Buying land and building

Metter

i know I would need expert advice and go through a notary but when buying land with a 25 year lease an option to extend can the price of the extension be set at the outset. For example if I paid the full freehold sale price but for a lease could the price be set for a renewel in 25 years of 1million Rp or similar? With regard to buying a house already built and building what would be the rough cost per meter to build a good standard house ( not all western applicances but a sound good build )?

ronb

If you are buying the lease this year, you have formed an idea of a fair price per are per year. But guessing what a fair market rate will be in 2053 is beyond most people. I've seen lease contracts that attempt to put a cap on the renewal price but my guess is that these clauses are worthless. If the land owner doesn't want to renew at the low price suggested, he won't.

Metter

ronb wroteIf you are buying the lease this year, you have formed an idea of a fair price per are per year. But guessing what a fair market rate will be in 2053 is beyond most people. I've seen lease contracts that attempt to put a cap on the renewal price but my guess is that these clauses are worthless. If the land owner doesn't want to renew at the low price suggested, he won't.

Thanks Ronb, For renewal of leases is there much difference in leasing land and building compared to leasing a house or does it work out much the same over a longer period?

ronb

With long leases, the property owner only owns the land while you own buildings. So if you buy into a long lease where the house is already built one part of what you pay is for the remainder of the property lease and the other part is buying the buildings.

Metter

ronb wroteWith long leases, the property owner only owns the land while you own buildings. So if you buy into a long lease where the house is already built one part of what you pay is for the remainder of the property lease and the other part is buying the buildings.

Thanks Ron, I didn’t know that, so I wouldn’t need permission from the land owner to modify the property. When does this begin to apply? Is there a set time time frame or is it all leases vs rentals?

Mark

Further due diligence should include verifying that the person you are dealing with and who will sign the lease is actually the owner according to the land certificate, and ensuring that the house has an IMB. Anyway, I suggest you get yourself to a good notary, sharpish.

davita

Metter wrotei know I would need expert advice and go through a notary but when buying land with a 25 year lease an option to extend can the price of the extension be set at the outset. For example if I paid the full freehold sale price but for a lease could the price be set for a renewel in 25 years of 1million Rp or similar? With regard to buying a house already built and building what would be the rough cost per meter to build a good standard house ( not all western applicances but a sound good build )?

When you talk about a lease in Indonesia be careful what is meant. A lease might be a long-term rent which conveys nothing...it is notarised as a contract between the lessor and the lessee. The content of the contract will define that which is permitted by the owner/lessor. Another definition of a lease is Hak Pakai, which does convey ownership of the land for a period of time and is registered in the Land Office in the new owner's name....which can be a foreigner. A long-term rental lease may not permit mortgage or sub-let whereas Hak Pakai can.

Metter

davita wroteWhen you talk about a lease in Indonesia be careful what is meant. A lease might be a long-term rent which conveys nothing...it is notarised as a contract between the lessor and the lessee. The content of the contract will define that which is permitted by the owner/lessor. Another definition of a lease is Hak Pakai, which does convey ownership of the land for a period of time and is registered in the Land Office in the new owner's name....which can be a foreigner. A long-term rental lease may not permit mortgage or sub-let whereas Hak Pakai can.

Thanks Davita, We look like we have choosen a property. The owner wanted 140 million a year which would be 110 a year for 5 years. As I won’t be moving for a year I will need to rent out ( air bnb etc),can this just be built into contract? Maintenance of course will be down to me so I guess a professional house inspection would be good. The fibre to the house is Indihome but this is not yet connected. Water if from a well. Anything else I should consider other than inspection and notary contract?

davita

Metter wrote [COLOR=#ff0000]As I won’t be moving for a year I will need to rent out ( air bnb etc),can this just be built into contract?[/COLOR] Anything else I should consider other than inspection and notary contract?

