Bali Property Laws

bali property

All land matters except for mining and forestry are under the jurisdiction of the National Land Agency (Badan Pertanahan Nasional) formed to administer all matters relating to the Basic Agrarian Law of 1960 such as the registration of land rights and the granting of rights and various permits to use the land.

There are currently only two categories of land rights:
a) Adat land (customary land)
Where the land is not registered with the relevant land office. There are 2 individual rights and 6 community rights in this category. All rights held under this category will eventually be converted to certified titles.
b) Certified land
The title to which is governed by the Basic Agrarian Law of 1960 and is registered at the local land office. There are five principle types of land rights held under the Agrarian Law.These are:

Right of Ownership (Hak Milik)
This refers to absolute ownership of land and corresponds to a fee simple or freehold title in common law jurisdictions. This right can only be held by an Indonesian citizen, not a corporate entity whether local or foreign. Certain legal entities designated by the government, such as State Banks, agricultural cooperatives, religious bodies, and social foundations may hold this right subject to certain restrictions. This right of ownership is held in perpetuity. It can be sold, transferred, bequeathed, and hypothecated (mortgaged).

Right to Build (Hak Guna Bangunan - HGB)
This is the right to construct a building on land for a period of 20 or 30 years (renewable for another term of 20 years). This right can be sold, exchanged, transferred, and mortgaged, and can be held directly by any corporate entity whether it is a local company or a government approved PMA company.

Right to Rent (Hak Sewa Bangunan)
This is the right to use land owned by another private party (the lessor) for building purposes. The right cannot be registered at the land office and therefore does not exist in certificate form. The law does not stipulate a period for such lease agreements and whether this can be transferred or not depends on the original agreement between the parties.

This right may be held by a foreigner permanently domiciled in Indonesia or a foreign legal entity having a representative office in Indonesia. It cannot be mortgaged.

Right of Use (Hak Pakai)
This is the right to use State-owned or other land by public or private persons or entities for a specific purpose for a definite period or occasionally for an indefinite period. This land right cannot be sold, exchanged or transferred unless explicitly provided in its grant or agreement and normally for a period not exceeding 10 years.

This right may be held by an Indonesian individual or entity or foreigner permanently domiciled in Indonesia, or a foreign legal entity with a representative office in Indonesia such as foreign banks, embassies, etc.

Right of Exploitation (Hak Guna Usaha)
This is the right to exploit State-owned land for agriculture, fishery or husbandry purposes for a period of up to 35 years with a possible 25 years extension.

This right can be held by Indonesian individuals/entities as well as government approved PMA companies. The certificate can be mortgaged.

Renewal Rights
Renewal or extension of rights on expiry of the initial term is via an application to the National Land Agency and is subject to payment of a fee. An application must be submitted one year before expiry of the term. Although the law is silent in regard to the period after the expiry of the extended term/s, the consensus is that a land right can be extended if there has been no infringement of the conditions attached to its usage.

Procedures for Property Acquisition
All transactions of land rights must be via deeds executed before a land deed official at the local office of the Pejabat Pembuat Akta Tanah (PPAT) where the land is located and must be registered in the regional office of the National Land Agency. The PPATs are privately managed offices (usually run by a notary) authorized by the National Land Agency to handle land acquisition matters.

Although there is no regulation that contracts have to be in Indonesian language, we recommend having contracts and agreements always drawn up and executed in Bahasa Indonesia to prevent later arguments that the local partner did not fully understand the content.

According to Indonesian Law concerning Land, there is no concept of freehold land rights for business. To foreign as well as domestic investors, the following three main rights are significant: The Land Cultivation Right (Hak Guna Usaha, abbreviated as HGU), The Right of Building on Land (Hak Guna Bangunan, abbreviated as HGB) and The Right of Use on Land (Hak Pakai, abbreviated as HP).

Obtaining Land.
Many foreigners have had problem in the process of having land rights on the land that they have bought. It is because they didn’t have good enough information re the Indonesian Land Law .

There are 2 (two) alternatives that we introduce for foreigners to obtain land in Indonesia :

1. Having an Indonesian nominee, either an individual or a company.
The land you buy will be on the Indonesian nominee. It is considered safe for you if you have some legal deeds that made before Notary Public. They are :
Power of Attorney that gives the power to you to transfer, sell, lease the land without any reference from the Indonesian nominee.  Statement that states that the money to buy the land belongs to the investor, and not the Indonesian nominee.

2. Forming a PMA company (Foreign Investment Company).
It is the most secure way to buy land or to enter a business in Indonesia, indeed. With a PMA company that the share is owned by you, you can buy land on the name of the PMA company.
Building. A house or a residence that can be owned by a foreign person shall be:
A separate house constructed on a piece of land with the right of utilization on state land or controlled on the basis of an agreement with a land title holder; or
An apartment constructed on a piece of land with the right of utilization on state land.

