I have bought some land and am putting it in a Balinese friend's name and having a mortgage loan agreement drawn up from him to me. I spoke to the notaris yesterday as to how long it will take until all the legal transactions are completed and I can hold the loan documents in my name. He told me 3 months! I was taken aback that it was so long. He said the initial transfer to the new owner ( my friend) takes about 3 weeks then the loan agreement has to be registered on the land which will take the rest of the time. Seems a lot to me, is this normal?
I have bought some land and am putting it in a Balinese friend's name and having a mortgage loan agreement drawn up from him to me. I spoke to the notaris yesterday as to how long it will take until all the legal transactions are completed and I can hold the loan documents in my name. He told me 3 months! I was taken aback that it was so long. He said the initial transfer to the new owner ( my friend) takes about 3 weeks then the loan agreement has to be registered on the land which will take the rest of the time. Seems a lot to me, is this normal?[/QUOTE]I cannot answer your question but I do recall arguments to the case of whether a foreigner [B]can[/B] offer a mortgage in Indonesia without first being registered as a lender.I would seek the advice of a lawyer before entering into an agreement that may be contested in law.The transfer of the Hak Milik property from the owner to your Balinese friend is straight-forward and he/she becomes the titled owner to the property. Legally tying a contract on the property to protect your financial investment is also straight forward. Trying to tie the two together so you have an legal interest in the 'title' to the property is where it becomes fraught. i.e. it would depend on what the mortgage-agreement says if your friend reneged on the mortgage...if it says you then become 'owner' of the property that could constitute an unlawful agreement as a foreigner cannot own Hak Milik property.
Everything seems to take time here, so I suspect it is probably right. If you have paid for the property. you probably could talk to the owner and take early possession. If it is just land you could probably just start building or at least apply for an IMB. I don't see a problem with the loan agreement and haven't heard of people having problems with this. To me this is less risk from the myriad of ownership options. Foreigners who entered long term leases have their own problems also. You should be aware though, the tax office now gets notices when someone purchases property. The tax office can treat the asset as income and the nominee can be taxed accordingly. I am no expert, so speak to a tax consultant or your notary. As long as you pay the tax for the nominee then there shouldn't be a problem.
[URL='https://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?referer=https://r.search.aol.com/_ylt=Awr9IleMIv1af24AV5VpCWVH;_ylu=X3oDMTByMXM3OWtoBGNvbG8DZ3ExBHBvcwM4BHZ0aWQDBHNlYwNzcg--/RV=2/RE=1526567693/RO=10/RU=http%3a%2f%2fscholarlycommons.law.northwestern.edu%2fcgi%2fviewcontent.cgi%3farticle%3d1180%26context%3dnjilb/RK=0/RS=aW1E3nN6YVaYTO5.xyVcyfSSBto-&httpsredir=1&article=1180&context=njilb']https://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?referer=https://r.search.aol.com/_ylt=Awr9IleMIv1af24AV5VpCWVH;_ylu=X3oDMTByMXM3OWtoBGNvbG8DZ3ExBHBvcwM4BHZ0aWQDBHNlYwNzcg--/RV=2/RE=1526567693/RO=10/RU=http://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?article=1180&context=njilb/RK=0/RS=aW1E3nN6YVaYTO5.xyVcyfSSBto-&httpsredir=1&article=1180&context=njilb[/URL]Above is a link to foreign banking and mortgaging in Indonesia. It is legalise, and I'm no lawyer, so get a headache reading thru'..... but scroll to section 3 and view the conditions any foreign bank needs to comply with to register a mortgage on property in RI.I'd suspect having a similar mortgage registered from a private foreign lender could be onerous.A mortgage agreement with Hak Milik property as collateral needs to be registered as such in the land office.A simple contract to indicate how a loan is repaid from one party to another, but isn't based on the title and therefore not registered, is a different thing. That is a loan contract between two people.
