Thread: Potential pitfalls when buying a property in Bali

Hello Balipoders,


I thought it would be a good idea to start a thread about the potential pitfalls you can encounter when buying land in Indonesia. I'm sure It will help plenty of rookies like me to avoid the most common mistakes. So here I start with the potentials pitfalls I read /heard about (I might quote some answers written by other balipoders in other posts, I hope you guys don't mind). Please help me complete this list, it will be good for your karma as you'll help many people not being eaten alive :-) I've written in capital letters eventual solutions to prevent each problem in question. If I haven't got a solution, I'm not right, in doubt or you simply have a better solution, please let me (us) know!


1.Foreigner buys land. Land is transferred from current owner to new owner (your Indonesian nameholder). Then, the land is "disputed" by some family member of the original landowner. The sales transaction is revoked and you loose your money. > MAKE SURE THE GUY WHO WANT TO SELL YOU THE LAND HAS HIS OWN NAME ON THE CERTIFICATE AND NOT HIS FAMILY'S NAME. IF THIS IS NOT THE CASE, ASK ALL THE FAMILY MEMBERS TO BE PRESENT AT THE NOTARY THE DAY OF THE SIGNATURE (BUT THIS IS EASIER SAID THAN DONE, QUESTION ANYBODY : DO YOU KNOW REALLY NEED TO BRING ALL THE FAMILY MEMBERS, EVEN THE 90 YEARS OLD GRANDPA??? IF NOT WHICH MEMBERS SUFFICE?)

2.You buy a land that can be sold but not built on ( ex : forestry or 'prohibited development land”, presence of a temple nearby...). > GET A GOOD LAWYER + YOUR NOTARY TO DO THE DUE DILIGENCE.

3.As Indonesian law does not recognize rights of beneficial ownership of property, the use of an Irrevocable Power of Attorney (POA) seeking to convey rights of beneficial ownership is, in general, legally unenforceable; subject to revocation at any time and may raise other legal issues in the event of a dispute. So if you want to do anything on this land (even say grow veggies) and your nominee doesn't agree, you're not legally allowed to do so even if your POA stipulates the contrary. If you decide to still do it, your nominee could bring you to the court and may very well win the trial. Or he might blackmail you and squeeze money out of you to get his consent > GET A HAK PAKAI TITLE ON THE LAND OR A LEASE (WITH A LEASE AGREEMENT DESCRIBING IN DETAILS WHAT YOU'RE ALLOWED TO DO ON THE LAND).

4.“The land (certificate) holder goes off to a bank, and takes a nice big fat loan on it. When payments aren’t being made, the bank comes calling on the lessee! The bank of course has no legal hold on the lessee, but then again, the lessee has no legal hold on the certificate either, but rather only the person in who’s name the certificate is issued. Neither liens or mortgages are recorded on land certificates, aka titles here. All you will see recorded on them are sales transactions, viz, change of ownership…so you can find yourself easily against the wall…the bank wanting to foreclose on the loan issued to the certificate holder, and you, wanting to enforce the lease to that land.” > I READ THIS SOMEWHERE IN THE FORUM BUT IS THAT REALLY TRUE? I THOUGHT ON THE CONTRARY THAT A HIPOTIK (=MORTGAGE) WAS WRITTEN ON THE CERTIFICATE IN WHICH CASE IT WOULD PREVENT YOUR NOMINEE TO TAKE THE LOAN ON THE FIRST PLACE... (SIDE QUESTION : WHAT IS THE FEE FOR THE MORTAGE ?)

5.Legally the property belongs to the nominee and in any civil dispute your nominee has with unrelated third parties, the nominee’s assets can be seized by those third parties. Under this scenario, you as the funder of the “investment” could potentially lose control or lose entirely the investment> BUT IF YOU HAVE A HAK PAKAI OR HAK SEWA ON THE LAND, OK YOU LOOSE YOUR HAK MILIK, BUT YOU CAN AT LEAST USE THE LAND FOR THE PERIOD GRANTED BY YOUR HAK SEWA / HAK PAKAI, AM I RIGHT? OR COULD YOUR LEASE / HAK PAKAI TITLE BE CANCELED?

6.If your indonesian nameholder dies, the ownership will pass on his heirs and they can undo the contracts you made with the original nameholder OR the Power of Attorney may automatically terminates with the death of the person granting it > INCLUDE A CLAUSE GIVING THE POWER FOR THE FOREIGNER TO FREELY SUBSTITUTE THE NOMINEE AT ANY TIME.

7.As land values increase, the Nominee can settle the mortgage and claim back the property who's now worth several time the initial value. > ASK THE NOMINEE TO AKNOWLEDGE A LOAN OF SEVERAL TIMES THE VALUE OF THE PROPERTY EVEN IF COURSE NO REAL MONEY CHANGES HANDS.

8.The nominee goes to the BPN, declare the certificate stolen or lost, get a new one and sell it to somebody else. > IF YOU HAVE A MORTGAGE/LOAN AGREEMENTS (HIPOTIK) ON THE LAND, 1) IT IS WRITTEN ON THE LAND SO NOBODY WILL BUY IT, 2) THE BPN WILL LET YOU KNOW (AM I RIGHT ON THIS LAST POINT?).

Hope this thread will help!

Cheers


Leeloo