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Freehold land title for foreigners in Bali DENPASAR - Foreigners trying to obtain a freehold title on land in Indonesia should note that current law is clear in both its letter and intent: namely, foreigners cannot directly hold freehold title on Indonesian land.

Despite this lack of equivocation by the Government on the continuing prohibition of foreign land ownership; it is ironic to discover real estate companies have erected booths in the arrival halls of Bali's airport, placed ads in local publications and distributed brochures - all advertsing "freehold" land in Bali. Given the state of current property law, the very use of the English language term "freehold" in connection to a local property transaction involving a foreigner is highly suspect and is a tactic that, in other jurisdictions, would form the basis of a criminal prosecution.

The bottom line: "freehold title", or in Indonesian "hak milik", does not exist for foreign property buyers and, as such, should be banished in its English form from all promotional material for Bali property sales. Companies offering the Indonesian equivalent of "hak milik" should be compelled to only use the Indonesian term for what is, after all, an exclusive privilege for Indonesian property buyers.

But, barring such regulations to protect Bali property buyers, the very use of the English term "freehold title" in an Indonesian property offering should be viewed with great suspicion and set cautionary alarm bells ringing in the head of any potential property investors.

What's really going on here?

If "freehold title" is unavailable to foreigners, what do non-Indonesian buyers actually purchace when responding to a "freehold" property purchase agreement in Bali? Those offering "freehold title" to foreigners typically create a legal construction that, in the end, fails to deliver the free and direct ownership title implied by freehold.

To conclude a property sale a local nominee is generally used, with a notary creating a multi-party, multi-document legal constructs that:

  • Puts the "hak milik" or "freehold title" in the hand of an Indonesian nominee. It is, in fact, the Indonesian nominee whose name is on the property title and who freeholds the parcel, not the foreign purchaser fronting the money for the land.
  • The notary will also usually create an irrevocable power of attorney in which the nominee owner surrenders all rights to use, sell and lease the subject property to the foreign purchaser. Is such an irrevocable "power of attorney" legally iron clad? The most truthful answer is that there is very little in Indonesian law that should be considered "iron clad" and should the foreigner eventually wish to transfer or sell his "title" to a new party, the transfer transaction will be heavily dependent on the good grace and continued docility of the Indonesian nominee who will need to attend the notary and sign over the deed to the new owner or his nominee.
  • In such transactions the notary also typically draws up a loan agreement for a large sum of money that is theoretically on loan from the foreign purchaser to the Indonesian nominee. In principle, this creates a lien on the property held by the Indonesian nominee. The purpose of the loan agreements is to "legally compel" the Indonesian nominee stay tame and cooperative.

While such agreements are often superficially attractive to a foreigner eager to own a home in Bali, these loan agreements may not have much force if legally challenged and may be extremely vulnerable to any future vagaries of the "personal bond" between the foreign owner and his Indonesia nominee.

There are at least two other legal pitfalls may befall such loan agreement arrangements. First, because the loan is fictiional, if legally challenged the foreign owner may be hard pressed to demonstrate to a court that the "loan" was ever transacted. No less legally problematic is the prohibition under current Indonesian for any foreign borrowings not approved by the Foreign Investment Coordinating Board.

Caveat emptor - Let the buyer beware!

In the face of a legal environment in which foreigners are clearly not allowed to hold title on Indonesian property, any effort to circumvent the letter of the law is a path wrought with potential future heartache for the foreign purchaser.

The good news in an otherwise sad tale is that Indonesian law does permit the lease of land and property to foreign individuals and companies for fixed periods of time. While perhaps not guaranteeing the personal satisfaction of direct ownership of a Bali property, such leases can be freely registered in the name of most foreign renters and have generally proven to offer a high level of security to the foreigner for the duration of the lease.



