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Tuesday, March 01, 2016
Govt Regulation on Property Ownership for Foreigners in the Spotlight
Marcell Sihombing, Nando Narendra
Seminar Organized by INI and IPPAT. Photo by: NNP
It is almost inevitable that Indonesian notaries and land-deed officials ( Pejabat Pembuat Akta Tanah - PPAT) will find themselves dealing with foreign citizens during the course of their careers, especially in the wake of the effective enforcement of Government Regulation No. 103 of 2015 on the Ownership of Residential Property by Foreign Citizens Domiciled in Indonesia (2015 Regulation).
“In fact though, dealing with foreign-citizen clients has always been an issue in our [notaries and PPATs] lines of business, since long before the issuance of the 2015 Regulation,” commented Alwesius, a notary and PPAT from Tangerang, during a national seminar which was held in South Tangerang on Friday, 26 February 2016. The seminar itself was jointly organized by the Regional Executive Board of the Indonesian Notaries Association (INI) and the Association of Land-Deed Officials (IPPAT). Both associations are responsible for the Tangerang Regency area.
Mr. Alwesius also set out three important issues which, he explained, notaries and PPATs must be aware of in relation to the implementation of the 2015 Regulation. The first matter relates to ownership titles for foreigners. In general, foreign citizens are only allowed to own land under the right-to-use ( hak pakai ) title-and-lease designation.
However, Mr. Alwesius also referred to Article 21 (3) of Law No. 5 of 1960 on Basic Provisions of Agrarian Principles (Basic Agrarian Law), which outlines situation where foreign citizens to own land not classified under the right-to-use title. These situations encompass: legitimate inheritance, mixed marriages resulting in joint marital property, and foreign citizens who have become Indonesian citizens (e.g. via a process of naturalization).
Through a process of legitimate inheritance, for example, a foreign citizen may obtain land under the right-to-exploit (hak guna usaha ) title, and the right-to-build (hak guna bangungan ) title, as well as the right-to-use title. Nevertheless, because foreign citizens are only allowed to own land under a right-to-use title, any land obtained under a right-to-exploit or right-to-build title must be transferred or sold to another party within one year. Indeed, according to Articles 21 (3), 30 (2) and 36 (2) of the Basic Agrarian Law, failure to transfer such plots of land within the one-year time limit will result in the revocation of their titles and the land in question becoming state property.
“We should be clear that property ownership by foreign citizens comes with certain requirements and restrictions, such as the mandatory transfer of land titles within one year. Indeed, even if a land title remains in the possession of a foreign citizen, the legal status of such land is that it is designated state-owned property, therefore it cannot be transferred/sold to another party or serve as a guarantee for obtaining loans,” asserted Mr. Alwesius.
The second issue that notaries and PPATs should be cautious of involves clients who appear before them requesting the formulation of sales-and-purchase deeds (Akta Jual Beli - AJB) or requesting fiduciary transfers of ownership in the form of Authorization for the Assignment of a Mortgage (Surat Kuasa Membebankan Hak Tanggungan - SKMHT) or requesting Mortgage Deeds ( Akta Pemberian Hak Tanggungan - APHT). Article 26 (2) of the Basic Agrarian Law expressly prohibits any transfer of ownership by parties who are not the legitimate holders of property-ownership titles (e.g. freehold, right-to-exploit, or right-to-build titles), be it either directly or indirectly.
“Whenever a foreign element is involved, we [notaries and PPATs] must be aware that these parties are only allowed to own right-to-use titles. If a foreign citizen wants to secure an official deed from a PPAT as regards the sales of an inherited property, then it is better to convert the title of the property to right-to-use in advance. An AJB can then be drawn up before a notary, and this is to be followed by changing the title’s ownership to the name of its buyer. After that, the buyer is allowed to keep the right-to-use title or convert it into a freehold title. This method costs more, however the results will be satisfactory and safe. One just needs to choose whether one wants to play it safe or take a risky chance,” asserted Mr. Alwesius.
In the light of these issues, all notaries and PPATs are being urged to be thorough and to not accept any clients who violate the Basic Agrarian Law’s provisions, as set out above. This will ensure that they are not held responsible should a legal issue ever arise in the future regarding the issuance of AJBs, SKMHTs, or APHTs.
One final issue relates to nominee-arrangement agreements ( perjanjian pinjam nama). In essence, notaries and PPATs should only incorporate the intentions of the various parties to a given agreement into an authentic notary’s deed that conforms to the prevailing laws. However, Mr. Alwesius asserted that foreign citizens often exploit nominee-arrangement agreements in a bid to outsmart the law that prohibits foreign citizens from possessing land under freehold titles. Under a nominee-arrangement agreement, land is registered under an Indonesian citizen’s name, although in actuality the land is utilized and controlled by a foreign citizen.
“As a notary, we must absolutely avoid offering the means to secretly breach or work around any of Indonesia’s applicable laws and regulations,” asserted Mr. Alwesius. “Nominee-arrangement agreements used by foreign citizens in this way clearly violates the prevailing laws, and should this come to light, then we [notaries] will also be held accountable.”
Syafran Sofyan, Chairman of the IPPAT, who was also present at the event, also ventured an opinion on the matter and stated that notaries and PPATs must ensure legal certainty in every authentic deed that they issue. Thus, all notaries and PPATs are obliged to keep updating their knowledge as regards any new regulations issued by the government.
“[A notary and/or PPAT’s] main duty is to produce authentic notarial deeds that ensure legal certainty. In order to achieve this goal, of course we [notaries and PPATs] must be aware of all of the relevant regulations,” concluded Mr.Sofyan.