114.jt.12.07.seminar.indonesia real estate

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Presentation on New Condominium Law in Indonesia that was issued in November 2011 By Eddy Leks, from Leks&Co. Please visit www.lekslawyer.com

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114.jt.12.07.seminar.indonesia real estate

  1. 1. REVIEWING IMPLICATIONS OF INDONESIA’S NEWCONDOMINIUM LAW ON THE PROPERTYINDUSTRY1
  2. 2. Background • Indonesia has a new Condominium Law that is Law No 20 of 2011 on Condominium. This law takes into consideration Article 20, Article 21, and Article 28H paragraph (1), paragraph (2), and paragraph (4) of the Indonesian Constitution Law 1945 as well as Law No. 1 of 2011 on the Housing and Occupancy • With this new law, the previous Law Number 16 of 1985 on Condominium is revoked since it is no longer in accordance with the development of law, the people’s needs, and the participation of the society as well as the responsibility and the state’s obligation with regards to the condominium matters  All the implementing regulations of the Law No. 16 of 1985 on condominium shall remain valid as long as it is not in contrary to or has not yet been replaced with a new implementing regulations under the new condominium law2
  3. 3. Condominium development by Foreign Investment Company The development of the commercial condominium is able to be implemented by everyone and can also be conducted through the foreign investment company in accordance with the laws and regulations (article 41 condominium law) Every foreign investment in Indonesia shall take form as Limited Liability Company which is called as a foreign investment company (Article 5 Law No. 25 of 2007 on Investment) The foreign investor must check the Negative Investment List in order to know the maximum percentage that can be owned by foreigner or foreign entity in a company for particular sector in Indonesia.3
  4. 4. Condominium development by Foreign Investment Company Presidential Regulation No. 36 of 2010 on List of Business Fields Closed to Investment and Business Fields Open, With Conditions, To Investment. The real estate business in Indonesia is able to be owned 100% by foreigner Based on Standard Indonesian Business Field Classifications number 68110. This field includes buying, selling, leasing and operating of real estate, which is owned or leased.4
  5. 5.  A condominium is a multilevel building which is built in an area that is divided into sections which are structured functionally, whether horizontally or vertically that constitutes as units in which each can be owned and usedDefinition separately, mainly for residence complemented with common equipment, common facilities and common land. (Article 1 paragraph 1 condominium law) Special State Condominiu Condominium Condominium Owner and Tenant m Association (PPPSRS)• Legal entity Public Condominium Commercial Condominium• The members are the owners or the Types of Condominiu tenants of the condominium m5
  6. 6. Certificate of Certificate of building ownership condominium of condominium unit (SHM unit (SKBG Sarusun) sarusun) Evidence of ownership upon the Evidence of land over Right of ownership upon Ownership, Right to the building over Build or Right of Use the state /area over state’s land, property in the Right to Build or form of land or Right of Use over waqaf land Right of through lease. Management.Proportiona l • A number showing the comparison between condominium unit and common facilities, common equipment and common land which is Compariso calculated based on the respective condominium unit over total value of n Value condominium by the time the developer initially calculated the total construction costs to determine its selling price6 (NPP)
  7. 7. Certificate of Condominium Unit (SHM Sarusun)Is an integral part which consists of:a. Copy of book of land and measurement letter of right of common land in accordance with the laws and regulationsb. Floor sketch picture at the level of the related condominium which shows the owned condominium unitc. Title of division regarding the size of the parts of rights upon the common equipment, common facilities, and common land for the person concerned. Can be used as a security which is encumbered by mortgage in accordance with the laws and regulations7
  8. 8. Certificate of Building Unit Ownership (SKBG Sarusun) Is an integral part comprising : a. Copy of building books b. Copy of land lease agreement c. Floor sketch picture at the level of the related building which shows the owned building unit d. Title of division regarding the size of the parts of rights upon the common equipment and common facilities concerned. Can be used as a security which is encumbered with fiducia in accordance with the laws and regulations8
  9. 9. Obligation of the Commercial Condominium to Provide Public Condominium • The developer of the commercial condominium is required to provide a public condominium (can be conducted outside the commercial condominium area location in the same regency/city) with the minimum of 20% from the total floor area of the developed commercial condominium’s floor • Further regulation will be regulated in the Government Regulation.9
  10. 10. • Right of Ownership Condominium can be • Right to Build or Right of Use over state land; and constructed over the • Right to Build or Right of land of: Use over Right of Management10