I have bought some land and am putting it in a Balinese friend's name and having a mortgage loan agreement drawn up from him to me. I spoke to the notaris yesterday as to how long it will take until all the legal transactions are completed and I can hold the loan documents in my name. He told me 3 months! I was taken aback that it was so long. He said the initial transfer to the new owner ( my friend) takes about 3 weeks then the loan agreement has to be registered on the land which will take the rest of the time. Seems a lot to me, is this normal?[/QUOTE]Quite within normal parameters, Rob. When its all signed, sealed and delivered, you should hold onto the original sertifikat hak milik, and other original dox. Do you mind saying who the Bali notaris is that you're using? Reason is, not all Bali notaris are ok to establish a mortgage and a Hak Tanggungan in bule's name on a SHM any more. So I'd like to know which one's are still doing this. There's nothing unlawful about it, but pressure from Jakarta has discouraged a number of local notaris from actually going thru with it anymore. That said, 100% foreign-owned banks in Indonesia such as HSBC records itself on hundreds of certificates to secure mortgages on land their account holders borrow against. Also, have you asked your notaris if your local partner could grant you a Power to Sell (Menjual Beli)? Finally, many of us also sign 4 consecutive, back-to-back 25 year leases, simultaneously with full payment on each, for effectively, a century of exclusive use rights.
A mortgage agreement with Hak Milik property as collateral needs to be registered as such in the land office.[/QUOTE]The foreigner in this case is the lender and their name appears on the certificate as such. So in this way it is registered with the land office. I am sure when the certificate is registered the BPN know exactly what is going on.I know you and and others have said foreigners cannot loan Indonesians money and use property as collateral. Maybe this is true, I have no idea, but this seems fairly common practice among notaries. Everyone has their own opinion on this and at least in my opinion it is a good way to go. Long term lease, HGB and Hak Pakai all have their pros and cons.I know a couple of people who have bought property this way and they have made agreements with their nominee that they can keep the property when they pass away. It seems fair to me (but maybe also dangerous!).
The foreigner in this case is the lender and their name appears on the certificate as such. So in this way it is registered with the land office. I am sure when the certificate is registered the BPN know exactly what is going on.I know you and and others have said foreigners cannot loan Indonesians money and use property as collateral. Maybe this is true, I have no idea, but this seems fairly common practice among notaries. Everyone has their own opinion on this and at least in my opinion it is a good way to go. Long term lease, HGB and Hak Pakai all have their pros and cons.I know a couple of people who have bought property this way and they have made agreements with their nominee that they can keep the property when they pass away. It seems fair to me (but maybe also dangerous!).[/QUOTE]I have lived/worked here as an investor and professional adviser since 1995. After reading all the Indonesian regulations I could find (starting with the [I]Agraria[/I] Act of 1960) and discussing with countless local [I]notaris, [/I]and [I]advokats[/I], I have never seen or heard that loaning money by a foreigner to an Indonesian is unlawful. In fact, all of us [I]bule [/I]are encouraged and expected to invest foreign capital in all manner of development projects, such as restaurants, hotels, manufacturing, etc. And financing a local partner is generic to this investment activity. Wholly foreign-owned banks in Indonesia, such as HSBC, secure their loans with mortgages ([I]Hak Tanggungan), [/I]registered with BPN, all the time. Also, if you can get a Power to Sell ([I]Kuasa Menjual[/I]) from your local partner, this would also be a good idea. Above all, you keep the original [I]sertifikat hak milik[/I] yourself under lock and key. Finally, 4 consecutive, back-to-back, 25 year leases, all signed and paid on day one, gives you a rock-solid century of exclusive use rights and is 100% kosher. Hope this clarifies. Any questions? Just let me know. e-m: [email]info@balisafeharbor.com[/email]