Posted in General @ 12 September 2007 by Jeroen · 'Blog' RSS feed · permalink





fligo2
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(Edited) Posted @ 09 June 2008 23:00

Hi, ik ben erg geintereseerd in wat hier geschreven staat maar kan het niet helemaal op waarde schatten omdat ik niet weet uit hoofde van wat of wie of dit geschreven is.
Wat ik alleen weet is dat er er heel veel met deze constructie gewerkt wordt. Adu ja, dat zegt niet alles over de betrouwbaarheid dat weet ik ook wel. Maar toch zijn er dan zoveel mensen die hun geld steken in een constructie die "zo maar" onder uit te halen is??




Yogya-Bali
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On 09-06-2008 23:00 fligo2 wrote:
Maar toch zijn er dan zoveel mensen die hun geld steken in een constructie die "zo maar" onder uit te halen is??


Ja, believe it or not , er zijn legio mensen (Nederlanders) die hun geld in een dergelijke constructie steken. Vaak tegen beter weten in en ondanks vele waarschuwingen. Stijfkoppigheid is niet alleen aan de Friezen voorbehouden maar geldt blijkbaar voor een groter deel van de Nederlandse bevolking.
De "droom" zal en moet waarheid worden; wat het ook mogen kosten (en het kost vaak heel wat...........geld en tranen).




fligo2
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Yogya-Bali
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Waar het mis gaat? Bij de aardige man/vrouw die met dat mooie voorstel komt, bij de zgn. "betrouwbare" naamhouder, bij de notaris.
Meestal is er onderling allang gekonkeld. Deze constructies zijn nml. heel makkelijk onderuit te halen. Notarissen zijn hier niet te vergelijken met die in NL (en daar durf ik zelfs mijn hand niet voor in het vuur te steken) want men maakt vaak actes op die strijdig zijn met de wet. Er is hier nml. geen centraal meldsysteem. De Nederlandse ambassade accepteert in vele gevallen al geen Indonesische notariele acten meer omdat gebleken is dat er vele strijdig zijn met de Indonesische wet.

Daarnaast is het recht nog steeds zo krom hier als het maar krom kan zijn. Het gaat om geld, zowel bij de naamhouder, de notaris als bij de rechter (mocht er een rechtzaak komen). En dan is het......wie heeft het meeste te bieden. En dat is altijd de naamhouder; niet u die uw verlies zo klein mogelijk probeert te houden. De naamhouder heeft alleen maar te winnen en zal met weinig al genoegen nemen. Dus meer extra's voor de rechter.

Waarom u die mislukte stories niet leest? Ten eerste hangt een mens niet snel de vuile was buiten (eigen mislukkelingen en dommigheden) en ten 2e hebben de meeste van hen na een dergelijk avontuur hun buik zo vol van dit land dat ze er niets meer over willen horen, schrijven en lezen.




Jeroen
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This topic should be in English guys Emoticon: Puh!



sidia
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(Edited) Posted @ 12 June 2008 08:28

By Indonesian law a foreigner can not own land in Indonesia.

If a foreigner chooses, he/she can own land 'indirectly'.To do this you need to have an agreement between the foreigner and an Indonesian, signed with the witness of a notary public. In the agreement the Indonesian is the 'legal owner' while acknowledging that the foreigner is the 'rightful owner' of the land and thus the Indonesian owner would carry out any instructions from the foreigner regarding the land, including selling the land at certain price with the funds to be paid to the foreigner owner.

1. Using the Nominee
The Nominee will sign four documents with the foreigner as follow:

1. A Loan agreement: acknowledges that the foreigner has lent to the Nominee the purchase price of the land.
2. A Right of Use agreement: allows the foreigner to use the land.
3. A Statement Letter: where the Nominee acknowledges the foreigners loan and intention to own the land.
4. Power of Attorney: Nominee sign an irrevocable Power of Attorney giving the foreigner the complete authority sell, mortgage, lease or otherwise deal in the land.

-----
The Indonesian is "the legal owner"" and the foreigner is "the rightfull owner " ????

See :
pt 1. What about the incometax and interest of the loan ?
pt 4.very strange construction : a stranger (foreigner) can get rights to make deals of the (indonesian) property.

Something stinks .







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