Legalities

Acting with Legal Integrity

All property matters throughout the Indonesia archipelago, including the island of Bali, come under the jurisdiction of the national land agency (Badan Pertanahan Nasional). This government body was formed to administer all matters relating to the basic ‘Agrarian Law of 1960’, including the registration of the use of land.

The Basic Agrarian Law recognises several types of rights over Real Estate, as outlined below. However, only the following three main rights are relevant to foreign investors:

1. Right of Exploitation (Hak Guna Usaha)
2. Right of Building (Hak Guna Bangunan)
3. Right of Use (Hak Pakai)

These three rights authorize the use of land. The differences lie in the duration of validity and nature of utilisation and the opportunities for obtaining a mortgage. The right of ownership is an inheritable right that can only be held by Indonesian citizens.

• Right of Ownership (Hak Milik).

  This refers to absolute ownership of land and corresponds to a freehold title in common legal terms. This right can only be held by an Indonesian citizen, not a corporate entity whether local or foreign. Certain legal entities designated by the government, such as a state bank, agricultural representative, religious body or social right of ownership is held in perpetuity. It can be sold, transferred, bequeathed and mortgaged. By discussing with your legal advisor you will learn more on this title. We can assist with a referral to a competent legal advisor.

• Right to Rent (Hak Sewa).

  This is the right to use leased land owned by another private party for building purposes. The right can not be registered at the land office and therefore does not exist in certificate form. Land leases are not public documents.

  The law does not stipulate a given period for such lease agreements. Whether this can be transferred or not depends entirely on the original agreement between the two parties involved. This right may be held by a foreigner permanently domiciled in Indonesia or a foreign legal entity having a representative office in Indonesia, and may not be mortgaged.

• Right of Ownership (Hak Milik).

  This refers to absolute ownership of land and corresponds to a freehold title in common legal terms. This right can only be held by an Indonesian citizen, not a corporate entity whether local or foreign. Certain legal entities designated by the government, such as a state bank, agricultural representative, religious body or social right of ownership is held in perpetuity. It can be sold, transferred, bequeathed and mortgaged. By discussing with your legal advisor you will learn more on this title. We can assist with a referral to a competent legal advisor.If a joint venture company needs a land for a factory, storage, employee housing or whatever, the company can be granted the right of building (HGB) in accordance with existing regulations.

• Right of Use (Hak Pakai).

  This is the right of use over state-owned (crown land) or property owned by public or private persons/entities for a specific purpose for (generally) a limited period and occasionally for an indefinite period. This land right may not be sold, exchanged or transferred unless explicitly stated in an agreement.Hak Pakai may be held by an Indonesian individual or entity or foreigner permanently domiciled in Indonesia, or a foreign legal entity with a representative office in Indonesia such as foreign Banks, embassies, etc.

• Right of Exploitation (Hak Guna Usaha).

  This is the right to exploit state-owned land for agricultural, fishery or animal husbandry purposes. Title is normally granted for a period of 35 years, which may be extended for a maximum of 25 more years, conditional that the company is still operational and sound. This right can be held by Indonesian individuals/entities as well as government approved PMA (foreign joint venture) companies, and may be mortgaged.Foreign investors who have obtained mining rights from the Minister of Mines and Energy or exploitation rights from the Minister of Agriculture or the Minister of Forestry have automatically obtained the right to use the land within their concession boundaries for purposes directly connected with the operations of the enterprise