  11. 11. Sketch and Description In constructing the condominium, the developer shall separate the condominium into condominium units, common equipment, common facilities, and common land The separation of the condominium as set out in Further regulations are Article 25 (1) shall be made in the form of sketch and regulated in the description Government Regulation The sketch and description becomes the basis to determine the Proportional Comparison Value (NPP), certificate of condominium unit(SHM sarusun), or certificate of building ownership of condominium The sketch and description is made before unit (SKBG), and the conditional sale and purchase the construction of a condominium. agreement (CSPA)11
  12. 12. The sketch and description are made in the form of the deed of separation that is legalized by the regency/mayor Specifically for the Province of DKI Jakarta, the separation deed of separation is legalized by the Governor In implementing the condominium’s a. Status of right development, the of land; and developer shall fulfill the administrative requirements which b. The building include: construction permit (IMB)12
  13. 13. The function and Specifically for the utilization plan has to Province of the DKI obtain the permit from Jakarta, the function and the regency/mayor. utilization plan has to obtain the Governor’s permit After obtaining the permit, the developer shall ask the legalization from the local government of the title of division showing the clear boundaries of each condominium units and also common equipment, common facilities, and common land as well as the description of Proportional Comparison Value (NPP)13
  14. 14. The permit application is proposed by the developer by attaching the following documents: • the land certificate; • the regency/city plan information letter; • the site plan sketch; • the architecture sketch plan which includes drawing, look, and the piece of the condominium which shows clearly the boundaries vertically and horizontally of a condominium unit; • the structure plan sketch as well as its calculation; • the sketch plan which shows clearly the common equipment, common facilities, and common land and • the sketch plan of the public utility and the installations as well as its equipments14
  15. 15. Change Over the Function Plan and the Utilization of the Condominium •Obligated to have the permit from the regent/ mayor •Specifically for the Province of DKI Jakarta, has to obtain the permit from the Governor •In the case of the change of the function and utilization plan of the condominium causing the change of Proportional Comparison Value (NPP) the title of division has to be re-legalized by the Mayor/Regent.15
  16. 16.  The developer shall apply the application of the certificate of feasible function to the regent/mayor after finishing all or part of the condominium’s development as along as it is not in contrary to the building construction permit (IMB)  Feasible Function  the functioning of all or part of a condominium that can guarantee the fulfillment of building structure and its reliability according to the function as set out in Building Construction Permit  Specifically for the Province of DKI Jakarta, the application of the certificate of feasible function is proposed to the Governor.16
  17. 17.  Developer is allowed to market the condominium before the construction is begun as long as they meet the following requirements (Article 42 Condominium Law):a. The certainty of the usage of land;b. The certainty of right of land;c. The certainty of the condominium controlling status (the certainty of condominium controlling status needs to be provided to the buyer based on the title of division legalized by local government)d. The building construction permit; ande. Guarantee over the condominium’s construction from the guarantee institution (may be in the form of support letter from bank or non bank). When the marketing is performed before the construction of the condominium, everything that has been promised by the developer and/or its marketing agent binds as the Conditional17 Sale and Purchase Agreement (CSPA) to both parties
  18. 18. Conditional Sale and Purchase Agreement (CSPA) 1. Land Ownership Status; 2. Obtain the Building Construction Permit; 3. The availability of facilities and public utilities; CSPA is conducted after 4. The completion of fulfilling certain (20% of the volume of the condominium building 20% of construction; requirements : construction that are being marketed) and (the condition of condominium unit that is built and sold to the costumers, including through promotional media, inter 5. The provisions alia, condominium location, type of condominium, agreed building specification, condominium price, facilities, public utilities, and hand over date of condominium unit)18
  19. 19. Conditional Sale and Purchase Agreement (CSPA) Technical Guideline for CSPA Decision of State Minister for Public Housing No.11/KPTS/1994 on Technical Guidelines of Conditional Sale and Purchase Agreement19
  20. 20. Conditional Sale and Purchase Agreement (CSPA) Material issues in CSPACSPA regulates the following, among others: The objects of sale and purchase is the right of ownership over condominium unit which covers common facilities, common equipment and common land according to the Proportional Comparison Value of the respective condominium unit. The condominium must have required licenses such as location permit, proof of control and payment of land and Building Construction Permit. Management of the condominium which stipulates that the buyer should be willing to be the member of Condominium Owner and Tenant Association in order to manage the common facilities, common equipment and common land also the 20 amount of service charge that will be agreed amicably.
