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Bali Land Ownership through a Nominee Agreement: A Guide

Owning Land in Bali through a Special Purpose Agreement: Your Guide

In Indonesia, foreigners are prohibited to own a Hak Milk (freehold title) of land under the Indonesian Agrarian Law. Freehold lands only belong to Indonesian citizens.

Foreigners are only entitled to Hak Pakai (leasehold title) of land, i.e. the right of use of land. Therefore, even a foreigner inherits a freehold land through a marriage with an Indonesian national, they will have to release the land by selling or granting it within a year upon the receipt of the land.

If foreigners do not do so within the period specified by law, the inherited land will be taken by the state and the foreigner’s land ownership title will be removed as well.

Legally, Special Purpose Agreements that leverage professional shareholder or director or commissioner services to transfer freehold lands to foreigners are not permitted as it does not conform to the legislation that was previously mentioned.

However, there is always a solution. Foreigners can in fact take advantage of the binding power of Special Purpose Agreements to obtain land in Bali.

How Foreigners can Take Advantage of Special Purpose Agreements to Obtain a Piece of Land in Bali

It is possible for foreigners to obtain land in Bali when they make use of the Special Purpose Agreements described below:

1. Land Ownership Agreement (with The Power of Attorney)

The local partner acknowledges that the foreigner (beneficiary) who provides the fund to buy the land is the owner of the land even though the land is registered under the local partner’s name. The power of attorney will also present to provide authorisation that the beneficiary can carry out activities on the land.

2. Lease Agreement

The local partner leases the land to the foreigner within a specific time frame. Extension of the lease is possible.

3. Option Agreement

The beneficiary is given the option to buy the land from the local partner that was previously bought with the beneficiary’s money.

4. Loan Agreement

The local partner buys the land with funds from the beneficiary provided as a loan. Under the loan agreement via a mortgage mechanism, the local partner and the beneficiary use the land as the loan collateral.

5. Grant with Testament (Hibah Wasiat)

The land and property are granted to the beneficiary by the local partner.

Due Diligence Prior to Bali Land Ownership

Before signing a deal through the Special Purpose Agreement for your Bali land ownership, it is essential, or compulsory in practice, to conduct due diligence.

Things you have to validate with your due diligence include the following:

  • The land seller is the legal owner with a valid certificate and sole selling right
  • The owner has settled the tax payments so that you can apply for your building permit IMB
  • If the land comes with a building on it, make sure that the building permit IMB fits the zoning and building classification requirements
  • Verify if your business activities are allowed on the land under Bali’s zoning regulations
  • Determine the land border and land infrastructure
  • Ensure there is no limited property access. For example, the permission of road access linked to the property and land

How Cekindo can Assist

In the business world, you should not only know your enemies but also know your friends and customers.

In today’s complex regulatory and business environments, a rising screening of business partners, customers, and investors has become increasingly important.

Cekindo’s professional due diligence investigators provide you with an extensive background check on your local partner for your Bali land ownership. Our detailed analysis report then enables you to dig deeper and make an informed decision on whom you are doing business with.

Reduce your Bali land ownership risk now and make the right decision. Get in touch with Cekindo and our solutions will be tailored to your requirements.

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