Property Term & Definition

Are: A Balinese unit of measurement for land. An "are" measures 10m X 10m.

Badan Pertanahan Nasional: The National Land Agency.

Bale: A Balinese style gazebo. Often a simple platform with an alang-alang roof set poolside.

Banjar: Literally, a "sub-village".The smallest unit of the Balinese community structure, the Banjar is very active in community life. All land owners are members of their local Banjar. The Banjar handles a number of community responsibilities including often basic services like security for the area, management of garbage collection, and other essential services. Good relations with your local Banjar is a must.

Certificate Tanah: Title certificate of the land.

Dijual: The Indonesian word meaning "for sale".

Dikontrakkan: The Indonesian word meaning "for lease".

Gambar Denah: Essentially a site plan.

Shows boundaries of the land and all solid/permanent structures (note: in Bali swimming pools and Bales – anything without walls- do not count as permanent structures!).

Gambar Lokasi: Map with streets, trees, and land marks.

Hak Guna Bangunan (“HGB”): This is a type of leasehold title that includes land with the right of construction. This form of title is available to Indonesia individuals, Indonesian Companies, and Indonesian Companies controlled by foreigners (known as PMA’s, see below). This type of title must be renewed every 20 years by payment of an HGB tax.

Hak Milik: A form of Title. This form resembles to freehold title in UK, Australia, US and can only be held by an Indonesian individual.

Hak Pakai: A form of Title. This form is similar to leasehold title and is technically, the right of utilization of state land. The maximum length of lease is the issue that causes most discussion, with the stated maximum allowable lease terms varying between 20 years + additional 20 years renewal, to 20 years + 30 years + 20 years, to 25 years + 25 years up to 60 years + 60 years.

Nilai Jual Obyek Pajak ("NJOP"): The value of the land, as assessed for certain tax purposes. This valuation is normally substantially less than market value.

Nominee structure One of the most popular for single structure ownership by foreigners. Essentially a buyer puts land ownership in an Indonesia nominee’s name who signs a series of legal agreements giving up their rights to the land until a sum of money is ‘repaid’. The process has gotten very refined over the last few years with the multiple agreements and willingness of the land office to register a foreigner having debt on land (hak tanggungan) at the cantor agrarian itself has facilitated this. One of the issues with nominee structures is that, understandably, purchasers prefer to have some sort of relationship with their nominee. This can make it impractical for most developments, owing to the fact there are multiple buyers.

Notaris: The Indonesian equivalent of a Notary Public, with powers roughly equivalent to their Western counterpart.

PMA: A common form of public corporation in Indonesia. This form of corporate entity can be held by foreigners

Tanah: The Indonesian word meaning "land".
Undergoing MyBlogLog Verification

Property Mortgages.

Governing Law – Mortgages on land and land related object is governed by law No. 4 of 1996 dated 9^th of April 1996 concerning Mortgage.

Mortgage (hak tanggungan) on land and land related objects must be prepared by land conveyancer official (Pejabat Pembuat Akta Tanah / PPAT) in writing. (Art 10(2)). PPAT are general Government licensed officials vested with authority to draw up deeds of transfer, proxies and mortgages in relation to land. (Id. At Art 1 (4)). PPAt has responsibility to record mortgages deed (Akta pemberian hal tanggungan) (Id Art 13(2)), failing which PPAT is subject to warning, suspension and ultimately termination of PPAT license (Id Art 23(1)).

Mortgage deed must be registered and mortgage certificate (sertipikat hak tanggungan) must contain words “ DEMI KEADILAN BERDASARKAN KETUHANAN YANG MAHA ESA” which translates to “ FOR SAKE OF JUSTICE ON BASIS OF ONE AND ONLY GOD” (Id Art 14(2)) to have force of final legal judgments execution order (Id Art. 14(3)).

National Land Office issues mortgage certificate which tendered to mortgagee (Id. Art 14(1)).

Mortgages may be made over several land titles as security for single debt, specifying that payment in installments releases land titles as debt is satisfied in accordance with their values. (id Art 2(2)).

Single mortgage may cover one or more debt to one or more creditors. (Id Art. 3(2)).

Mortgages may be imposed at time of or following time underlying obligation arises (Id. Art 3(1)).

Mortgages may be conveyed over rights to ownership (hak milik), rights to cultivate (hak guna usaha) or rights to development of land (hak guna bangunan) and may also encumber fixtures (Id. Art 4(1)). Multiple mortgages are permitted with priority based on date of registration with land office. (Id. Art 5(2)). If two competing bear same registration date, date of mortgage deed determines priority. (Id. Art 5(3) and (4)). Mortgages run as burden with transfer of ownership benefits in mortgaged property. (Id. Art 7).

