Defending Tribal Programs: Section 81 Contracts and Federal Approval

The development deal looked solid. The tribe had partnered with an experienced developer, the financing was in place, and construction was ready to begin. Then someone noticed the lease term was fifteen years and the project involved trust land. The contract required BIA approval under Section 81—approval that no one had sought. Everything stopped while parties scrambled to determine whether the deal could be saved.

Section 81 of Title 25 (25 U.S.C. § 81) is one of those federal requirements that catches parties by surprise. It mandates that certain contracts involving tribal lands receive approval from the Secretary of the Interior. Its purpose is protective: to ensure that tribes aren't encumbered by unfavorable long-term obligations without federal oversight. But its effect is practical: unapproved contracts may be void and unenforceable.

What Section 81 Requires

Section 81 requires approval from the Secretary of the Interior (delegated to the Bureau of Indian Affairs) for any contract that "encumbers Indian lands for a period of 7 or more years." The statute applies to trust and restricted lands—lands held by the United States in trust for tribes or subject to restrictions on alienation.

The key elements are:

Indian lands. The contract must involve trust or restricted land. Fee simple land owned by tribes is not subject to Section 81. Determining land status requires title research; not all land within reservation boundaries is trust land.

Encumbrance. The contract must encumber the land—create some interest, right, or obligation affecting the land. Leases are the most obvious example, but other arrangements may also qualify depending on how they affect the tribe's land interests.

Seven or more years. The encumbrance must last for at least seven years. Shorter-term agreements fall outside Section 81's scope, though they may still require approval under other authorities (such as leasing regulations).

When all three elements are present, the contract requires BIA approval before it becomes enforceable.

Contracts That Typically Require Approval

The most common Section 81 contracts involve long-term land use arrangements:

Surface leases. Commercial leases, residential leases, and agricultural leases of trust land for seven or more years require approval. This includes leases for retail developments, housing projects, and farming operations.

Rights-of-way. Easements and rights-of-way that encumber trust land for seven or more years may trigger Section 81, though separate right-of-way regulations also apply.

Development agreements. Comprehensive development arrangements that commit tribal land to particular uses over extended periods typically require approval.

Joint venture interests. If a joint venture structure creates an encumbrance on tribal land lasting seven or more years, Section 81 may apply—even if the arrangement is structured as something other than a traditional lease.

The question is always functional: does the arrangement create an encumbrance on Indian lands lasting seven or more years? If yes, approval is required regardless of what the parties call it.

Contracts That Don't Require Approval

Section 81 doesn't apply to everything:

Contracts not involving land. Employment contracts, service agreements, equipment purchases, supply contracts, and other arrangements that don't encumber tribal land fall outside Section 81. A tribe can contract for legal services, construction work, or commodity purchases without BIA approval (unless other regulations apply).

Fee land. Contracts involving land owned by tribes in fee simple, rather than trust or restricted status, don't require Section 81 approval. This is one reason tribes sometimes take land into fee ownership for commercial purposes—to avoid federal approval requirements.

Short-term arrangements. Encumbrances lasting less than seven years are outside Section 81's scope. Month-to-month leases, short-term permits, and temporary use agreements don't require approval. However, structuring an intended long-term arrangement as a series of short-term renewals to avoid Section 81 may not succeed; the BIA and courts look at substance over form.

Certain contracts exempted by regulation. The BIA's implementing regulations (25 C.F.R. Part 84) exempt some categories from approval requirements. These include contracts with other governmental entities and certain routine matters.

The Consequence of Non-Compliance

The core risk of Section 81 noncompliance is voidness. An unapproved contract that requires approval may be void and unenforceable. This isn't merely a procedural defect that can be cured; it goes to the existence of the contract itself.

For non-tribal parties, this is serious. A developer who builds on trust land under an unapproved lease may find that the lease is void. The tribe could potentially claim the improvements without paying for them. The developer's investment—potentially millions of dollars—could be lost with no legal remedy.

Courts have applied this principle rigorously. In Pueblo of Santa Ana v. Kelly, the Tenth Circuit held that an unapproved lease was void ab initio, leaving the non-tribal party without recourse even after years of performance. The protective purpose of Section 81—ensuring BIA oversight of long-term encumbrances—requires strict enforcement.

The practical lesson: verify approval requirements before substantial performance. Once money has been spent and improvements built, discovering that the underlying contract is void creates problems that may be impossible to solve.

The Approval Process

BIA approval involves several steps:

Submission. The parties prepare the contract and submit it to the appropriate BIA regional office. The submission should include the contract itself, documentation of tribal authority to enter the contract, and any supporting materials the BIA may require.

Review. The BIA reviews the contract for compliance with applicable law and regulations. This includes determining whether the contract terms are in the tribe's interest, whether required consents have been obtained, and whether the encumbrance is appropriate.

Approval or objection. The BIA either approves the contract or raises objections. If objections are raised, parties may revise the contract and resubmit. The BIA cannot unilaterally modify contract terms—approval is yes or no—but it can indicate what changes would enable approval.

Timing. The approval process takes time—often months. Building BIA review into transaction timelines prevents delays. Deals that assume instant approval often fail when approval takes longer than expected.

Protecting Tribal Programs and Partners

Section 81 compliance protects both tribes and their partners. From the tribal perspective, BIA review provides an additional check on long-term encumbrances that might otherwise disadvantage the tribe. From the partner's perspective, proper approval ensures the contract is enforceable—that the investment is protected by a valid agreement.

Good practice includes:

Land status verification. Before negotiating long-term arrangements, verify whether the land is trust, restricted, or fee. This determines whether Section 81 applies.

Duration planning. If Section 81 would apply, consider whether the business purpose requires a term of seven years or more. Shorter terms avoid approval requirements, though they may not serve commercial needs.

Approval timeline integration. Build BIA review into transaction schedules. Closings should be conditioned on BIA approval, and timelines should allow for review periods.

Tribal authorization documentation. Ensure that the tribe has properly authorized entry into the contract—typically by tribal council resolution—and that documentation is prepared for BIA submission.

Compliance confirmation. Before substantial performance, confirm that all required approvals have been obtained. Don't rely on assumptions; verify.

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Frequently Asked Questions

Who is responsible for obtaining Section 81 approval?

Typically both parties have an interest in ensuring the contract is approved; an unapproved contract is unenforceable by either side. As a practical matter, the tribe often takes the lead in BIA communications because of its existing relationship with the agency.

How long does BIA approval take?

Timelines vary depending on the regional office, the complexity of the contract, and the BIA's workload. Allow at least 60-90 days for straightforward matters; complex transactions may take longer. Building cushion into deal timelines is essential.

Can parties proceed before approval is obtained?

Proceeding before approval is risky. If approval isn't obtained, performance may not create enforceable rights. Some parties include conditions that allow termination if approval isn't obtained by a certain date.

What if the BIA objects to contract terms?

Objections typically identify specific concerns. Parties can revise the contract to address those concerns and resubmit. The BIA cannot rewrite the contract, but negotiation often resolves objectionable provisions.

Does Section 81 apply to gaming compacts?

Gaming compacts between tribes and states are approved under separate authority (IGRA) and aren't subject to Section 81. However, related development agreements or leases for gaming facilities may require Section 81 approval.

What happens to an unapproved contract?

An unapproved contract that required approval is void. Performance under it may not create enforceable rights. Parties who have performed may seek equitable remedies, but recovery is uncertain.

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This article is for general information only and is not legal advice. Section 81 analysis requires case-specific review of land status, contract terms, and applicable regulations.