Introduction
What would happen if 62-year-old evidence, converted under the Agrarian Law of 1960, but without any land certificate, was still deemed valid today? What would happen if parties claiming to be the rightful party:
- had not applied for land certification since 1980 (the expiry period of previously converted ex Western right to Indonesian land right);
- had not possessed the land for a very long time; but
- still had the right to apply for a land certificate?
This situation begs the question as to what constitutes valid land rights ownership evidence.
This article discusses a case1 that was first overruled by the Supreme Court2 and was subsequently repealed by the Supreme Court in its judicial review,3 focusing on the good faith buyer’s perspective.
Facts
On 30 November 2016, several heirs and one party (a limited liability company that bought the land right from the heirs on 1 August 2016) registered an unlawful act claim. The heirs claimed that their underlying right was permanent.4 Four days later, on 5 August 2016, the buying party applied for a land certification to the land office. The land office replied on 24 October 2016 explaining the importance of land possession as a prerequisite to applying for land certification. The period between the buying party’s purchase of land and the heirs’ registration of the claim in the court was three months. This meant that, from the beginning, the claim was planned by all claimants, particularly the buying party.
Background
Article 1338 of the Indonesian Civil Code (ICC) stipulates that an agreement must be performed in good faith. This provision applies for an agreement made by parties that are not subject to the customary law principles. A land transaction is subject to customary law principles and other related regulations, but not provisions under the ICC. It does not mean, however, that there is no good faith principle known under Indonesia’s customary law. Several jurisprudences prior to and after Agrarian Law of 1960 have proven that the good faith principle is also applicable in the land transaction. Under decision No. 210 K/SIP/1955, the law says that “the buyer of a farm who had bought the farm in good faith from an heir of the owner must be protected”. After 1960, under decision No. 1230 K/SIP/1980, the law says that the good faith buyer must be protected. Further, under decision No. 3201 K/PDT/1991, the law says that the sale and purchase made only in proforma will only bind the parties in that agreement and will not bind the third party as good faith buyer.
The good faith concept has been developing. In 2016, through a circular letter, the Supreme Court provided a clearer concept. If it is a sale and purchase, it must be performed at a reasonable price. Then, the buyer must be prudent by ensuring that the seller is the rightful party for the land. Article 531 of ICC stipulates that a possessor is considered as good faith when the possessor of property was not aware of any defect in it. This same principle has been affirmed by the Supreme Court in its legal rule under decision No. 1847 K/Pdt/2006 stating that “the Claimant is a bad faith buyer since the Claimant has been aware that the disputed object that he bought was and has been possessed by the Defendant since 1963”.
Decision
In this case the Supreme Court stated that the disputed object has been under the status of state land (land possessed by the state) and, therefore, the claimants were unable to transfer the land to the other party. The Court considered that such transfer and delivery of right of disputed object was not legally binding and the buyer could not be protected as the good faith assignee. The good faith concept was not discussed by the Court in the judicial review stage. The Court instead focused on who had the stronger underlying right to apply for land certification, despite the fact that the land assignee had full knowledge of the presence of so many people over the assigned land.
Comment
Who would buy questionable land that was possessed by so many different people with uncertain right? This situation indicates that the seller did not rightfully own the land. The jurisprudence shows that a buyer must check that the land is legally owned by the seller. The jurisprudence also shows that, when the buyer is aware of different owners and yet continues to buy the land, they are a bad faith buyer. It should be added that the possession of third party does not automatically justify that the claimed party is not the owner. But this fact is important enough to raise reasonable doubt on the legitimacy of the ownership-related document.
Should the judges have checked the assignment price between the heirs and the assignee? This point was not discussed in any of the Court’s legal considerations. But it is sensible to assume that the purchase or assignment price will most likely be not up to the market standard. This can show whether the buyer was in good faith or not.
Despite these questions, the decision by the Supreme Court has shown that there is still inconsistency on the good faith concept. It is imperative for the Court to be consistent to ensure legal certainty in a land-related matters that have become very complicated.
For further information on this topic please contact Eddy Leks at Leks&Co by email (eddy.leks@lekslawyer.com). The Leks & Co website can be accessed at www.lekslawyer.com.
