Rules for Land Leasing or Ownership in Bali
The Indonesia law states foreigners cannot own land in Indonesia but there are ways to indirectly purchase whether it be leasing / leasehold or ownership/freehold. If you are planning to purchase a freehold property you will need an Indonesia national as a nominee which in most cases are preexisting relations/ friends or the owner of the land.
In order to secure any land whether it be a lease or purchase, you will need to have legal documents between you and the Indonesian nominee. There are several ways to do this.
- As a buyer you must state a loan has been given to the owner of the land (your nominee) . The nominee will state they have indeed borrowed the said amount of the property which has been loaned by you the buyer and a mortgage agreement will be drawn up at the notary. To secure the agreement a lease between you and the nominee is drafted for 30 years with another 30-year lease as an extension at an agreed price and yet again another 30 year lease extension. Another agreement is then drafted to allow full use of the land, building rights, selling the property, renovating and other developments but without consent of the land owner which are allowed in that area according to the zoning. This is called a Surat Kuasa.
- It is also possible for a foreigner to convert a certificate of land to Hak Pakai or “The right of Use of Land” as well as have their name on the certificate. The Hak Pakai can be used for 25 years and extended to 90 years with full permission to develop the land providing it is in a properly zoned area. Also, if the land is to be sold again to an Indonesian national, it can be converted back to proper Hak Milik / Right of Ownership.
- Another option and more popular for foreigners having interest in a preexisting villa or home is having a long term lease on land, apartment, home or villa. Buildings can be leased out from 1 year to 30 years with an option to extend up to 90 years . Most long term leases are paid in full for the 1st 30 years and an agreement may or may not be worked out between the owner or the land or villa for the following 30 or 60 years. As far as land leases, they are usually for a minimum or 20 years and up to 90 years with 30-year interval leases. Again, a very detailed agreement must be written up at a notary which allows development and use of the leased land. All fine points can be agreed upon at the notary and must be extremely clear to avoid any problems further down the road. This is very similar to ownership where the lease agreement can be transferred to a spouse or sold for the remaining time on lease. These points all need to be stated in the agreement between the Lessee and the Lessor. It is also a good idea to discuss the extension of the lease in the beginning so the price is not increased 30 years later after a structure has been built on the property or the value of the existing villa and property has increased in value. Regardless of what route is taken, any agreement should be written in English and Indonesia so all the information is clear for both parties.
All the above sales agreements must be completed at a “Notaris” Notary which will organize the next important step; Due Diligence of the certificate. Although our land meets the below criteria, here are important points to consider and must be completed if a lease or sale does take place.
Check the type of certificate: is it Pertanian / Farming which sometimes can be converted to Perumahan /Residential depending on the current zoning laws of the area. In most cases the certificate has already been converted to Perumahan.
Original hardcopy: Make sure to see the original certificate and not a photo copy and there are no loans against the property
Proper ownership: Check that the certificate owners name is the same as the ID card ( KTP) of who is selling the land.
Family agreements of the sale: Check that all family parties agree on selling the land including legal notary statements from the wife or husband of the seller.
Correct Boundary: Check with the BPN office that all the boundaries of the land are according to what is stated on the certificate.
Boundary agreements : Check that the neighbors agree to your boundaries
Zoning Laws: Check the zoning map in that area. If its Jalur Hijau or green belt land you won’t be able to do anything but farm the land.
Proper usage of the land : Check that the land can be used for residential or commercial purposes and zoned correctly. This is usually done by getting a ITR(Informasi tata Ruang) recommendation at the Bidang Penataan Ruang office. Once obtained you can proceed with a building permit (IMB).
Back Taxes: Check that land & building tax has been paid to date. This is called the PBB(Pajak Bumi dan Bangunan)
If all these points have been addressed, problems will be avoided further down the line after the purchase. Notary agencies will do all of the above DD but keep in mind Notary services in Bali vary in price so it would be wise to look around at several offices and use a service from the regency you are purchasing the land from. Any agreement should also be written in English and Indonesia so the information is clear for both parties.