Upon default of underlying obligation, mortgagee has right to sell property through public auction and apply proceeds of sale to mortgagor’s outstanding obligations (Id. Art 6). Mortgagee is not authorized to directly set value of property off debt and any provisions to contrary are void as against interests of law (Id. Art 12).

Bestowal of mortgage is technically and necessarily preceded by pledge to mortgage as security for satisfaction of particular debt. (Id. Art 10(1)). Pledge is expressed in underlying agreement secured obligation (Id. Art 10(1)). Proxy authorizing conveyance of mortgage (Surat kuasa membebankan hak tanggungan) without right of substitution is also required. (Id. Art 15(1)(d)).

Government provides model deed of mortgage. (Id. Art 17). Deed of mortgage must contain following information:

- Name, identity and Indonesian domicile (foreign partier may select domicile in Indonesia) (Id. Art 11 (1) (a) and (b).

- Description of debt secured (utang yang dijamin) (Id Art 11 (1) (c)).

- Value of security (Nilai tanggungan (id Art 11 (1)(d)).

- Clear description of object of mortgage (obyek hak tanggungan) (id Art 11 (1)(e)).

Deed may include:

- Restriction on mortgagor’s right to lease or modify leases or received advance rent relating to property (is Art 11 (2)(a)).

- Restriction on mortgagor’s right to modify condition of property (is Art 11 (2)(b)).

- Grant of right to mortgagee to manage property following default of mortgagor (id Art 11 (2)(c)).

- Grant of right to mortgagee to take steps to prevent wasting of property or loss of interest in property (id Art 11(1)(d)).

- Grant of right to mortgagee of direct power of sale upon default (id Art 11(1)(e)).

- Restriction on transfer of property by mortgagor (id Art 11 (1)(g)).

- Grant of right to mortgagee to received compensation in event of condemnation action by state (id Art 11(2)(h).

- Pledge of insurance proceeds benefiting property (id Art 11 (1)(i)).

- Pledge by mortgagor to vacate property upon enforcement of mortgage (id Art 11 (2)(j)).

- Pledge that mortgage will return land title certificate upon satisfaction of underlying obligations (id Art 11(2)(k) and 14(4)).

Mortgages are transferable in interest of law in event of assignment (cessie) of underlying obligation, by subrogation (subrogasi), by inheritance (pewarisan) or by similar circumstances. (id Art 16(1)). Transferees must register their transfer with National land Office (BPN). (id Art 16(2)).

If mortgagor breaches its pledge, property may be sold by first mortgagee through public auction pursuant to applicable procedures (id Art 20(1)). Mortgagor and mortgagee may agree to sale executed informally if in this way highest price can be obtained (id Art. 20(2)), provided that sale may only be executed after:

- Passage of one month from:

a. Notification in writing by buyer and/or holder of mortgage to concerned parties.

b. Announcement in mass media or at least two news paper circulating inn area concerned.

- During publication period there is no objection from creditors (id Art 20(3)).

Buyer of property sold by mortgage at public auction imposed by injunction of District Court or in informal voluntary transaction should obtain and file with National land Office statement of clearance of mortgage rights on property exceeding purchase price paid and file statement with National Land Office (BPN). (id Art. 19(1)).

Mortgages cancel due to:

- Cancellation of underlying obligation (id Art. 18(1)(a)).

- Release by mortgagor (b).

- Clearance based on ranking by District Court (c).

- Cancellation of underlying land title (d).

Cancellation of underlying land title does not cancel underlying obligation (is Art 18(4)).

Land Office expunges record of mortgage from land and book of titles (buku tanah hak atas tanah) and nullifies mortgage certificate. (id art. 22(1)). Creditor must provide written statement of settlement or other relinquishment of mortgage to enable National Land Office to nullify mortgage lien. (id Art. 22(4)). Otherwise, interested parties must obtain District Court order for expungement directed to National Land Office (id Art. 22(5)). If dispute regarding underlying obligation is before another court, expungement suit is removed to that other court (id Art. 22(6)).

Property mortgages.

Governing Law – Mortgages on land and land related object is governed by law No. 4 of 1996 dated 9^th of April 1996 concerning Mortgage.

Mortgage (hak tanggungan) on land and land related objects must be prepared by land conveyancer official (Pejabat Pembuat Akta Tanah / PPAT) in writing. (Art 10(2)). PPAT are general Government licensed officials vested with authority to draw up deeds of transfer, proxies and mortgages in relation to land. (Id. At Art 1 (4)). PPAt has responsibility to record mortgages deed (Akta pemberian hal tanggungan) (Id Art 13(2)), failing which PPAT is subject to warning, suspension and ultimately termination of PPAT license (Id Art 23(1)).

