This question arises more often than it should — usually after money has been paid. The starting point is that the restriction is constitutional, which puts it on a different footing from an ordinary statutory requirement.
Why the source matters
Section 56(1)(b) of the Constitution reserves the acquisition of freehold land to citizens. Under section 11, the Constitution is the Supreme Law, and all acts — legislative, executive or judicial — that are inconsistent with it are, to the extent of the inconsistency, invalid and ineffective.
So this is not a licensing requirement that can be cured by a later approval or a penalty. An acquisition that section 56(1)(b) forbids is not an acquisition the law recognises.
Papua New Guinean land legislation uses the same technique elsewhere. Section 132 of the Land Act 1996 says a customary landowner has no power to dispose of customary land otherwise than to citizens in accordance with custom, and that a contract to do so is void. Section 128(2) says an unapproved controlled dealing is void and of no effect.
In each case the consequence is the same: nothing passes, and money paid is recoverable only by a personal claim against whoever took it.
Section 4 — the structures do not work
An “indirect interest” is an interest that, in law or in equity, confers or includes powers or rights equivalent to those possessed by an owner of freehold land. For that purpose “interest” includes any right, power or privilege in, over or in connection with land conferred by any instrument or transaction — whether or not it would otherwise amount to an interest in land.
Ownership of an indirect interest in freehold land is to be regarded as a form of freehold ownership for the purposes of section 56(1)(b).
The drafting is deliberately functional. It looks at the powers and rights actually conferred, not at the label on the document. Arrangements that commonly fail:
- A nominee holding for a non-citizen. The beneficial powers sit with the non-citizen.
- A company formed to hold the land. An ordinary company is not a citizen corporation under section 15, and citizenship is not traced through shareholding.
- An option or long-term call over the land that gives control equivalent to ownership.
- A trust under which the non-citizen has the beneficial interest — noting that trusts are kept off the Register, which conceals the arrangement but does not validate it.
- A management or control agreement conferring the practical rights of an owner.
Registration does not cure the problem
A natural question is whether indefeasibility saves an acquisition that should not have happened. Two provisions point the other way:
- Section 9 of the Freeholds Act provides that the additional interest arising from registration in favour of the person entitled to be registered is not freehold ownership for section 56(1)(b) purposes. It addresses a person entitled to be registered; it does not confer entitlement on someone constitutionally barred from acquiring.
- Section 155 of the Land Registration Act lets the Registrar refuse to receive an instrument that contains matter contrary to law — which an instrument giving effect to a constitutionally prohibited acquisition does.
The prudent assumption is that the arrangement is exposed, not protected.
The practical exposure
- No enforceable interest. The buyer may end up with nothing that a court will recognise or a registry will record.
- Money at risk. Recovery is a personal claim against the recipient — worth only what that person can pay.
- The nominee problem. Where title is in a nominee’s name, the nominee is the registered proprietor, and under sections 24 and 45 a purchaser from them is not affected by notice of the arrangement except in case of fraud. The nominee can sell.
- No security. A lender cannot take a good registered mortgage over an interest that cannot validly be held.
- Improvements at risk. Money spent building on land you cannot hold is very difficult to recover.
What to do instead
A State lease is a term of years, and therefore falls outside the section 3 definition of freehold ownership. It is open to companies and to non-citizens, and it is the tenure under which nearly all commercial land in Papua New Guinea is held.
Terms of up to 99 years are available for most lease types — long enough for any ordinary commercial purpose.
- Take a State lease, or a sublease of one — obtaining Ministerial approval where the term or remaining term exceeds five years.
- For a project on customary land, use lease-leaseback and an SABL — the mechanism designed for exactly that situation.
- If freehold is already held by a qualifying person and needs to be dealt with commercially, apply for a substitute State lease under Part IV.
- Get advice before money moves, not after — the Public Solicitor, or a firm from the law firms directory.
Take advice immediately and do not compound it with further payments or improvements. There may be a route to regularising the position — conversion, a lease, or restructuring the transaction — but it depends entirely on the facts, and the longer the arrangement runs the more is at stake.
Sources
- Land (Ownership of Freeholds) Act (Chapter 359) — ss 3, 4, 9, 15; Parts II, III and IV
- Constitution — ss 11, 56
- Land Act 1996 — ss 11, 102, 128, 132
- Land Registration Act (Chapter 191) — ss 24, 45, 155
- Mudge v Secretary for Lands [1985] PGSC 13; [1985] PNGLR 387
Before relying on anything here, read the current text of the Land Act 1996 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.