Freehold is rare in Papua New Guinea, and deliberately so. The constitutional restriction and the Act that implements it are short, but they decide who can own land outright in this country.
Section 56(1)(b) of the Constitution
Section 56 of the Constitution reserves certain rights and privileges to citizens. Paragraph (b) reserves the acquisition of freehold land.
It is expressed as a restriction on acquisition, not on holding what was already held. That distinction runs through the whole scheme, and it is why the Act deals so carefully with interests acquired by operation of law, by registration, or under transactions begun before Independence.
What the Land (Ownership of Freeholds) Act does
The Land (Ownership of Freeholds) Act (Chapter 359) states its own purpose in section 1. It exists to implement section 56(1)(b) by defining:
- (a) the forms of ownership that are to be regarded as freehold; and
- (b) the corporations that are to be regarded as citizens,
for the purposes of that paragraph — and to facilitate dealings in certain land by providing for the conversion of certain interests into State leases.
The application of those definitions is limited to the purposes of section 56(1)(b) of the Constitution, and the Act does not, for any other purpose, affect the nature or incidents of any interest in land.
So the Act is not a general statement of what freehold means in Papua New Guinean law. It is a definitional statute for one constitutional paragraph.
Section 2 defines “interest” to mean an interest in land, including an estate in land.
Section 3 — the general definition
Subject to the qualifications and exceptions in Division 2 and to section 4, the forms of ownership to be regarded as freehold for the purposes of section 56(1)(b) are —
(a) absolute ownership; and
(b) ownership in fee simple; and
(c) equivalent forms of ownership — being the ownership of interests greater than estates for terms of years —
whether technically called “legal” or “equitable”, but not including any form of customary ownership of, or customary interest in, land.
Three features do a great deal of work:
- Substance over label. Paragraph (c) catches any ownership of an interest greater than a term of years, however it is described. That is what keeps a State lease — a term of years — outside the restriction.
- Legal or equitable. Dressing an interest as equitable does not take it outside section 56(1)(b).
- Customary ownership is expressly excluded. Customary land is not freehold for these purposes; it has its own regime, including the prohibition in section 132 of the Land Act 1996.
Section 4 — indirect ownership is caught
“Indirect interest” means an interest that, in law or in equity, confers or includes powers or rights equivalent to those possessed by an owner of freehold land. “Interest” for this purpose 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).
This is an anti-avoidance provision, and a wide one. An arrangement that gives a non-citizen the practical powers of a freehold owner — through options, trusts, control agreements or layered instruments — is treated as freehold ownership, whatever form it takes.
Which corporations count as citizens
A company is not automatically a citizen because its shareholders are. The Act defines which corporations are to be regarded as citizens for section 56(1)(b), and that definition is what determines whether a corporate entity may acquire freehold at all.
This sits alongside a different but related rule: under section 2 of the Land Act 1996, “citizen” for that Act’s purposes includes a business group, a land group, and customary kinship, descent and local groups — which is what makes dealings with customary land possible between such groups.
Why most land here is leasehold
The combined effect of section 56(1)(b) and the definitions is that freehold is closed to non-citizens and to corporations that do not qualify. So commercial and foreign-invested land holding proceeds by State lease — a term of years, outside the section 3 definition — which is why the Register of State Leases is where nearly all registered dealings happen.
- Customary land — the great majority; held under custom; dealings restricted by section 132 of the Land Act.
- State land under lease — the working commercial tenure; open to companies and non-citizens; governed by the Land Act and the Land Registration Act.
- Freehold — a small residue; acquisition reserved to citizens by section 56(1)(b), with a statutory route to convert into a State lease.
The exceptions matter
Division 2 sets out a series of interests that are not to be regarded as freehold ownership — life estates, interests acquired by executors and trustees, interests arising on registration, title by survivorship, and others. They are dealt with in the exceptions to the freehold definition, and they are what stop the restriction producing absurd results when land passes by operation of law.
Sources
- Land (Ownership of Freeholds) Act (Chapter 359) — ss 1–4; Parts I and II
- Constitution — s 56
- Land Act 1996 — ss 2, 4, 132
- Land Registration Act (Chapter 191)
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.