  21. 21.  Developer’s obligation are: 1. Before conducting initial marketing, developer shall report to the Regent/Mayor copied to the Minister of Public Housing. The report shall comprise: o Copy of principle license; o Copy of decision of granting of location permit; o Evidence of procurement and payment of land; o Copy of Building Construction Permit o Title of Division legalized by the Local Government; If, within 30 days after the receipt of submission of report, there is no response from the Local Government, the initial marketing may be conducted.21
  22. 22. CSPA - Cont’d 2. Provide documents of development such as:  the land certificate;  the site plan sketch;  the architecture sketch plan which includes drawing, look, and the piece of the condominium which shows clearly the boundaries vertically and horizontally of a condominium unit;  the structure plan sketch as well as its calculation;  the sketch plan which shows clearly the common equipment, common facilities, and common land; and  the sketch plan of the public utility and the installations as well as its equipment.22
  23. 23. 3. Complete the construction according to the agreed standard; 4. Repair any damages within 100 days after signing the minutes of delivery of condominium unit from the developer to the buyer, with the conditions:  Developer’s responsibility is limited to the design and the specifications of condominium unit;  The damages that occurred are not due to buyer’s fault. 5. Responsible to the hidden damages which may be discovered later on 6. Become a temporary manager before the Condominium Owner and Tenant Association is established23
  24. 24. CSPA - Cont’d 7. Insure the building construction during the development 8. If during the construction force majeure takes place beyond the ability of both parties, then Developer and buyer would consider amicable settlement with the priority to complete the construction of condominium. 9. Prepare the Sale and Purchase Deed then together with buyer sign the deed before the Land Conveyancing Officer on the stipulated date. Then the developer and/or the appointed Land Conveyancing Officer will manage so that the buyer will obtain the certificate of right of ownership over condominium unit under the name of the buyer and the buyer will bear its costs. 10. Deliver the condominium unit including the public facility and social facility perfectly on the stipulated date and if the construction has not finished yet, the developer has a chance to complete the construction within 120 days, counted since the planned delivery date.24
  25. 25. CSPA - Cont’d 11. If the construction is not completed after 120 days then the CSPA shall be null and void and its nullification may not be proven or requested through a court decision or arbitration body, and for the developer, it is obligated to refund all the payment which has been received from the buyer plus penalty and monthly interest in accordance with the prevailing bank rate.25
  26. 26.  Buyer’s Obligations are: Stating that the buyer has read, understood and accepted the entire terms and conditions on purchase order and CSPA. Buyer will subject to the terms and conditions in the Article of Association of Condominium Owner and Tenant Association and any related documents, and the conditions of the agreements and documents will bind the buyer . Buyer of condominium unit shall pay management fee and utility expenses and if the payment is late, the buyer will be penalized as stipulated by the Association of Condominium Owner and Tenant Association The responsibility of buyer covers: • Payment of the required deeds • Service fees of Land Conveyancing Officer for a deed of sale and purchase of condominium unit • Costs to obtain Right of Ownership over condominium unit, registration costs 26 (change of name) in Land Office
  27. 27.  After the deed of sale and purchase is signed but before the certificate of right of ownership over condominium unit is issued by the National Land Agent: If the condominium unit is transferred to third party, it will be charged administrative fees as stipulated by the developer, which cannot be more than 1% from the selling price If the condominium unit is transferred to family member for whatsoever reason, including inheritance by law, it will be charged administrative fees for Notary/PPAT according to the prevailing rate.  Before the selling price of condominium unit is fully paid, the buyer is not able to transfer or encumber the condominium unit as debt security without prior approval in writing by the developer.27
  28. 28.  Dispute settlement on the CSPA is conducted through arbitration in accordance with the rules of BANI (Indonesian National Board of Arbitration) where the parties will bear the costs equally.28
  29. 29. Certificate of Certificate of Feasible Building Unit Function Ownership / Certificate of Condominium Unit After the issuance of: Article 44 condominium law The development of the condominium is stated as completed29
  30. 30. The Utilization of the Condominium Utilization of • Residential or condominium: • Mix-use Mix-use means a mix between residence function and non-residence function30
  31. 31. Pengelolaan Rusun Management of condominium covers the Management agency of condominium has operational activity, maintenance and to be in a form of legal entity except treatment of the common equipment, commercial lease condominium, special common facilities, and common land condominium, and state condominium The Management of Condominium Management has a right to receive The Management has to register & obtain amount of management fee that is the business permit from: regency/ mayor. charged to the owner and the tenant For DKI Jakarta, has to obtain it from the proportionally. Governor31
