Modern land tenure policy dates from the Land Development Ordinance of 1935, which forbade the transfer of crown lands for purposes of cultivation except to enlarge the landholdings of near-landless or landless peasants. The intent of this ordinance was to help small farmers whose livelihood was seen to be at risk from the exploitation of rich peasants and urban landowners.

In 1958 the Paddy Lands Bill was enacted, mainly to benefit the tenant farmers of some 160,000 hectares of paddy land. The bill purported to assist tenants to purchase the land they worked, to protect them against eviction, and to establish a rent ceiling at around 25 percent of the crop. It also established cultivation committees, composed of rice farmers, to assume general responsibility for rice cultivation in their respective areas, including the direction and control of minor irrigation projects. Shortcomings in the law and official indifference in enforcing the act hampered its effectiveness, and many observers termed it a failure. In some regions tenants who tried to pay the lower, official rents were successfully evicted by landlords, and the old rents, often about 50 percent of the produce, remained in force. In the 1980s, however, the rent ceiling of 25 percent was effective in most districts.

The Land Reform Law of 1972 imposed a ceiling of twenty hectares on privately owned land and sought to distribute lands in excess of the ceiling for the benefit of landless peasants. Because both land owned by public companies and paddy lands under ten hectares in extent were exempted from the ceiling, a considerable area that would otherwise have been available for distribution did not come under the purview of the legislation. Between 1972 and 1974, the Land Reform Commission took over nearly 228,000 hectares, one-third of which was forest and most of the rest planted with tea, rubber, or coconut. Few rice paddies were affected because nearly 95 percent of them were below the ceiling limit. Very little of the land acquired by the government was transferred to individuals. Most was turned over to various government agencies or to cooperative organizations, such as the Up-Country Co-operative Estates Development Board.

The Land Reform Law of 1972 applied only to holdings of individuals. It left untouched the plantations owned by joint-stock companies, many of them British. In 1975 the Land Reform (Amendment) Law brought these estates under state control. Over 169,000 hectares comprising 395 estates were taken over under this legislation. Most of this land was planted with tea and rubber. As a result, about two-thirds of land cultivated with tea was placed in the state sector. The respective proportions for rubber and coconut were 32 and 10 percent. The government paid some compensation to the owners of land taken over under both the 1972 and 1975 laws. In early 1988, the state-owned plantations were managed by one of two types of entities, the Janatha Estates Development Board, or the Sri Lanka State Plantation Corporation.

Data as of October 1988