Forest Bather
Fred2 wrote
Agrarian Law Of 1960 states that only Indonesian citizen can OWN land. That will NEVER change, no mater what anyone will tell you.
So how do you move forward? 25 year lease legal, Hak Tanggungan (mortgage) legal, PMA company Lease legal, Nominee lease, you don't own anything just have agreements with legal owner some documents legal some illegal. Depends on how much money you are willing to lose if things go wrong.
Thanks Fred. Yes the agrarian law and land ownership law operate in the same way as in Thailand, Vietnam and various other places. Will likely explore the PMA route.
spicyayam
I don't know the exact figures for setting up a PMA but it is not cheap and the capital requirements are steep. I don't think the government wants it to be used for just purchasing property.
[QUOTE]I wonder if it could also be possible to draw up a 'watertight' lease agreement addressing the weaknesses you suggested and other conceivable loopholes.[/QUOTE]
I am sure it is possible but the problem is always the owner could sell the property under you, or they can use it as collateral for a loan without your knowledge.
People keep saying leaseholds are safe, but many of these lease agreements that I have seen are very weak and the potential for a scam is great.
Markit
In my experience the people that hate the Nominee mode of land ownership have invested heavily in the Leasehold model and the ones that have invested heavily in the Nominee model keep quiet because everyone that doesn't know shit will tell you that it's illegal out of jealousy or the dire fear/denial that they may have really fucked up as they watch their 4 bedroom villa with 2000 squ meters and 20 meter pool with landscape gardening gradually turn into the real owners property as the lease runs out. Both systems work if you want to "own" property in Bali - if you intend to stay longer than 10 years go Nominee if not and you go leasehold then after the 10 years is over your remaining 15 years may still be worth something on resale. Good luck.
Forest Bather
spicyayam wrote
Well, it has been discussed many times before as you say. My own opinion is to go for a 'hak tanggungan', which is where you lend money to a local to buy the property and your name is added to the certificate as a lender.
I have started to see many comments from people that "leases" are the safest for foreigners. The leases that I have seen are pretty weak and more of a long term rental. Cases like if the owner sells the property is not mentioned in the lease. Or the owner uses the certificate to borrow money and the bank comes knocking when they don't pay back the loan. Also, cases where a foreigner has a nominee agreement with an Indonesian and then he "leases" it to another foreigner. The foreigner somehow thinks he is safe because he has a lease, but in actual fact, he is still dependent on the nominee type of agreement.
Hak Pakai is good if you actually plan to live in Indonesia and HGB if you are starting a commercial enterprise like a hotel.
Thanks SpicyAyam. Hak tanggungan is a possibility as is the PMA route. Any idea what the latter will entail? In Vietnam, a foreign-owned company may own property if it has a paid-up capital of US$900,000 for the expressed purpose of land investment (a lot of money!). I wonder if it could also be possible to draw up a 'watertight' lease agreement addressing the weaknesses you suggested and other conceivable loopholes.
Forest Bather
spicyayam wrote
I don't know the exact figures for setting up a PMA but it is not cheap and the capital requirements are steep. I don't think the government wants it to be used for just purchasing property.
I am sure it is possible but the problem is always the owner could sell the property under you, or they can use it as collateral for a loan without your knowledge.
People keep saying leaseholds are safe, but many of these lease agreements that I have seen are very weak and the potential for a scam is great.
Thanks. Yes there is always risk. If I wanted to set up a home and also operate a boutique hotel, I guess I would need a PMA plus other licences.
tel522
I just heard a story from a foriegn nieghbour ,whom was pressured by his "nominee" to lend the "nominee" 200 juta , he lent him the money which Im sure he wont get back , I know the "nominee" , imho a "lowlfe".
Now hes after him again for another 100.
Balifrog
Live in paradise....isn't it great ?
Fred2
I have just one lease agreement, but looking to buy or lease. I know how much i will pay over the term of the lease so no surprise.
Same lease documents that I have in Australia no problems there.
The properties in Australia that I own have a document, with my name on it. no problems there.
The properties in Indonesia have my wife's name on the deeds. hope no problems there.
People that have a nominee agreement have just that, an agreement between two people. The owner with his/her name on the title and the westerner with his/her name on agreements, right to use etc.
Any way of living in Indonesia would be great, but look at the pit falls before you commit.
spicyayam
tel522 wrote
I just heard a story from a foriegn nieghbour ,whom was pressured by his "nominee" to lend the "nominee" 200 juta , he lent him the money which Im sure he wont get back , I know the "nominee" , imho a "lowlfe".
Now hes after him again for another 100.
Why do they feel compelled to give money? They give money once and it is likely never going to stop. Extortion is also a crime in Indonesia.
tel522
Because, after he did the nominee agreement some years ago ,he then realised it was an ilegal agreement a few years later, ie Agrarian Law Of 1960 ,he felt exposed and somewhat nervous about the situation ,the nominee applied subtle pressure and he caved .
Ya if your nominee is a good guy fine ,but if not .............
I prefer to rent ,no liability ,and if something untoward happens ,agung ,earthquakes ,tsunami etc I can just go ,im fully insured ,so no problems .
