Law 2/2012 art. 5). Once compensation is paid, or deposited with the court, the right ends, its evidence stops being valid and the land becomes State land (Law 2/2012 art. 43).

The amount: valued once, then final

Valuation is plot by plot: land, airspace and underground, buildings, plants, related things and other losses that can be valued (Law 2/2012 art. 33), at the value at the date the location decision is announced (Law 2/2012 art. 34(1), as amended by Law 6/2023). The 2023 amendment then made the appraiser’s value final and binding (Law 2/2012 art. 34(3), as amended by Law 6/2023): what is deliberated is the form — money, replacement land, resettlement, shares, or another form both sides agree (Law 2/2012 art. 36(1), as amended by Law 6/2023) — not the number. An objection still goes 14 working days after the deliberation, to the district court, which decides within 30 working days (Law 2/2012 art. 38(1)-(2)).

The date matters to a buyer. A value fixed at the announcement of the location does not move with what the land would fetch later, and land within an announced location is land whose price has stopped mattering. Checking the spatial plan and any announced project before buying is the protection. The spatial plan.

When the money is held by the court

Compensation is deposited with the district court (Law 2/2012 art. 42(1)-(2), as amended by Law 6/2023) where it is refused, where the holder cannot be found, or where the land is in litigation, disputed, seized or mortgaged to a bank. A plot with a dispute or a mortgage therefore does not stop the acquisition; it only changes where the money waits.

Who is paid: owners, holders, and the owner of the building

Compensation goes to land-right holders, HPL holders, wakaf administrators, owners of former customary land, customary communities, good-faith occupiers of State land, holders of a basis of control, and owners of buildings, plants or things on the land (Law 2/2012, elucidation to art. 40, as amended by Law 6/2023). For a right on someone else’s land, it is split: the HGB or hak pakai holder is compensated for the buildings, plants and things it owns, and the hak milik or HPL holder for the land (Law 2/2012, elucidation to art. 40, as amended by Law 6/2023).

That split is the part that concerns foreigners most. A foreigner’s hak pakai over an Indonesian’s hak milik, or a PT PMA’s HGB over hak milik, is compensated for what the holder owns on the land, while the land’s value goes to the owner. A leasehold villa is not named, but the owner of the building is: on our reading a lessee who built or bought the villa falls in that category, and the lease’s value as such is not separately listed. Whether the lease contract allocates acquisition compensation between the parties is worth checking. Leasehold explained.

This is commentary, not legal advice. The procedure is detailed in PP 19/2021, which we have not read for this page.

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