Do I Need Approval to Sell or Transfer My State Lease?

This is the provision that most often destroys a property transaction in Papua New Guinea. Part XVII of the Land Act 1996 makes an unapproved dealing void, not merely unenforceable — and the ground on which approval must be refused is one that a great many leases fall foul of.

Section 127 — what it does not cover

This Part does not apply to or in relation to customary land. Dealings with customary land are governed by section 132, which makes a contract to sell, lease or otherwise dispose of customary land otherwise than to citizens in accordance with custom void.

Section 128(1) — the definitions that matter

Section 128(2) — the consequence

The practical discipline is: make the contract conditional on Ministerial approval, and do not release the purchase money until approval is endorsed.

Section 129 — when approval must be withheld

This is the provision that stops most sales. A lessee who has held agricultural or business land without meeting the improvement conditions cannot sell it — the Minister is directed to withhold approval unless the special-grounds exception applies.

Section 129(2) reinforces it from the other direction: unless the Minister has given prior approval under paragraph (b), a lessee shall not dispose of, or enter into a contract or agreement to dispose of, land the subject of a State lease unless the improvement and other covenants and conditions have been fulfilled.

Section 128(3) — reasons must be given

Where the Minister refuses to approve a controlled dealing, he shall notify the reasons for his refusal to the person seeking approval.

A statutory right to reasons is valuable. It tells you whether the obstacle is arrears (curable), unmet improvement conditions (curable, or a candidate for section 118(2) relaxation), or something else. It is also the material for a judicial review if the refusal is legally flawed.

Section 128(4) and (5) — the 28-day duty, and the offence

The grantee or transferee (or intended grantee or transferee) shall, within 28 days of the execution of the relevant instrument:

• (a) present the instrument to the Department for endorsement with a certificate of approval; and
• (b) lodge a duplicate or certified copy with the Department.

Helpfully, section 128(6) provides that a duplicate or certified copy prepared solely for the purposes of subsection (4)(b) is not liable to stamp duty.

Section 128(7) — resource interests are not controlled dealings

For the avoidance of doubt, a transfer, transmission or dealing with an estate or interest arising under or subject to:

• the Forestry Act 1991;
• the Mining Act 1992; or
• the Petroleum Act (Chapter 198),

is not a controlled dealing for the purposes of this Act. Resource tenements have their own transfer and approval regimes under their own statutes.

Checklist before you buy or sell

1. Is it a leasehold estate? Check the remaining term against the five-year line, and any option to renew.
2. Is the rent paid to date? Obtain evidence. Remember the gazetted arrears list under section 83(7) and (8) is prima facie evidence that rent is due and unpaid.
3. Have the improvement conditions been performed? This is the usual sticking point. Get the evidence together before contracting.
4. If not, seek prior special-grounds approval under section 129(1)(b) — before signing anything.
5. Make the contract conditional on Ministerial approval, and hold the money until approval is endorsed.
6. Diarise 28 days from execution for presentation and lodgement.
7. Check for a notice to show cause and for any reservation under section 49.
8. Register the transfer under the Land Registration Act. Ministerial approval and registration are two separate steps, and you need both.