FTW advises on legal aspect of real estate and hotel development and on all aspect of construction law, including the preparation and negotiation of consultancy and construction project agreements. We also assists clients on compliance with environment laws and hazardous waste regulations.
The Indonesian law is mostly governed by the provision of the Basic Agrarian Law Number 5 year 1960 and its numerous implementing regulations. The basic agrarian law constitutes major inroad on the civil law tradition of Indonesia. An important element of the replacement of the old law regime is the registration of land envisaged under the Basic Agrarian Law. In practical terms, registration of land means that the uniform ser of land titles of the basic law imposed on land.
The basic agrarian law specifies several types of land right which all offer the right to utilize the land concerned. Differences exits in duration of validity, nature of utilization, possibility to mortgage and proof title. The most important of which are the following :
- Right of ownership / free hold called as Hak Milik, here right of ownership is the most complete form of individual right on land. It gives the holder the right to use land and the earth underneath and also water and air above it. Right of ownership to apiece of land does not include the right to obtain the wealth underneath the earth. Right of ownership has no time limit, the land owner is entitled to convey the use this land to another. The land owner is given a legal document as evidence of his right officially known as a Certificate
- Right of Cultivate called as Hak Guna Usaha, this right to cultivate state land or to use it for other agricultural purposes is for a fixed period of time not to exceed 35 years, extendible for 25 years. Right to cultivate can also be released to the state . In practice there are two kinds of Hak Guna Usaha, one for farming enterprise which smaller then 25 hectares, and one for enterprise which are 25 hectare or more. The regulation applicable to each kind are not same. However according to our new investment law number 25/2007 which just approved on the end of April 2007 Hak Guna Usaha may be given for 95 (ninety-five) years and simultaneously renewed in advance for 60 (sixty) years, and it may be further renewed for 35 (thirty-five) years.
- Right of building (Hak Guna Bangunan), is a title on land which gives its holder the right to erect and posses, normally belongs to company. In turn the holder of the title is given a certificate as evidence of the right. Right of building does not entitle its holder to obtain the natural resources in the earth underneath the land possessed. However according our new law investment number 25/2007 Hak Guna Bangunan may be given for 80 (eighty) years and simultaneously renewed in advance for 50 (fifty) years, and it may be further renewed for 30 (thirty) years; and
- Right of Use (Hak Pakai), is a title on land which gives its holder the right to use and obtain the product of a certain piece of land. The land possessed with right of use can be either state land or land belonging to a private sector. According our new law investment number 25/2007 Hak Pakai may be given for 70 (seventy) years and simultaneously renewed in advance for 45 (forty-five) years, and it may be further renewed for 25 (twenty-five) years
Basically foreigner cannot own land in Indonesia, its totally restricted according law number 5/1960, however since 1967 Indonesian government already governed about investment law whereas foreigner through investment mechanism they could have land in Indonesia legally. Foreign direct investment normally called as PMA, here foreigner could set a PMA with 100% ownership which can own land and properties in Indonesia.
Land rights may be granted and simultaneously renewed in advance for any investment activity, with, among others, the following conditions:
- such investment is for long term and associated with the structural change of Indonesian economy into the more competitive one;
- such investment is with the level of investment risk requiring long-term Return on Investment according to the types of the investment activity;
- such investment doesn’t require extensive area;
- such investment uses state-owned land rights; and
- such investment doesn’t interrupt the sense of impartiality in the community as well as public interest.
Land Rights may be renewed after being evaluated that the land can be further used according to the condition, nature and objective of granting such rights.
The granting and the simultaneous renewal of land rights in advance and further renewal may be halted or annulled by the government if such investment company abandons, inflicts damage to public interest, uses or makes use of the land in violation with the purpose and objective of such granting of land rights, or violates any rules of law applicable to land maters.
To own land through PMA company.
For a new prospective PMA company especially that which requires land or real estate to conduct its business, one crucial procedure must be followed in respect of land. This regards the processing of the location permit. The location permits allows a PMA company to acquire the land needed for its operation, and also serves as license for the transfer of rights and for utilizing the land for its investment. The location permits must be obtained from the Regent (camat) which has jurisdiction where such land is located. Please note also that there is a strong policy in Indonesia against ownership or control of land. Hence the PMA companies while granted the rights in land necessary to make their project viable, are not allow to hold land beyond that which is actually required and specifically licensed for their project.
Ownership of Strata Unit / Condominium by individual foreigners
The ownership of strata unit by individual foreigner in Indonesia is governed by a government regulation issued in 1996 (Government regulation No.41 of 1996). Under this regulation foreigners resident in Indonesia are only allowed to buy and own residential property if it is built upon land Hak Pakai over state owned land. Ownership of strata unit covers :
- Joint right on parts of the condominium (Bagian Bersama);
- Joint right on things attached to the condominium (benda bersama) and
- Joint right on land which the condominium built.
All these form a unity of rights which functionally cannot be separated. Ownership will be evidenced by a Land Right Certificate (Sertifikat Hak atas Tanah) issued by the relevant land office in local regency. All ownership rights to a strata unit are initially issued in the name of Developer and only after the respective strata unit is bought. The deed and land certificate will be registered in the name of the buyer as the owner of strata unit. Once it has been properly registered, the owner will be entitled to (i) use or alternatively rent such strata unit to other party (ii) secure such strata unit in the form of land mortgage (hak tanggungan) and (iii) transfer it to other party.
In additional FTW also provide legal all services in the field of tourism services in Indonesia especially in Bali.
