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Land Compensation

19 May 2010

For more on land issues see our other web pages:

Who will get land under the draft transitional Land Law? – Provides information on who will get land under the Land Law, major changes since the first draft, and issues of concern.

Transitional Land Law (also Tetum) – Includes various drafts of the law in three languages, submissions and information on the public consultation process.

When is it fair for the State to take private Land? (also Tetum) – Analysis on the draft Expropriation Law which allows the State to take land for public purposes and private companies, with few limitations.

RDTL Strategic Development Plan 2011-2030Threatening Land Rights section explores the government’s plans to claim over 22,000 hectares of land, which many people depend on for daily needs.

La'o Hamutuk Bulletin February 2010 (also Tetum) – Articles on Land Justice in Timor-Leste, Transitional Land Law, and Public Consultation on the Land Law.

Land Processes in Timor-Leste (also Tetum) – An overview of land-related processes currently taking place. This includes documents, commentary and analysis from various sources.

Can distributing Effective Registration Certificates resolve the land problem? (also Tetum, December 2011)

President Vetoes Three Land Laws March 2012



The draft transitional Land Law is intended to resolve confusion over land ownership, and to enable some people to receive compensation if they lose their land. This will require a large number of compensation payments, and it is important to ensure an accountable and transparent process. In many other countries compensation funds have been stolen, with money for compensation lost to corruption or taken to fund other activities. For cases where there is more than one claimant for the same land, the draft transitional Land Law ranks land claims from strongest to weakest. The holder of the strongest claim gets the land right, the second receives compensation and other claimants get nothing (see Who will get land under the draft transitional Land Law).

The draft transitional Land Law also allows for compensation payments to non-Timorese people. If the RDTL State pays this cost, millions of dollars could go to foreigners to compensate for the loss of property they gained when their government stole Timor-Leste’s land. Alternatively, the Indonesian and Portuguese governments could pay this compensation – but they may use this as leverage in other negotiations. Compensation could therefore play an important role in Indonesian and Timor-Leste government negotiations on justice for past crimes. Parliamentary Committee A raised this issue when the Minister for Justice testified on the transitional Land Law on 5 May 2010.

Four processes decide the compensation structure for claims under the draft Land Law:

  • The transitional Land Law decides who has the right to compensation, appeal processes and who has the final decision. In most cases the State pays compensation. (Draft is before Parliament).

  • A future Official Table of Land Values will determine how much compensation is paid. Compensation is based on “historic land values” – the value of the land at the time the successful claimant gained their right to own the land.

  • The Real Estate Finance Fund Law establishes a fund to pay compensation (also known as the Real Estate Financial Fund). The Fund will also issue mortgages to loan people money to pay compensation costs. (Draft is before Parliament).

  • A future Compensation Mechanism Law will decide the terms of the loan. It will also determine when the State cancels this debt.

Some of the compensation mechanisms established by the draft transitional Land Law will also be used for expropriation.

We welcome further commentary, analysis and documents from all sources.

Going into debt to pay compensation

The draft Land Law requires people who gain their land right through “special adverse possession” to pay compensation costs. People can gain special adverse possession if they peacefully, publicly and continuously occupy land since 31 December 1998. This only applies in limited cases, because stronger ranking rights do not permit special adverse possession (see Who will get land under the draft transitional Land Law). Special adverse possessors must pay compensation to the previous owner. The amount they pay is the value of the land the year that they started occupying it. If people cannot meet this cost, the State will issue them a mortgage on their land. This will allow them to meet this cost, but will also put them in debt.

Policy advisors believe that having special adverse possessors pay the full compensation costs will encourage the local community to accept them as land owners. However, they could soon lose their land ownership if they cannot meet repayment costs. Special adverse possessors are more likely vulnerable, because they had little land security. They are less likely to have a regular and secure income. Mortgages could lead onto other debts – for example, people may borrow money from unethical money lenders if they fall behind on repayments. Other options are to cancel or reduce the repayment, or only require repayment if people sell their land.

Draft Real Estate Finance Fund Law

The Real Estate Finance Fund Law (also Tetum and Port.) establishes a structure for paying the compensation required under the transitional Land Law.

Accountability and Transparency

Government allocates money to the fund through the annual State budget process. A three person Executive Commission manages the fund, with support from a technical secretariat. The many functions of the proposed fund confuse what the core goals, focus and expertise are. The draft law outlines some accountabilities for fund managers, but not repercussions. The law needs stronger accountability and transparency mechanisms, as well as a clear chain of command, protections for whistleblowers, and clear course of action if accountabilities are not met.

Core Functions

The draft law describes four functions for the fund, which we explore below:

  1. Pay compensation
  2. A fund for unspecified needs arising from the Land Law
  3. Provide payment of damages and relocation for State expropriation of lands
  4. Manage rent collection for State properties and manage mortgages

1. Pay compensation

The draft Land Law outlines a clear structure to decide who gets compensation, who pays and how much (to be detailed in an official table). The Fund is the mechanism to provide this money over a fixed period of time until all land ownership is resolved.

2. A fund for unspecified needs

The Fund is also to pay for needs arising from the Land Law. The Fund must approve proposals but it does not say who will provide these proposals, or how the Fund makes policy decisions. This confuses the Fund’s responsibilities – is it to manage finances or make social policy? Doubling up funding and implementation responsibilities creates confusion, decreases accountability and enables corruption. Government ministries are best equipped to deliver social housing, increased legal aid, mediation services and fund review bodies. Establishing a strong process for intra-government planning and cooperation is the best way to meet these needs (see Land Justice in Timor-Leste).

3. Pay expropriation costs

The Fund pays damages and relocation costs when the State compels people to sell their land for the “public interest” (see our page on Expropriation). Under the draft law, project implementers pay extra costs to avoid expropriation out of their budgets - such as making a longer road – but not expropriation costs, these can come from the Fund. This creates an incentive to expropriate land – even when it is the more expensive option. Requiring government ministries to pay expropriation costs out of project budgets would encourage them to find alternatives: for example building a road around a village, not through it.

4. Manage mortgages

In principle, commercial mortgages are issued on evidence that a person can repay the debt. This will not be the case for State mortgages issued under the terms of the draft transitional Land Law. The law does not outline any in principle commitment to minimize mortgage defaults – such as hardship policies. (The government’s draft Strategic Development Plan also proposes issuing government mortgages – these will be governed by a separate mortgage law).


The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)
Institutu Timor-Leste ba Analiza no Monitor ba Dezenvolvimentu
Rua D. Alberto Ricardo, Bebora, Dili, Timor-Leste
P.O. Box 340, Dili, Timor-Leste
Tel: +670-3321040 or +670-77234330
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