1. [COLOR=#ff0000]I have never seen or heard that loaning money by a foreigner to an Indonesian is unlawful.[/COLOR] In fact, all of us [I]bule [/I]are encouraged and expected to invest foreign capital in all manner of development projects, such as restaurants, hotels, manufacturing, etc. And financing a local partner is generic to this investment activity. 2. [COLOR=#ff0000]Wholly foreign-owned banks in Indonesia, such as HSBC, [/COLOR][/QUOTE]1. Just lending money is not what we are referring to...it is using Hak Milik property as legal collateral and registering such in the land office I'm posting about.I keep two Sertipikats (Tanda Bukta Hak) and all other documents (Apt in Jakarta and villa in Bali) and neither 'Tanda Bukta Hak' have my name, nor my wife's name, as having a mortgage with the owner of title, although it was our money that bought the properties.I inquired from lawyers, when we bought over ten years ago, and was told registering a legal mortgage between ourselves and a 'nominee' could constitute attempting to circumvent the Agrarian law....as I referred in my post # 2.We have Akta Pernyataan (Statement Deeds) which has our names and documents the intent of the owner of title in regards to how we wish the property arrangements be conducted.....but that is a statement, not a legal title. We have to trust the owner to abide by those statements. Also, If we wish to sell we will need their permission to do so.2. HSBC Indonesia is not a foreign bank any more...it registered as an Indonesian entity last year to comply with Indonesian banking requirements. Prior to that the bank, as any legal foreign entity, was permitted to issue mortgages as I posted in my link in post # 4 but I'm not so sure a foreign person can, unless registered as a legal lender. If a mortgagee reneges on a mortgage held by a foreign legal entity, such as a bank, the property disposal is covered in my link. It doesn't mention what remedy a foreign individual has in similar circumstances.HSBC Indonesia website.....[I]"On 17 April 2017, HSBC Group integrated the operations of HSBC Foreign Bank Branch in Indonesia with PT Bank HSBC Indonesia to form PT Bank HSBC Indonesia." [/I]I'm not professing any expertise but have read about a few downfalls in foreigners buying property, particularly in Bali, that I suggest caution and research....not all Notaries seem to know their own laws.Edit: I'd be interested if any member can show they have a 'Sertipikat Tanda Bukta Hak' with their name printed as having a mortgage on the property.
I know a couple of people who have bought property this way and they have made agreements with their nominee that they can keep the property when they pass away. It seems fair to me (but maybe also dangerous!).[/QUOTE]I did a bit of research into this; I don't think it bodes well with hukum warisan (inheritance law in Indonesia), because even if the property is given as a gift (hibah) from parents to one of their children (say, they've got a few); when the parents pass away, the property which has been given will be added back to the pool of properties that the parents owned to be distributed evenly in accordance with hukum warisan (unless the consents of all the other children have been obtained prior to the 'gift'). Although maybe as a matter of contract law, the person who inherits the property has to honour the contract...
I cannot answer your question but I do recall arguments to the case of whether a foreigner [B]can[/B] offer a mortgage in Indonesia without first being registered as a lender.I would seek the advice of a lawyer before entering into an agreement that may be contested in law.The transfer of the Hak Milik property from the owner to your Balinese friend is straight-forward and he/she becomes the titled owner to the property. Legally tying a contract on the property to protect your financial investment is also straight forward.Trying to tie the two together so you have an legal interest in the 'title' to the property is where it becomes fraught. i.e. it would depend on what the mortgage-agreement says if your friend reneged on the mortgage...if it says you then become 'owner' of the property that could constitute an unlawful agreement as a foreigner cannot own Hak Milik property.[/QUOTE]Well said Davita. Yet although a foreigner cannot own freehold property, a grace period is provided on mortgage foreclosure to allow alienation of the land to a bona fide purchaser ("BFP", i.e., Indo citizen or Indo Pt.; the same as when a [I]bule[/I] spouse of an Indonesian landowner inherits the property upon the death of his/her husband/wife. There is a year window during which he/she must have the property sold to a BFP. That said, if the underlying loan agreement between the foreign land investor and the joint venture local partner is a "demand note", and repaid on sale of the land, the foreclosure issue discussed above, becomes moot. The note is called, the property is sold by the local partner to a new BFP, and the investor realizes a return on his investment and the local partner gets an appropriate % of the sale proceeds. Meanwhile, the mortgage ([I]Hak Tanggungan[/I], recording the investor's name on the SHM as mortgagee) is automatically discharged. Long story short: win-win and all perfectly legit or else no [I]notaris [/I]would structure it that way to begin with. Overseas spenders in Indonesia are expected & encouraged to invest. The mortgaging of a local partner's property to secure a capital development investment, only promotes the national interest in increasing overseas investments here by affording the foreign spender secured, full-recourse.
