For all clarity, the Hak Milik certificate of my property is in the name of my wife, and does not have a nominee agreement. And this Hak Milik title can easily be changed to a Hak Pakai if so wanted, or if needed in case none of the married partners has the Indonesian nationality.
Enough has been written on several forums w.r.t. Indonesian Land titles, but I will summarize once again below.
In Indonesia there are 4 types of ownership possible:
Hak Milik (HM) (i.e. landownership)
Hak Pakai (HP) (i.e. Right to use property)
Hak Guna Bangunan (HGB) (i.e. Right to build)
Hak Sewa ((Leasehold)
Hak Milik certificate is only possible (i.e. legal)
for Indonesians, or alternatively for a foreigner married to an Indonesian. In the latter case a
pre-nub needs to be put in place before the marriage, thereby allowing the Indonesian to maintain the rights on owning land plus the house which sits on this. Nowadays also a
post-nub can also be drafted by a notary for the same purpose.
Without any type of “pre/ post-nub” the Indonesian party of a mixed marriage can NOT by law claim and hold the rights to own land.
In some cases people and even some notaries may recommend to use a local nominee. This is however BAD practice as well as illegal. Sometimes foreign nationals believe that they have found a local person that they can 100% trust and that it’s better or easier to buy land under that person’s name.
When using a Local Nominee Ownership structure a foreigner “owns” a land with a freehold certificate by registering the certificate under a Local Indonesian name and making a set of agreements to make sure that the local Indonesian nominee cannot sell or transfer the land.
While you might have all the trust and the local person can have the best intentions, it’s still an investment on shaky ground as you will have no legal rights as owner the property.
Human relations can take wrong turns, or something might happen with your trustee. Divorce, marriage, death – all these scenarios involve external parties who may not have the same intentions with your property as your potential trustee.
So, unless you are ready to accept that in the worst-case scenario you will lose your entire investment, don’t go for the trustee option. In fact, trusting an unreliable individual nominee is one of the
top mistakes foreign investors make in Indonesia.
Bear in mind that using a nominee structure is illegal, and the nominee agreements as such are void. If the nominee agreement is detected by the government, the government
can confiscate the land, and the foreigner may have tax as well as criminal liability.
2.1 Does this mean that as a foreigner, who is not married to an Indonesian, you cannot buy a Hak Milik property?
NO …. It is possible to change a Hak Milik property into a Hak Pakai property by using a notary. A Hak Pakai certificate has a validity of 30 years validity + 30 years extension + 20 years extension,
for a total of 80 years. Estimated cost is relatively small and has been quoted as less than 2000 euro. But check with a few notaries. Consequently by a later reselling to an Indonesian party, the Hak Pakai can be reversed again to a Hak Milik.
Also a property offered with a Hak Pakai certificate can be sold from one foreigner to another foreigner. Hak Pakai is a primary title directly
between you and the government and so is very safe. It would appear from the Agrarian Law that
you cannot register Hak Pakai between you and an individual unless the individual surrenders control.
For opting for a Hak Pakai foreigners or expats
need to legally reside in Indonesia with a KITAS or KITAP (stay permit). If you lose the KITAS or KITAP, you don’t have right to hold the land anymore;
Note that you can hold Hak Pakai only if the land already has a building on it and there are limitations for operating a property with a Right to Use (Hak Pakai) certificate
as a business.
3.1 Hak Guna Bangunan (HGB). Another safe way for a foreign national to invest in property in Bali is to do it
through a foreign-owned company (PT PMA) and acquire the ‘Right to Build’ (Hak Guna Bangunan) certificate.
A PT PMA is a foreign limited liability company in Indonesia. With a PT PMA, you will have the right to acquire the Right to Build (Hak Guna Bangunan/ HGB) and Right to Use (Hak Pakai/HP) certificates. The process of setting up a foreign company in Indonesia usually takes 2-10 weeks in Bali.
The pros of this title: 1) a foreigner can hold land through a 100% foreign owned company for 80 years which is the longest the Indonesian law allows; 2) the foreign-owned company name goes on the land certificate, thus the foreigner has a full control over the land. The cons of this title: 1) you must set up a company; 2) you must have commercial activities, and report taxes 3) there are fees for changing the title from freehold to HGB if you acquire the land from an Indonesian individual
4.1 Hak Sewa. This is a lease from the freeholder (
the landlord) to use the property for any number of years, up to 25 years or more. Thereafter the land plus property falls back to the landlord. Whereafter potentially a new lease contract can be negotiated if the landlord agrees to this.
Leasehold is one of the most popular ways to acquire rights to the land. The process is easier, cheaper and faster compared to “Right to build” or “Right to use” titles as there is no need to change the land certificate.
However, leasehold is also the least safe – you will have only the rights to the land that you set out in the agreement on the land certificate. In some rare cases there have been several leases signed by the landowner, and there is a dispute who is actually entitled to use the land. There is no central notary system for lease agreements to check if any leases have been signed. Also the value of the property is negatively effected by a lease contract which is getting closer to its expiry date
Essentially both the Hak Pakai as well as the Hak Guna Bangunan licenses make you the owner of the property. Your family members can inherit them and you can sell the property. If the buyer is an Indonesian citizen they are also able to convert the certificate to a Hak Milik (right to own).
If you wish to hold the property after the 80 years (which would potentially be in the 22nd century by then), you can acquire a new certificate once the old one expires.
Note that you can hold Hak Pakai only if the land already has a building on it and there are limitations for operating a property with a Right to Use (Hak Pakai) certificate as a business.