Mortgage deed must be registered and mortgage certificate (sertipikat hak tanggungan) must contain words “ DEMI KEADILAN BERDASARKAN KETUHANAN YANG MAHA ESA” which translates to “ FOR SAKE OF JUSTICE ON BASIS OF ONE AND ONLY GOD” (Id Art 14(2)) to have force of final legal judgments execution order (Id Art. 14(3)).

National Land Office issues mortgage certificate which tendered to mortgagee (Id. Art 14(1)).

Mortgages may be made over several land titles as security for single debt, specifying that payment in installments releases land titles as debt is satisfied in accordance with their values. (id Art 2(2)).

Single mortgage may cover one or more debt to one or more creditors. (Id Art. 3(2)).

Mortgages may be imposed at time of or following time underlying obligation arises (Id. Art 3(1)).

Mortgages may be conveyed over rights to ownership (hak milik), rights to cultivate (hak guna usaha) or rights to development of land (hak guna bangunan) and may also encumber fixtures (Id. Art 4(1)). Multiple mortgages are permitted with priority based on date of registration with land office. (Id. Art 5(2)). If two competing bear same registration date, date of mortgage deed determines priority. (Id. Art 5(3) and (4)). Mortgages run as burden with transfer of ownership benefits in mortgaged property. (Id. Art 7).

Upon default of underlying obligation, mortgagee has right to sell property through public auction and apply proceeds of sale to mortgagor’s outstanding obligations (Id. Art 6). Mortgagee is not authorized to directly set value of property off debt and any provisions to contrary are void as against interests of law (Id. Art 12).

Bestowal of mortgage is technically and necessarily preceded by pledge to mortgage as security for satisfaction of particular debt. (Id. Art 10(1)). Pledge is expressed in underlying agreement secured obligation (Id. Art 10(1)). Proxy authorizing conveyance of mortgage (Surat kuasa membebankan hak tanggungan) without right of substitution is also required. (Id. Art 15(1)(d)).

Government provides model deed of mortgage. (Id. Art 17). Deed of mortgage must contain following information:

- Name, identity and Indonesian domicile (foreign partier may select domicile in Indonesia) (Id. Art 11 (1) (a) and (b).

- Description of debt secured (utang yang dijamin) (Id Art 11 (1) (c)).

- Value of security (Nilai tanggungan (id Art 11 (1)(d)).

- Clear description of object of mortgage (obyek hak tanggungan) (id Art 11 (1)(e)).

Deed may include:

- Restriction on mortgagor’s right to lease or modify leases or received advance rent relating to property (is Art 11 (2)(a)).

- Restriction on mortgagor’s right to modify condition of property (is Art 11 (2)(b)).

- Grant of right to mortgagee to manage property following default of mortgagor (id Art 11 (2)(c)).

- Grant of right to mortgagee to take steps to prevent wasting of property or loss of interest in property (id Art 11(1)(d)).

- Grant of right to mortgagee of direct power of sale upon default (id Art 11(1)(e)).

- Restriction on transfer of property by mortgagor (id Art 11 (1)(g)).

- Grant of right to mortgagee to received compensation in event of condemnation action by state (id Art 11(2)(h).

- Pledge of insurance proceeds benefiting property (id Art 11 (1)(i)).

- Pledge by mortgagor to vacate property upon enforcement of mortgage (id Art 11 (2)(j)).

- Pledge that mortgage will return land title certificate upon satisfaction of underlying obligations (id Art 11(2)(k) and 14(4)).

Mortgages are transferable in interest of law in event of assignment (cessie) of underlying obligation, by subrogation (subrogasi), by inheritance (pewarisan) or by similar circumstances. (id Art 16(1)). Transferees must register their transfer with National land Office (BPN). (id Art 16(2)).

If mortgagor breaches its pledge, property may be sold by first mortgagee through public auction pursuant to applicable procedures (id Art 20(1)). Mortgagor and mortgagee may agree to sale executed informally if in this way highest price can be obtained (id Art. 20(2)), provided that sale may only be executed after:

- Passage of one month from:

a. Notification in writing by buyer and/or holder of mortgage to concerned parties.

b. Announcement in mass media or at least two news paper circulating inn area concerned.

- During publication period there is no objection from creditors (id Art 20(3)).

Buyer of property sold by mortgage at public auction imposed by injunction of District Court or in informal voluntary transaction should obtain and file with National land Office statement of clearance of mortgage rights on property exceeding purchase price paid and file statement with National Land Office (BPN). (id Art. 19(1)).

