Understanding land titles in Bali is essential for anyone involved in construction in this dynamic region. For foreigners, navigating the legalities can be challenging, but with the proper knowledge, it’s entirely manageable. This guide clarifies the essential aspects of leasehold land titles in Indonesia, crucial for today’s construction business in Bali.
Leasehold Titles: Understanding Your Options
Foreigners are not permitted to own freehold land (Hak Milik) in Indonesia. Therefore, they must consider leasehold options such as:
- Hak Pakai (Right of Use): This title involves leasing land directly from the government. The initial lease is typically for 30 years, with the possibility of renewals, potentially reaching a total of 90 years. This is a primary right established directly between the individual or legal entity and the government, and must be officially registered. A private landowner would need to surrender their land to government control for the duration of the Hak Pakai title.
- Hak Sewa (Private Lease): This is a secondary right where land is leased from a landowner who possesses a primary right such as Hak Milik (freehold title). The lease agreement is between you and the landowner.
- Hak Guna Bangunan (Right to Build): Similar to Hak Pakai, this title involves leasing from the government, usually for 30 years with extensions up to 90 years. It is designed for companies to own property for business operations. Foreigners using this option must establish a foreign investment company (PMA).
Key Factors in Leasehold Agreements
Consider these vital points when entering a lease agreement:
- Due Diligence: Always perform thorough due diligence to verify land ownership, the right to lease, existing debts, exact land boundaries, legal road access, and zoning regulations.
- Documentation: Ensure that all documents are carefully prepared. This includes setting the price, clarifying tax responsibilities, securing the lease against ownership changes, establishing your right to sell or transfer the lease, and defining lease periods and renewal options. Any deposit should be paid with a notarized document, and a receipt should be provided.
- Legal Counsel: Engage a reliable legal professional to represent your interests, especially when drafting and reviewing legal documents.
- Building Permits: For leasehold properties, the building permit (IMB) must be in the landowner’s name.
Legal Framework and Regulations
- Agrarian Law: The fundamental law that governs land ownership in Indonesia. It establishes the basic legal parameters, with further regulations defining the implementation and management of land ownership.
- Regulation 40 of 1996: This regulation specifies the conditions and limitations of land titles. It allows for land titles to be bought, sold, exchanged, granted, or inherited. It sets a maximum period of 25 years for a Hak Pakai title, which can be renewed. However, some sources indicate that it may be for an initial 30 year period.
- Lease Periods: The maximum lease period for a Hak Pakai title is commonly stated as 25 years, with possibilities for extensions and renewals to reach a total of 90 years. Though, some sources indicate an initial 30-year period.
Avoiding Common Mistakes
- Unregistered Agreements: Ensure the Hak Pakai title is officially registered at the land office; unregistered agreements may not comply with the law.
- Landowner Cooperation: If leasing from a private individual, verify their Hak Milik status and maintain a strong working relationship, given that the building permit (IMB) must be in their name.
By following these guidelines, you will be better equipped to handle land leases in Bali and secure the success of your construction ventures. Always seek professional legal advice to ensure your interests are fully protected.
