LEGAL SERVICES
Foreign Ownership | Nominee | Lease | Company | Solicitor/Lawyer | Survey's/Guarantees/Searches | Government Approved Building | Sales Contract | Insurance
Foreign Ownership
Non Indonesian Citizens cannot own land or property on a “Freehold Title” basis, plain and simple. Two options as individuals exist, an additional option for those that setup a Company.
The first and generally the more common type of ownership is Sertipikat Hak Milik, no real meaningful translation, but broadly "your certificate", ultimately the Freehold Title.
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Nominee
To facilitate the transaction, the foreign nation needs an Indonesian Citizen to be named on the certificate(s) as the owner. As a result the foreign national will have agreement in place “Perjanjian Damai” broadly a “Fair Agreement” with the nominee outlining the terms of who ultimately owns the land (the foreign national) and that they have unrestricted control over the land/property in exchange for an agreed fee payable when the land is sold. Power of Attorney can also be used when the particular circumstances surrounding the sale or purchase call for it. If there is no agreement the nominee as the legal owner can makes things very difficult and expensive for the investor.
Lease
A second possibility to consider is Hak Pakai title, effectively a lease agreement that gives the investor exclusive right to use the land. Leases can be up to 25 years, extendable for a further 20 years with consent of the owner. In this situation the certificate would be in the foreign nationals name. CHECK!
Company
A third possibility is via a PMA- (Penanaman Modal Asing) a Foreign Investment Company. The Company would purchase the property for a period of 25 years. On a cautionary note the amount of capitalization required to incorporate depending on your line of business and can range from 100,000USD to 500,000USD.
Depending on where you’re from there are possible tax implications for property owned abroad and any income derived from it, so check with an accountant or local tax authorities.
Locally referred to as a Notary, an essential part of the process who will conduct the legal, documentary checks, drafting of agreements and processing of payments. Ensure all legal transactions are done in the presence of a Notary.
Your Notary will ensure the authenticity of any certificates and documents. Depending on the circumstances, there maybe more than one certificates and more than one name on any given certificate. ALL interested parties must be involved and sign when instructed to facilitate the completion. The Notary will check there are no debts (charges) related to the property and no access/restrictions or zoning issues. Access to land (not property) via a non Government side road, could very well be subject to an access charge and conditions imposed by the Village Head.
Most importantly DO NOT MAKE ANY PAYMENTS unless you and your Notary are completely satisfied with what you have seen and the appropriate checks have been made. Only then make payments via the Notary’s account who will then make the appropriate disbursements. Once funds have been received both parties will sign a ???? which instigates the transfer of ownership and the issue of a new certificate by the Land Registry.
When it comes to professional fees, many will charge a percentage of the purchase price, anything between 1% and 1.5%. Some however charge a fixed fee irrespective of the value of the transaction.
For the purposes of any land or property purchase the services of the Notary is essential. Apart from checking the validity of the certificates/documentation and instigate credit checks to ensure the certificate is free of any “charge” against it such as any facility provided by a bank. They will act as custodian of documents and retain deposits paid in nominated account held by them. Some agents utilise the services of Notary’s who reside outside the area and are therefore unable to complete the process and simply broker you again to a Notary in a district where the property is located. The original Notary will lack local knowledge, there will be a breakdown in communications and you will pay more. So proceed with caution when selecting your Notary and agent for that matter.
Survey’s/Guarantees/Searches
Basically there are no Surveyors, only those employed by the Government who survey Government buildings. To our knowledge there are no Surveyors in the private sector. The testimony to any existing building is how long has it been standing and the condition it’s in, if it’s still standing then its okay, scary but true. With a new build you would have to negotiate and establish your own terms of guarantee directly with the builder.
Government Approved Building
IMB (Ijin Mendirikan Bangun) meaning (Building Permission) Most Balinese don’t bother with obtaining an IMB unless it’s a business premises or situated on a main road. It’s considered an unnecessary cost for a residential property in a village for example. Buildings that don’t have an IMB can in effect be demolished by the Government as they don’t have approval to be there. This is not to be confused with planning permission. There are no planning or building regulations that are imposed on private homes. In effect you can build what you like, but be confident your builder is competent and uses suitable materials for the project. IMB’s can be obtained for existing building’s at cost, for a foreigner we would recommend that one is obtained as either a condition of the purchase or at a later date if that proves to be a problem. Also if the side road to your land or property is less than 3 metres wide an IMB will not be issued.
This known as Akta Jual Beli (Proof Sell Buy) is issued by the Government outlines the details and terms of buyer and the seller. The Notary will also calculate the tax related to the transaction which is met equally by both parties. In some situations the seller has tried to push the total tax burden onto the purchaser, make sure that doesn’t happen to you.
Note: All legal documents and certificates are written in Indonesian. Translations can be made at an additional cost.
The only recognisable insurance company of any size is Allianze that has an office in Singaraja. In our experience they have little grasp of the policies they sell despite who the underwriter is. They provide both contents and buildings insurance but the contents insurance has very high excesses and I doubt very much if they could offer you a suitable replacement in the event of a claim. Buildings cover is more realistic but make sure you insurance against the cost to re-build. Otherwise they will calculate what you paid for the property that of course includes the land.
Cars they will insure against, comprehensive only but wont insure anything over ten years old.