Re: Post # 10Thanks Cisco...I understand what you have said and agree with most although some is really off-subject. i.e. the grace period where a foreigner inherits SHM is not part of our discussion nor is Foreign Direct Investment (FDI) in Indonesia. Those are different subjects.We should focus on the OP's question of how a foreigner can protect his investment in SHM property if using a Balinese friend as 'nominee'. The area I have some difficulty is saying a foreign individual can have his/her name appended to the SHM as a mortgagor. I have heard many say it but when questioned they cannot show. It may be stated on the 'Deed of Statement' but that isn't registered as a mortgage on SHM property in the land office. Also, a 'demand note' for a loan agreement is not a registered mortgage....that constitutes an IOU.It is true a legal entity, such as a bank (foreign or domestic), or licensed mortgage company, can attach a mortgage to the SHM as I've indicated in my link on post # 4.I understand the purpose is to tie the 'nominee' to the foreign investor but if the nominee is nefarious I don't see how this protects the foreigner anyway. The nominee can easily sell the property for a profit then discharge the loan at its value...so where does that leave the foreigner...he has the original loan amount back but no villa. He may have a contract but Indonesia Law is so slow....good luck with discharging that in court before a few birthdays pass.Please don't think I'm advocating that it is illegal to have an Indonesian own property a foreigner has a contract to stay in or profit from...I have already stated I have two such properties. The point I'm making is it is [B]based on trust[/B] and no amount of jiggling with contracts etc. can change that. The ownership cannot be disputed...it belongs to the Indonesian whose name is on the SHM Title, his/her heirs and successors.Indeed..imo...it can be counter-productive if an official/politician decides the contracts are designed to circumvent the Agrarian Law. This has been debated in the past and I'm sure will be continued anytime someone wants to make a name for themselves.
Re: Post # 10Thanks Cisco...I understand what you have said and agree with most although some is really off-subject. i.e. the grace period where a foreigner inherits SHM is not part of our discussion nor is Foreign Direct Investment (FDI) in Indonesia. Those are different subjects.We should focus on the OP's question of how a foreigner can protect his investment in SHM property if using a Balinese friend as 'nominee'.The area I have some difficulty is saying a foreign individual can have his/her name appended to the SHM as a mortgagor. I have heard many say it but when questioned they cannot show. It may be stated on the 'Deed of Statement' but that isn't registered as a mortgage on SHM property in the land office. Also, a 'demand note' for a loan agreement is not a registered mortgage....that constitutes an IOU.It is true a legal entity, such as a bank (foreign or domestic), or licensed mortgage company, can attach a mortgage to the SHM as I've indicated in my link on post # 4.I understand the purpose is to tie the 'nominee' to the foreign investor but if the nominee is nefarious I don't see how this protects the foreigner anyway. The nominee can easily sell the property for a profit then discharge the loan at its value...so where does that leave the foreigner...he has the original loan amount back but no villa. He may have a contract but Indonesia Law is so slow....good luck with discharging that in court before a few birthdays pass.Please don't think I'm advocating that it is illegal to have an Indonesian own property a foreigner has a contract to stay in or profit from...I have already stated I have two such properties. The point I'm making is it is [B]based on trust[/B] and no amount of jiggling with contracts etc. can change that. The ownership cannot be disputed...it belongs to the Indonesian whose name is on the SHM Title, his/her heirs and successors.Indeed..imo...it can be counter-productive if an official/politician decides the contracts are designed to circumvent the Agrarian Law. This has been debated in the past and I'm sure will be continued anytime someone wants to make a name for themselves.