Forest Bather
Markit wrote
In my experience the people that hate the Nominee mode of land ownership have invested heavily in the Leasehold model and the ones that have invested heavily in the Nominee model keep quiet because everyone that doesn't know shit will tell you that it's illegal out of jealousy or the dire fear/denial that they may have really fucked up as they watch their 4 bedroom villa with 2000 squ meters and 20 meter pool with landscape gardening gradually turn into the real owners property as the lease runs out. Both systems work if you want to "own" property in Bali - if you intend to stay longer than 10 years go Nominee if not and you go leasehold then after the 10 years is over your remaining 15 years may still be worth something on resale. Good luck.
Yes, the problem with leasehold is the diminishing value of the land from year to year. Thanks for the heads-up.
harryopal
As Australia allows more and more assets and land to be sold to foreign owners including enormous cattle stations, agricultural and dairy farms it seems a pity that we hadn't used a similar system to the Balinese. How nice to know that when the lease expires the land stays in the family.
Mark
The eventual demise of the nominee model will probably not come from enforcement of the agrarian law or some such - this would require huge manpower and resources for investigation of the circumstances and subsequent court case, etc. It will instead result from the increasing enforcement of the tax laws, since the tax man will be most interested in how Pak Made (for example), who subsists on his small patch of sawa, was able to purchase a property worth several hundred million rupiah (or more) and build a luxury villa with a swimming pool, but never declared and paid tax on this 'income'... At this point, the foreigner 'owner' will either need to cough up a huge chunk of cash to pay Made's back taxes and penalties, or the property will have to be sold to satisfy the same. And, in the event that our Pak Made says that the foreigner simply loaned him the money to buy the land and build the villa, which the foreigner occupies rent free and holds a mortgage on, it will raise a case for abuse of the agrarian law, as well as throw up legal and tax consequences for the foreigner.
spicyayam
Mark wrote
It will instead result from the increasing enforcement of the tax laws, since the tax man will be most interested in how Pak Made (for example), who subsists on his small patch of sawa, was able to purchase a property worth several hundred million rupiah (or more) and build a luxury villa with a swimming pool, but never declared and paid tax on this 'income'.
This is already happening from what I have seen, and I am no expert but it seems as though a local who becomes a nominee, the property is treated like other income and taxed accordingly. The tax office, at least for now seems to accept the situation and why wouldn't they as they are having more money coming in than before.
If you read any books like about the Panama Papers, even in western countries it is common for properties being bought with shell companies, even with directors other than the 'real' owner of the property, so this concept of using a 'nominee' is not just being used in countries like Indonesia where foreign ownership is restricted.
Forest Bather
Mark wrote
The eventual demise of the nominee model will probably not come from enforcement of the agrarian law or some such - this would require huge manpower and resources for investigation of the circumstances and subsequent court case, etc. It will instead result from the increasing enforcement of the tax laws, since the tax man will be most interested in how Pak Made (for example), who subsists on his small patch of sawa, was able to purchase a property worth several hundred million rupiah (or more) and build a luxury villa with a swimming pool, but never declared and paid tax on this 'income'... At this point, the foreigner 'owner' will either need to cough up a huge chunk of cash to pay Made's back taxes and penalties, or the property will have to be sold to satisfy the same. And, in the event that our Pak Made says that the foreigner simply loaned him the money to buy the land and build the villa, which the foreigner occupies rent free and holds a mortgage on, it will raise a case for abuse of the agrarian law, as well as throw up legal and tax consequences for the foreigner.
closing a loophole?
Foamcrest
We leased our land for 25 years with a 10 year option after which it reverts to the Balinese land owner. We are more than happy with this arrangement as we have the use of the land/ now a villa, and then a Balinese will collect his superannuation.
It’s the mind set of Australians and others that our houses are our castle and nobody can take it away from us and so to just give something as precious as your house to someone else for nothing seems abhorrent. But thems the rules here so either comes to terms with the idea or don’t build or buy here.
As far as a mortgage from the nominee back to the bule is concerned more than often the value of the home when the mortgage is entered into is far exceeded over a number of years so the nominee can sell legally sell the home, repay the mortgage and still keep the difference between sale price and mortgage .
Why twist and turn with the rules, just abide by the rules and enjoy life then ultimately help a Balinese family.
tel522
Personally ,I have people in my extended family and freinds who would appreciate financial help ,rather than the locals here , but ya ,just my opinion .
Forest Bather
Foamcrest wrote
We leased our land for 25 years with a 10 year option after which it reverts to the Balinese land owner. We are more than happy with this arrangement as we have the use of the land/ now a villa, and then a Balinese will collect his superannuation.
It’s the mind set of Australians and others that our houses are our castle and nobody can take it away from us and so to just give something as precious as your house to someone else for nothing seems abhorrent. But thems the rules here so either comes to terms with the idea or don’t build or buy here.
As far as a mortgage from the nominee back to the bule is concerned more than often the value of the home when the mortgage is entered into is far exceeded over a number of years so the nominee can sell legally sell the home, repay the mortgage and still keep the difference between sale price and mortgage .
Why twist and turn with the rules, just abide by the rules and enjoy life then ultimately help a Balinese family.
25 years with option for another 10 seems fair
Markit
harryopal wrote
How nice to know that when the lease expires the land stays in the family.
Isn't it possible under Oz law to make this one of the stipulations of an Oz leasehold? That at the end of the lease it returns to the original owner? Who gets it then, if not?
Foamcrest
Markit wrote
Isn't it possible under Oz law to make this one of the stipulations of an Oz leasehold? That at the end of the lease it returns to the original owner? Who gets it then, if not?
