Overview:
Koror Gov. Eyos Rudimch has vetoed a major lease reform bill, warning it could violate national law, weaken public land protections and expose families to predatory lenders. Supporters said the measure would have expanded access to loans and home financing. Was the veto the right call?
Rudimch says measure could violate national law and put public land leaseholders at risk of losing homes
By: L.N. Reklai
KOROR, Palau (May 19, 2026)— Eyos Rudimch has vetoed a controversial lease reform bill that would have expanded the ability of Koror public land leaseholders to transfer or use their leases as collateral, saying the measure could violate national law, weaken existing contracts and expose residents to predatory lenders.
In a May 17 veto letter to Koror State Legislature Speaker Marie Anderson-Nabeyama, Rudimch said he supports efforts to promote development on Koror State public lands but believes L.B. 13-02 creates serious legal and financial risks that outweigh its intended benefits.
The bill, known as the “Leaseholder Empowerment Act,” was designed to give holders of residential public land leases greater flexibility to secure loans and transfer leasehold interests. Lawmakers argued the measure would help families obtain financing for home construction, renovations and development projects by making leaseholds easier to use as collateral.
But Rudimch said the legislation conflicts with protections under the Constitution of the Republic of Palau and the Palau National Code because it could override provisions in existing lease agreements.
“The bill, as written, would negate certain provisions in existing contractual agreements,” Rudimch wrote. “This conflicts with the contract clause of the national constitution and Section 405 of Title 1 of the Palau National Code, which prohibits legislation that impairs the obligations of contracts.”
The governor also warned that parts of the bill allowing mandatory transfers of leasehold interests could raise constitutional concerns involving due process and government “takings” protections.
The veto marks the latest development in a months-long debate over how far Koror should go in loosening restrictions on state residential leases.
Earlier versions of the legislation would have broadly allowed leaseholders to transfer or mortgage leases, even when existing contracts limited those actions. Supporters said the changes were necessary because many families have struggled to access financing due to restrictions in Koror State and Koror State Public Lands Authority lease agreements.
After concerns were raised by the governor and KSPLA, lawmakers scaled the measure back. The revised version narrowed transfer rights mainly to loan default situations while preserving broader rights to use leaseholds as collateral for financing.
Even with those revisions, Rudimch said he remains concerned the bill could leave residents vulnerable to “unscrupulous lenders” or disguised land purchases.
He argued that current requirements for KSPLA and Koror State Government approval of lease encumbrances serve as an important safeguard against exploitation.
“For example, a person wishing to avoid having to obtain KSPLA’s approval for a transfer of a leasehold interest could effectively purchase the lease by disguising the purchase monies as a loan,” Rudimch wrote.
The governor said KSPLA already routinely approves legitimate financing arrangements, including construction loans and home equity loans through the National Development Bank of Palau, allowing residents to build or renovate homes and purchase boats.
Rudimch also expressed concern that the bill could unintentionally discourage lending instead of improving access to financing.
He said banks and lenders carefully vet borrowers before approving loans, and could become reluctant to accept leasehold interests as collateral if the state retains authority to later force transfers to third parties not approved by the lender.
“If KSPLA or KSG has the authority to unilaterally order a loan to be transferred to a third party … a lender may not be willing to accept a leasehold interest when deciding whether to accept the lease as collateral,” he wrote.
Under the Koror Constitution, the governor said he cannot send the bill back to lawmakers for another round of revisions because it had already been referred once previously.
Still, Rudimch said he hopes the executive and legislative branches can work together on a new proposal that encourages development while protecting public lands, leaseholders and existing contractual rights.
The veto leaves unresolved ongoing questions over how Koror can expand access to housing and development financing while maintaining public control and oversight of state-owned lands.
