Property Ownership in Bali

 Freehold Methods

1: Hak Milik (the term for freehold title in Indonesian language) using Nominee structure

This is a contractual agreement - in this case between a foreigner and an Indonesian national whom he nominates to hold the Hak Milik title (on his/her behalf). This structure typically has several agreements (such as right to use and right to sell) as well as a mortgage agreement which states that the Indonesian nominee has borrowed the money in order to buy the property. This method has been used for many years now and a clear process has now evolved with legal precedents being established.

Simultaneously to acquiring the land, the Indonesian individual completes three additional agreements with the foreigner:

a: A loan agreement acknowledging that the foreigner has lent to the Indonesian citizen the purchase price of the land. This is then registered on the land exactly the same as a first mortgage or caveat. This is then noted on both the title at the Land Department and the copy held by the owner. There can be no dealing in the land until the loan agreement is cleared from the title. With the foreigner's loan details registered on the title, it also prevents the reissuing of new title deeds (due to "lost" title deeds) without the foreigner's consent.

b: An irrevocable power of attorney is signed giving the foreigner complete authority to sell, mortgage, lease or otherwise deal in the land. Without notice to the Indonesian Citizen, the foreigner can sell or otherwise deal in the land.

c: A permanent right of use agreement is completed, giving the foreigner rights to use and occupy the land.

To cover the event of death of the nominee, the Power of Attorney is drafted in such a manner so that the governing conditions are passed on to the heirs. In the event of subsequent dispute with the nominated Indonesian, the Power of Attorney allows the foreigner to sell the land to another Indonesian.

2: Corporate ownership

A foreign investment Limited Liability Company incorporated in Indonesia is commonly known as a PMA. All Indonesian companies whether they are Indonesian-owned or are foreign invested, are allowed to hold a 'Right to Build' title called Hak Guna Bangunan (HGB). In this case the freehold title (Hak Milik) is relinquished to the state and the company is given possession of the property under a right to use title (normally) granted for a period of 30 years with rights of extension (+20 + 30 years) - each extension subject to tax.

3: The 'Right to Use' (Hak Pakai)

Hak Pakai means "Right of Use" and works a little like a lease but is different in that the Hak Pakai certificate of title can actually be issued in the name of the foreign owner and the owner's interest is noted as an encumbrance on the Hak Milik title, unlike a leasehold structure.

The freehold Hak Milik owner grants the purchaser a Hak Pakai title of an initial 25 year term with a pre-determined amount of fixed term renewals. However, this has been a bone of contention with regard to the legalities of issuing such renewals and legal opinions vary on both the amount of renewals promised and the length of term of such renewals. As a result we are hesitant to recommend this variation of ownership.

 

Leasehold (or Hak Sewa)

This is a contractual agreement between the land owner and the foreigner. While leases are often notarized documents they have no official record of existence in the National Lands Department. As such there can be difficulties in enforcement when there are conflicting documents or multiple lease agreements.

A Typical Transaction

The following summary outlines the essential steps involved in a foreign investor transacting a Hak Milik ("Freehold Title") property in Indonesia.

Phase A- Due Diligence

The Notary initially checks all aspects of the Hak Milik property and advises in relation to any impediments to acquisition of the Hak Milik property.

Phase B - Hak Milik Transfer

Should the foreigner decide to proceed on the basis of the favorable outcome of the due diligence, the Indonesia Hak Milik owner executes with the nominee/designee of the foreigner, who must be an Indonesian citizen, either:

(a) an Akte Jual Beli ("AJB" or "Sale and Purchase Agreement") pursuant to which 100% of the purchase price is paid; or
(b) a Perjanjian Pengikatan Jual Beli ("PPJB" or "Agreement Binding for Sale and Purchase") pursuant to which a deposit is paid subject to payment of the balance of the purchase price. The deposit is generally not held by a stakeholder but is typically paid to the vendor.


Phase C - Power of Attorney etc

See  Freehold Methods. 1a, b and c above.

 Note: These laws were in place four or five years ago and some may have changed. Please also note that I did not write the above and so I take no credit for its production. It is in fact an old work document of mine that I found in my computer. Recently somebody asked me for information and I thought it may help anyone thinking of purchasing property in Bali.

Hold onto Your Husbands (excerpt from Bali Raw 2)

Beautiful Indonesia

Hold Onto Your Husbands

Married couples are retiring in Bali at an ever increasing rate. This would seem to make perfect sense. A couple, who has worked hard all their lives and built up a small nest egg, can retire to Bali and live out their golden years luxuriously and relatively cheaply. The people are friendly, the island is beautiful and the weather is perfect. But more importantly a reasonable lifestyle on the island can be achieved for as little as US $ 3000 a month. Bali could seem like a dream place to spend one's declining years. But unfortunately this may not be as simple as it may sound.

Retiring to a place like Bali can place a heavy burden on a marriage. There will be the expected pressures. The couple will have to adjust to different foods, different ways of paying bills, different driving habits and different laws for example. But then there may also be unexpected emotional strains applied to the relationship. And one of these pressures may be jealousy.

Western women considering retirement in Bali should think about the level of temptation that will be placed before their husbands on a regular basis. Bali is full of beautiful women, foreign and local alike. Any man living in on the island will be confronted regularly by beautiful young girls. He will see them wearing next to nothing and sitting astride motorbikes. He will notice them parading along the beach topless, or in bikinis that barely cover their lithe and lascivious bodies. And he will encounter them drinking in bars or dancing seductively in nightclubs. And these women are just the tourists. For a man, residing in Bali can be like living at the Playboy Mansion.

The beautiful and seductive young tourists are not the only problem. Then there are the stunning Indonesian girls who are ready with a smile and always willing to sit and chat. These women are not shy to approach an unaccompanied man. And although not all of them are planning some sort of sinister seduction, a number of these women have nothing but seduction on their minds. They are more than willing to steal a husband from unsuspecting Western women. To this type of woman, a rich Western man is the prize they have been seeking most of their lives. They couldn’t care less about his marriage status. They will weigh up what he has to offer and if he is deemed suitable, they will start making their take-over plans.

The female population of Indonesia, over the age of fifteen, is close to eighty million. If a woman retires to Bali with her husband and she is foolish enough to allow him to roam its streets alone, then she could be seen to be committing a form of marriage suicide. A woman contemplating this would be very wise to learn from Indonesian ladies. An Indonesian women involved in a relationship knows about her competition. She has to. She was once a competitor in this most ruthless of games. Regardless of his excuses she will never let he partner out of her sight. The risk of losing him is too high. She will keep constant tabs on her man and she will shadow him at any given opportunity.

An Indonesian woman will do anything in her power to keep other women away. A perfect example of this is the innocuous love bite or hickey. An Indonesian woman will randomly mark the neck of any man she is intimate with. She will not do this because she is overpoweringly caught up in the act of making love. She will do this as a warning sign for other women to keep away. For her the love bite is a dog pissing on a tree symbol of ownership. It is a message to her competitors that they had better stay away.

©Malcolm Scott

For more on Bali Retirement visit:  www.fb.com/baliraw