Foreign Investment Company (PMA Company)
1. A PMA company is in general established as a joint venture between foreign and Indonesian partners. The partnership may involve legal entities (corporations) or individual persons. A joint venture entity shall take the form of a Limited Liability company, which is subject to Indonesian Corporate Law, denoted as PT (Perseroan Terbatas). There is no requirement on the minimum amount of investment (equity plus loan). The amount is for the parties concerned to determine, based on their economies of scale and business considerations.

2. PMA companies in infrastructure projects such as port, generation and transmission as well as distribution of electricity for public use, telecommunications, shipping, airlines, potable water, public railways and nuclear electric power generation should be established by way of joint ventures between foreign and Indonesian partners provided that the Indonesian share is maintained at least 5%.

3. A PMA company may be established as a straight investment, or 100% foreign ownership. It is required, however that not later than 15 years of commercial operation, the company starts to be divested by selling some of its shares to Indonesian individuals and/or business entities, through direct placement and/or indirectly through domestic stock exchange
 
FOREIGNER COULD HAVE PRIVATE LAND IN INDONESIA

There are several techniques how foreigner could buy land in Indonesia.

According to Indonesia’s Act

Act No. 5 / 1960 about land main rule (UUPA). It has written that land in Indonesia only for Indonesian's or organization's, which have permission, by the Indonesia government.

Chapter III, Article 21, UUPA says:
(1) Land in Indonesia only for Indonesian's.
(2) Organization's which have permissions by Indonesia government and with its condition's.

UUPA also gives opportunity to foreigner to have land in Indonesia with authority to use it/explore it.

Chapter VI, article 41 UUPA, says:
(1) Applied Rights is authority to use and / or explore the land which directly powered of attorney by the state or belong to someone, who gives authority and duties to decide by some one who has authority or agreement with the owner which not lease agreement or land explore agreement, or anything aren’t brake the law and life.
(2) Authority to apply the land can be given if:
a. as long as he / she can;
b. Free, with payment's or fees;
(3) Applied Rights should not do by any harmful.

Chapter VI, article 42, UUPA says:
Who have authority to apply the land?
    a. Indonesian's;
    b. Foreigner's who stays / lives in Indonesia;
    c. Organization's which was made by law and located in Indonesia;
   d. Foreign organization's which has branch office in Indonesia.

According to Indonesia Government’s Rule (PP) No. 41 / 1996 about houses whose belong to foreigner who stays in Indonesia.

Article 1, point 1, says:
(1) Foreigner who stays in Indonesia can have a house for staying with some authority rights.

Article 2, says:
Foreign could have a house in Indonesia as written in article 1 are:
(1) A house which built on land:
     a. Applied rights on state land.
     b. By agreement.
(2) Houses that were built on land with applied rights.

Article 5, says:
(1) An agreement in article 2, point 1 could give approximately 25 years.
(2) The time above could add 25 year again if there are any new agreement or new application.

Practicing Law and Government Rule
Practicing laws above are ruled by Head of National Land.
Foreigner could have a house in Indonesia with some ways:

1. Application of applied rights on state land.
Foreigner should register the application to state in order to use the land as houses. To continue using this applied rights they should pay as compensation to state. By the time of applied right is finish, the land must release / replace to someone. If 1 year not release after the time was ended, the state will sale the land in public sale.

2. Application of applied right on own rights / applied rights of the building.
In this way, they should make an agreement between the owner of the land and foreigner. The agreement should write on PPAT / Notary (someone who has authority to make Land Acts). Continuing the applied rights must write on other agreement between owner and foreigner. If the time is end or foreigner does not live in Indonesia anymore, so the land is belong to the owner again.

3. Application of applied rights on own rights with release way.
In this way, Indonesian or the owner releases the land and foreigner make application to use the land. Continuing using the land should register to state with payment as compensation. This applied right could be released or buy-sale by the user to Indonesian or foreigner and then the buyer make the application. If the time is end or foreigner does not live in Indonesia anymore the land will belong to state or someone who makes application to use the land.

There are two choices in the practice.
Practically, foreigner could have private land in Indonesia with these ways:

a. Foreigner who bought land in Indonesia with Indonesian citizen name written on the land act.
Here are systematically to make land act by foreigner:
- Purchase acts must be signed by Indonesian who has been trusted by foreigner, so certificate will issue as Indonesian.
- In addition, they should sign a Statement Agreement, which amount of money written on it. The money that were used in buying land is belong to foreigner and Indonesian only representative. Also, it should be ruled or written that Indonesian could not do harm to foreigner who was bought land in Indonesia; and Indonesian and his / her relatives must help foreigner when she / he intend to sell or lease the land.

b. Using Loan Agreement.
Here are systematically in making Land Acts:
- Purchase acts should be signed by Indonesian who has been trusted by foreigner;
- Then, Indonesian should sign The Loan Agreement, which Indonesian owes some money to foreigner as much as land price with land as guarantee.
- Together, they also should sign Statement Letter, which amount of money written on it. The money that was used in purchasing land which was borrowed from foreigner.
- Next, both of Purchase Acts and Loan Agreement should register to Land Dept. Office so then Owner’s Certificate will issue as Indonesian where loan guarantee to foreigner written on it, also Credits Guarantee Certificate as foreigner will issue too.

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