You can put anything you like into the contract and, as long as agreed with the lessor, it becomes a contractual agreement. If you wish to rent out commercially by law it will need a Pondok Wisata license..... "[I]A Pondok Wisata is a license which allows you to rent out a small property or homestay. A Pondok Wisata – HOMESTAY OPERATIONAL LICENSE FOR VILLA is a type of building permit for commercial use required in Bali to operate villas as vacation rentals. This license covers up to 3 bedrooms (for older licenses) or up to 5 bedrooms (for newer licenses). For anything bigger than that, it would require a full hotel license. This License can only be under the name of an Indonesian Citizen, or managed by a PT Company with scope for business Villa Management. The Pondok Wisata licence will be issued with a duration of 5 years, after which it will need to be extended. Taxes will also need to be filed for the property but this may vary between being monthly or annually, dependent upon the requirements of the local tax authorities in your village. If the property does not generate any income you will still need to file the appropriate taxation documents."[/I] "[I]For an Indonesian; a guesthouse license can be obtained without setting up a business. For a foreigner; he/she must set up a business (PMA) in order to request a guesthouse license.[/I]" It seems you'd need the owner/lessor to apply for this as setting up a PMA is expensive and problematic bureaucratically. Many operate vacation rentals of their property without the license but I've heard there's a crackdown on this endeavor and the authorities scrutinize AirBnB adverts and investigate.

Mark

Metter wroteThanks Davita, We look like we have choosen a property. The owner wanted 140 million a year which would be 110 a year for 5 years. As I won’t be moving for a year I will need to rent out ( air bnb etc),can this just be built into contract? Maintenance of course will be down to me so I guess a professional house inspection would be good. The fibre to the house is Indihome but this is not yet connected. Water if from a well. Anything else I should consider other than inspection and notary contract?

Have you asked a notary for advice yet? If you are trying to go cheap and only rely on advice you get on the internet you are very possibly headed for disaster. Clearly your lease should give you the right to sublet if you need to do so for the first year. Access can also be an issue for some properties. Does this one have public road access? If not, access rights should be spelled out in the lease. As davita correctly asks, does the property have a pondok wisata certificate? If not, renting it out on Airbnb and other short term vacation rental sites may be illegal. And the list goes on...

Mark

You're welcome Metter, and I hope all works out well for you. One other piece of advice is to use your own notary (which it seems like you are doing) and not necessarily one suggested by the owner/landlord.

Metter

I have used google to find English speaking notaries in the area ( Sanur ). If anyone can recommend one that would be great.

Metter

Mark wroteFurther due diligence should include verifying that the person you are dealing with and who will sign the lease is actually the owner according to the land certificate, and ensuring that the house has an IMB. Anyway, I suggest you get yourself to a good notary, sharpish.

Thanks Mark, It will be a rental agreement rather than a lease which I think changes things a bit. We have agreed price and inclusions but everything will need to be in a legal notaries contract. I am still seeking a notary in the Sanur are as have been out of bali the last few days. Certainly not trying to do anything on the cheap. The owner ( I hope ) has today agreed a price. Nothing will be paid till a full notary contract is signed. The price seems very good and I am well aware of the risk of it being too good to be true. I will be asking the notary to check legal ownership etc. Thanks everyone for the advice.

matsaleh

Metter wroteI have used google to find English speaking notaries in the area ( Sanur ). If anyone can recommend one that would be great.

Rainy Hendriany has been recommended previously on this page, located in Sanur. Search Google for address details.

Mark

matsaleh wroteRainy Hendriany has been recommended previously on this page, located in Sanur. Search Google for address details.

Good recommendation. She's quite prominent, seems to know her stuff, and can communicate well in English.

Metter

Mark wroteGood recommendation. She's quite prominent, seems to know her stuff, and can communicate well in English.

Unfortunately I had trouble getting a contract whilst I am in Bali and have gone through Agus Suparman. I have vastly overpayed to get contract quickly :-( On the plus I don't need last minute flights to come back