Lease-leaseback is the mechanism behind the special agricultural and business lease, or SABL — the most contested land instrument in modern Papua New Guinea.
How the mechanism works
- The customary landowners lease their land to the State (the head lease).
- The State grants a special agricultural and business lease over the same land — typically to a company, sometimes to a landowner entity (the sublease).
- At the end of the term the land reverts, and customary rights revive.
It exists because section 132 prevents customary landowners dealing with their land directly with a non-citizen developer. Lease-leaseback routes the transaction through the State.
Section 11 — the provision
(1) The Minister may lease customary land for the purpose of granting a special agricultural and business lease of the land.
(2) Where the Minister so leases customary land, an instrument of lease in the approved form, executed by or on behalf of the customary landowners, is conclusive evidence that the State has a good title to the lease and that all customary rights in the land, except those specifically reserved in the lease, are suspended for the period of the lease to the State.
(3) No rent or other compensation is payable by the State for a lease of customary land under subsection (1).
What subsection (2) actually does
- “Conclusive evidence” of the State’s title. Once an instrument of lease in the approved form has been executed by or on behalf of the landowners, the State’s title to the head lease is established by the instrument itself.
- Customary rights are suspended for the whole period of the lease — all of them, except those specifically reserved in the lease. What is not written into the lease as a reservation is gone for the term. Terms of 99 years are not unusual.
- Reservations must be specific. Gardening rights, hunting rights, access to sacred sites, rights to water, rights of way — if the group wants them to survive, they must be expressly reserved in the instrument.
This is the single most important practical point about SABLs for landowners: the reservations clause is the whole protection, and it is written before signature, not after.
Section 11(3) — no rent from the State
The State pays nothing for the head lease. Any money reaching the landowners comes from the sublease — the arrangement with the developer — not from the State. So the commercial terms that matter to the group are in the SABL and any associated agreements, and the group needs its own advice on those.
Section 66 — the head lease controls
Notwithstanding anything in any other law, a provision of a State lease of customary land leased by the customary landowners to the State that is inconsistent with the terms and conditions of the lease from the customary landowners is, to the extent of that inconsistency, of no effect.
This is a real protection and it is under-used. The SABL cannot give the developer more than the landowners gave the State. Where an SABL purports to authorise something the head lease does not permit — a different purpose, a longer term, a use over an area the head lease reserved — that provision is of no effect to the extent of the inconsistency.
Anyone examining an SABL should read the head lease alongside it, and compare.
The special agricultural and business lease
The lease granted back is governed by Division 9 of Part X. See what is a special agricultural and business lease? for its terms, and note that under section 69(2)(i) land may be exempted from advertisement where a lease is to be granted under the SABL provisions — so these leases are not tendered in the ordinary way.
Grounds on which SABLs have been questioned
SABLs have attracted sustained legal and public scrutiny in Papua New Guinea. The recurring questions are:
- Was the instrument executed by or on behalf of the customary landowners, by people with authority under the custom of that place to bind the group?
- Was there a determination of ownership under section 9 before the head lease was taken?
- Was the lease in the approved form? Section 11(2)’s conclusive-evidence effect is conditional on that.
- Is the SABL consistent with the head lease, or does section 66 cut parts of it down?
- Was the purpose genuinely agricultural or business — or was the lease used to obtain access to something else, such as timber?
See Tzen Plantation Ltd v Mukurramainga Land Group [2025] PGSC 50; SC2746.
Get independent advice for the group, arranged and paid for by the group, before anyone signs. Ask to see the draft head lease and the draft SABL together. Read the reservations clause line by line. Ask what happens to the money, who receives it, and on what terms. And ask whether an incorporated land group should hold the group’s side of the transaction.
Sources
- Land Act 1996 — ss 9, 10, 11, 66, 69, 102, 132
- Land Groups Incorporation Act — PacLII 1986 Revised Edition
- Tzen Plantation Ltd v Mukurramainga Land Group [2025] PGSC 50; SC2746
- Constitution — ss 53, 54; National Goal 4
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.