Mortgages cancel due to:

- Cancellation of underlying obligation (id Art. 18(1)(a)).

- Release by mortgagor (b).

- Clearance based on ranking by District Court (c).

- Cancellation of underlying land title (d).

Cancellation of underlying land title does not cancel underlying obligation (is Art 18(4)).

Land Office expunges record of mortgage from land and book of titles (buku tanah hak atas tanah) and nullifies mortgage certificate. (id art. 22(1)). Creditor must provide written statement of settlement or other relinquishment of mortgage to enable National Land Office to nullify mortgage lien. (id Art. 22(4)). Otherwise, interested parties must obtain District Court order for expungement directed to National Land Office (id Art. 22(5)). If dispute regarding underlying obligation is before another court, expungement suit is removed to that other court (id Art. 22(6)).

Land title (ownership) rules in Indonesia.

Stipulated in Law No. 5 of 1960 regarding Basic Principles of Agrarian Law (the "Agrarian Law").

1. Hak Milik (Right of Ownership) ("HM"):

HM is the most complete land title available under Indonesian law. HM is transferable and may be encumbered. HM is equivalent to freehold land or fee simple absolute under the common law system. Unfortunately, except for certain legal entities (not including PMA companies) designated by the Indonesian government, only Indonesian citizens are allowed to hold HM. This is not relevant for foreign individuals owning residential property in Indonesia.

2. Hak Guna Usaha (Right of Cultivation) ("HGU").

HGU gives the owner the right to exploit land for a certain period for the purposes of agriculture, fisheries or cattle breeding. HG- U is transferable and may be encumbered. Land with HGU title may be owned by (i) Indonesian citizens and (ii) legal entities established under Indonesian law and domiciled in Indonesia, including PMA companies. HGU is granted for a maximum period of 35 years and extendable for further 25-year period. Upon the expiration of such extension, the HGU may be renewed. This is not relevant for foreign individuals owning residential property in Indonesia.

3 Hak Guna Bangunan (Right to Use Building) ("HGB").

HGB is right to construct and own buildings on land. HG is transferable and may be encumbered. Land with HGB title may be owned by (i) Indonesian citizens and(ii) legal entities established under the Indonesian law and domiciled in Indonesia, including PMA companies, HGB is granted for a period of up to 30 years and extendable for a farther 20-year period. Upon the expiration of such extension, new HGB title may be granted on the same land. This is the title most PMA companies use to hold real estate.

4. Hak Pakai (Right to Use) ("HP").

HP is the right to use and/or to harvest from land, which is directly controlled by the State, or land of other persons. HP may be encumbered. HP may be owned by:
(i) Indonesian citizens;
(ii) Legal entities established under the laws of Indonesia and domiciled in Indonesia, including PMA companies;
(iii) Departments, Non-Departmental State Agencies, and Regional Governments;
(iv) Religious and social organizations-,
(v) foreigners residing in Indonesia;
(vi) Foreign legal entities which have representatives in Indonesia;
(vii) Representatives of foreign countries and international organizations.

Ordinarily, HP is granted for a period of up to 20 years and can be extended for 20 years. Upon expiration of the extension period, HP may be renewed. This is the title used, in recent years, to "sell" condominium units (both commercial and residential property) to foreign individuals.

5. Hak Sewa (Right to Lease) ("HS").

An owner of HS is entitled to use property of others, with the owner of HS obligated to make rental payments to the owner of such property. There is no fixed term for HS. The following persons are eligible to hold HS:

(i) Indonesian citizens;
(ii) foreigners residing in Indonesia;
(iii) legal entities established under the Jaws of Indonesia and domiciled in Indonesia, including PMA companies-, and
(iv) foreign legal entities which have representatives in Indonesia.
This is the title held by foreign individual and company renters of houses in Indonesia.
6. Hak Membuka Tanah dan Memungut Hasil Hutan (Right to Clear Land and Collect the Forest Products):
Indonesian citizens may only hold this right.

Other.

Many foreign individuals in Jakarta, Bali and elsewhere also hold residential property indirectly through arrangements (often called nominee or trustee arrangements) where Indonesian individuals or companies are legal titleholder on behalf of foreigners. Under such arrangements, the foreigner generally funds the Indonesian purchasing the property and then takes a formal or informal security interest in the land purchased. These relationships are largely built on trust between the foreigner and the Indonesian and any contractual legal rights the foreigner has may be difficult to enforce. Nevertheless such arrangements are pretty common and many long-lived and appear to satisfy both parties.