  32. 32. The Management of Condominium Cont. can cooperate with the Manager  Developer, during the transition period shall manage condominium prior to establishment of Condominium Owner and Tenant Association (PPPSRS) - The transition period is determined for as long as 1 year since the first handover of the condominium unit to the owner -the amount of the condominium management cost during the transition period is covered by the developer and the owner of the condominium unit based on the Proportional Comparison Value (NPP) of each condominium unit32
  33. 33. Condominium Owner and Tenant Association (PPPSRS) Developer shall facilitate the establishment of PPPSRS before the end of transitional period. The PPPSRS is given a position as legal entity by law. The owner of the condominium unit shall establish PPPSRS PPPSRS consists of the owner or tenant who obtains the proxy from the owner of the condominium unit 33
  34. 34. Condominium – Cont’d  In the event PPPSRS has already been formed, the developer shall immediately hand over the management over common equipment, common facilities, and common land to the PPPSRS  PPPSRS may form or appoint a building manager  The procedure to manage the interest of the relevant owner and tenant is regulated in the Articles of Association and By-Laws of PPPSRS34
  35. 35. Condominium – Cont’d In terms of making decision concerning ownership or management of condominium, every member has equal right based on the Proportional Comparison Value (NPP) In terms of making decision concerning the interest of condominium occupancy, everyone has the right to give one vote. This means if the condominium unit has been occupied, the vote of owner may be granted to the occupant of the unit. If the unit has not yet been occupied then every owner only has the right of one vote. Although one person owns more than one units, he/she can only give one vote. 35
  36. 36. Condominium – Cont’dRight to Vote of member of Condominium Owner and Tenant Association• Voting Right of Occupancy A voting right to determine housing rules, utilization of common facility and obligation to pay service charge over management and fire insurance of common rights such as the management of common equipment, common facilities and common land• Voting Right of Management A voting right to determine maintenance, repair and construction of environment infrastructure, social facility, common equipment, common facility and common land.• Voting Right of Ownership A voting right to determine matters concerning the relationship between tenants of condominium unit, election of administrator and costs of condominium unit. 36
  37. 37. Condominium – Cont’dDecree of Ministry of Public Housing No.06/KPTS/BKP4N/1995 On Guideline of Deedof Establishment, Articles of Association andArticles of Condominium Tenant Association. Regulates the establishment of Condominium Owner and Tenant Association 37
  38. 38. Condominium – Cont’d Establishment Meeting: • Every owner and/or tenants of the condominium unit, firstly conduct the meeting of establishment of Condominium Owner and Tenant Association and its result will be made in form of Minutes of Meeting; • In the meeting it is necessary to designate some candidates/ member of the meeting which will be given proxy to come to Notary to make statements of the results of the meeting • In the meeting, without reducing any permission from the officials, it is stipulated the Article of Association of Condominium Owner and Tenant Association.38
  39. 39. Criminal Sanctions Convicted of maximum 2 (two) • A developer of the commercial condominium who breaches his obligation to provide public years imprisonment condominium at least 20 % of total floor area of or maximum fine of commercial condominium construction 20 billion Rupiah • A Developer who made a CSPA that is not in Convicted of accordance with the one that is marketed maximum 4 years • A developer who did not fulfill the certainty of: • Land ownership status imprisonment or • Building Construction Permit maximum fine of 4 • Availability of facilities, infrastructure, public utility billion Rupiah • Volume construction minimum 20% • Subjects in the agreement39
  40. 40. Criminal Sanctions • Everyone who damages or changes the infrastructures, facilities, and public utilities in the condominium Convicted of maximum 1 environment; conduct actions which endanger others or year imprisonment or public interest in the condominium environment; change maximum fine of 50 the function and utilization of the condominium unit; or million Rupiah convert the function of the infrastructures, facilities, and public utilities, as well as common equipment, common facilities, and common lands in the construction or the management of the condominium. • Everyone who changes the function of the determined Convicted of maximum 2 yearsimprisonment or maximum fine of 50 condominium location; or million Rupiah • Change the function and the utilization of the condominium40
  41. 41. Criminal Conduct Performed by a Legal Entity  Besides criminal sanctions and fine to its directors, criminal provision can be imposed to a legal entity in the form of three times the fine for a person (Article 117 Condominium Law)  Additional criminal sanctions can be imposed to the legal entity in the form of: Revocation of Business License Revocation of Legal Entity Status41
  42. 42. Leks&Co Jakarta Menara Palma 17 Floor, Suite17-02B Jl. HR. Rasuna Said Blok X2 Kav.6 Kuningan, Jakarta 12950, Indonesia T:+62 21 5795 7550 F:+62 21 5795 755142

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