Bali Property Purchasing Guide General Information
A. Purchasing Property
Step 1: Purchase and Sale Agreement
The Seller and Buyer, or representative agent, go to a Notaris of their choice and enter into a purchase and sale agreement, (called a Akta Jual/Beli). This document lists the seller and buyer and terms of the sale, it’s nearly identical to a Purchase and Sales Agreement used in American real-estate transactions. A deposit to secure the transaction is paid at the Notaris, after the purchase and sale agreement are completed by the buyer and the seller, this deposit is usually 5 percent of the agreed sales price.
Step 2: Title Search
The public notary called a Notaris in Bali inspects the deed. This document states the owner and gives a legal description of the property. The Notaris verifies that the property is not in a government-restricted area, performs a title search, surveys the property, and checks for any liens against the property. The entire process usually take 3-weeks at which time the Notaris will contact you with the final results.
Step 3: Title Transfer
A Notaris in Bali does a lot more, and is granted far more responsibility than a Notary Public in the USA. A Notaris in Bali, and also in other countries, is a high-ranking official. In Bali, for example, only Notary Publics have the final authority in regards to any legal transactions. Whether it be buying property or making legal contracts, they do it all. Attorneys in Bali must use a notary to prepare the deed or any legal contracts between a buyer and seller.
The old title, all previous land documents, and the new tax form are presented to the Notary with a minimal fee. The Notary in turn takes all the appropriate data, including that of the new owner, and types up the new title with the new owner's name, the seller, a description of the property, the location of the property, any special terms that may apply, etc. These documents then go into the Chief Notary’s office for final approval.
Step 4: Transfer of Funds for Purchase
Once the Chief Notary has signed these documents, it is then and only then that funds transfer hands. Payment is usually in cash, wire transfers or direct deposit into the sellers designated account. If a third party is involved then any commission or service charge will be paid at the time of closing.
B. Property Law In Indonesia
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 t he local land office.
C. 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. A foreigner permanently domiciled in Indonesia or a foreign legal entity having a representative office in Indonesia may hold this right. It cannot be mortgaged.
D. 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).
E. 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.
F. 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 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.
This right may be held by an Indonesian individual or entity, certain foreign individuals or a foreign legal entity with a representative office in Indonesia.
G. 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.
H. RENEWAL OF 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.
C. Indonesian Law Article 1 (1) Rma 7/96
Article 1 (1) of RMA 7/96 states that "a foreigner whose presence in Indonesia gives opportunities for national development" may own a house under Hak Pakai; and Article 1 (2) closes the circle by saying that such a foreigner is one who; "has and maintains an economic interest in Indonesia by implementing an investment in the ownership of that house”. In other words, any foreigner who buys a house in Indonesia is contributing to national development and therefore is entitled to hold Hak Pakai.
Tips: 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) authorised 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 Behasa Indonesia to prevent later arguments that the local partner did not fully understand the content.