[/QUOTE][COLOR=#0059b3]RESPONSES. Here are my responses to what you have imparted above, Davita: [/COLOR][COLOR=#000000] "The area I have some difficulty is saying a foreign individual can have his/her name appended to the SHM as a mortgagor." [/COLOR][COLOR=#0059b3] , the secured party in a mortgage/[/COLOR][I][COLOR=rgb(0, 89, 179)]Hak Tanggungan, [/COLOR][/I][COLOR=#0059b3]is a "mortgagee". The "mortgagor", being the financed party. The way the secured investment transaction should be structured, is with a [I]bona fide[/I], transparent, capital development agreement or a joint venture agreement. This kind of contract spells out that the local investor is utilizing financed funding from the overseas partner/investor in a land development. They sign an agreement clearly providing for the return on the overseas investor's investment and the local investor's benefits. Because the agreement sets up a debt obligation, it can be secured by recording the overseas investor's name on the SHM as mortgagee. The mortgage is automatically discharged when the land is sold. [/COLOR][COLOR=#000000]"The nominee can easily sell the property for a profit then discharge the loan at its value." [/COLOR][COLOR=#0059b3]The overseas party holds the original SHM. The mortgage is only discharged when the land is sold in accordance with their Agreement. Hence the local investor could not "easily" sell the property. The deal can be further strengthened by 4 back-to-back leases of 25 year terms, each signed and paid-up, simultaneously. In effect this amounts to a century of undisturbed rock-solid land use/possession. Some [/COLOR][I][COLOR=rgb(0, 89, 179)]notaris[/COLOR][/I][COLOR=#0059b3] even include a [/COLOR][I][COLOR=rgb(0, 89, 179)]kuasa menjual[/COLOR][/I][COLOR=#0059b3] from the local partner to the overseas partner. Note the total absence in this structure of a "nominee".[/COLOR][COLOR=#000000]"[/COLOR][COLOR=rgb(0, 0, 0)]The point I'm making is it is [/COLOR][B][COLOR=rgb(0, 0, 0)]based on trust[/COLOR][/B][COLOR=rgb(0, 0, 0)] and no amount of jiggling with contracts etc. can change that. The ownership cannot be disputed...it belongs to the Indonesian whose name is on the SHM Title, his/her heirs and successors." [/COLOR][COLOR=#000000] [/COLOR][COLOR=rgb(0, 89, 179)]At our Office, clients are routinely told that "trust is good, but no trust is better". Our formulae are devoid of the "trust" element. You are entirely correct when you say "ownership cannot be disputed". Of course the recorded owner on the SHM is the lawful owner and no one else (least of all, a foreigner). But effective use and possession has been surrendered by the owner as his/her contribution to the venture. And without spending a penny, he/she or more likely, his/her heirs have become owners of a nice land parcel. Zero trust and no "nominee". All documented by a [I]notaris[/I] PPAT and BPN.Also, contracts relating to overseas investments in land development, should [U]always[/U] specify dispute resolution exclusively by international arbitration either by BANI, ICC, etc., precluding any role by Indonesian courts except to enforce the arbitral award. And another thing, although the law now requires contracts to be signed in Indonesian, they can (and should) specify, that the English language version governs.[/COLOR][COLOR=#000000]"Indeed..imo...it can be counter-productive if an official/politician decides the contracts are designed to circumvent the Agrarian Law."[COLOR=rgb(0, 89, 179)] I've heard these scare stories, but from a legal perspective, they are way out in never-never land. Presumably, even assuming such official/politician could invade the exclusive province of the courts (which they cannot), they would need to conduct a "raid" of BPN offices everywhere and go file by file to discover anything "circumventing" the Agraria law (of 1960). Now what would that be? Even assuming BPN would even let them in the door, much less into their super-secret files (the opposite of public record in this Country), what documents would constitute evidence of circumventing the law? All they would ever see would be copies of totally legitimate certificates HGB & SHM by the hundreds of thousands. Any such certificates, having been transacted by a [I]notaris[/I] PPAT and accepted for filing by BPN, carry with them the "presumption of legality". And any arbitrary, non-judicial attempt to cancel such certificates would up-end the land tenure system of the entire Country. Long story short: a decidedly low percentage possibility, my friend. And unprecedented in the history of Indonesia.[/COLOR][/COLOR]