What Is a Business or Residence Lease?

If you hold land in Port Moresby, Lae, Mount Hagen or any other town, this is almost certainly the lease you hold. Division 5 of Part X of the Land Act 1996 governs it.

Sections 92 and 93 — the grant and the term

The three variants matter. A pure residence lease does not permit trading from the premises. A pure business lease does not permit living there. A combined lease permits both — the shop with a dwelling above it, which is a common form in PNG towns.

Using land otherwise than for the purpose of the lease is a breach of condition and a ground of forfeiture. Where the use has genuinely changed, the answer is an application under Part XII to vary the purpose, not simply to carry on.

Section 94 — classes of business

A business lease, or a combined lease, may specify the class or classes of business for which the land may be used.

Section 95 — the tender requirement

Subject to sections 69 and 73, before a lease under Division 5 of land in a physical planning area is granted, the land shall in the first instance be offered for lease by tender.

This is the general rule for urban land. It exists so that valuable town land goes through a competitive, published process rather than a private allocation.

Two qualifications:

• Section 69 — the Minister may exempt land from advertisement on the listed grounds, including a lessee applying for a further lease, land adjoining the applicant’s holding, and where the applicant funded the acquisition of the land from customary landowners.
• Section 73 — the tender rules. The tender notice must state the reserve price; a tender below the reserve is invalid and shall not be considered; unleased land may be re-offered by tender or afterwards granted on application; and the successful tenderer must pay the tendered amount and is then entitled to a State lease in accordance with the notice.

Zoning is a separate question

A lease purpose is not a planning permission. Section 67 provides that a State lease shall not be granted for a purpose that would contravene zoning requirements under the Physical Planning Act 1989, any other physical planning law, or any law about the use, construction or occupation of buildings or land.

So a development needs both: a lease whose purpose covers the use, and compliance with planning and building requirements.

Buying a business or residence lease

A transfer of a State lease requires approval of the dealing under Part XVII. Before you commit, check:

1. the unexpired term — a 99-year lease granted in 1975 has about half its life left;
2. the purpose clause and any specified class of business;
3. whether the improvement conditions have been satisfied;
4. whether rent is in arrears, and when the rent was last re-appraised;
5. whether any notice to show cause for forfeiture has issued;
6. whether the land has been reserved from further lease under section 49; and
7. the state of the register — mortgages, caveats and other encumbrances, under the Land Registration Act.

Renting from a lessee

If you are a tenant renting a house or shop from a State lessee, you are not dealing with the Land Act at all — you are in an ordinary landlord-and-tenant relationship, governed by your agreement, by the Landlord and Tenant (Miscellaneous Provisions) Act (Chapter 189), and, for recovery of possession, the Summary Ejectment Act (Chapter 202). A registered lease may also be recorded on the title under the Land Registration Act.