A Land Acquisition and Licensing For Property Development In Indonesia

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A Land Acquisition and Licensing For Property Development In Indonesia

  1. 1. A Land Acquisition and Licensing for PropertyDevelopment in Indonesia- A Legal Walkthrough
  2. 2. DiscussionPART A• Overview of Type of Land in Indonesia and its characteristics• Land registration and its system• Land Acquisition in Indonesia 2
  3. 3. Legal Basis• Law No. 5 of 1960 on Principal Provisions of Agrarian;• Government Regulation No. 40 of 1996 on Right to Cultivate (HGU), Right to Build (HGB) and Right to Use (HP) of Land;• Government Regulation No. 24 of 1997 on Land Registration; 3
  4. 4. OVERVIEW OF TYPES OF LAND IN INDONESIA AND ITS CHARACTERISTICS 4
  5. 5. OVERVIEW OF TYPES OF LAND IN INDONESIA AND ITS CHARACTERISTICTypes of Rights of Land in Indonesia Right of Ownership Right to Cultivate Right to Build Right of Use Right of LeaseOther Types of Rights in Indonesia (not regarded as Rights of Land) Right of Management Right of Ownership over Condominium Unit 5
  6. 6. OVERVIEW OF TYPES OF LAND IN INDONESIA AND ITS CHARACTERISTICS RIGHT OF OWNERSHIPRight of ownership is the most powerful and the fullest hereditary rightthat can be owned by a person over a land. (Article 20 Law No. 5 of 1960on Principal Provision of Agrarian) 6
  7. 7. Owned by Indonesian only RIGHT OFOWNERSHIP Cannot be owned by foreigner and legal entity. Except the legal entity that was appointed by government, as follows: a. State Bank b. Agricultural Cooperatives c. Religious InstitutionsPeriod of Time: d. Social Institutions Indefinite 7
  8. 8. RIGHT OF OWNERSHIPRight of Ownership may be revoked if:1. The lands falls to the States due to:• Revocation of right due to land procurement for public interest through appropriate compensation• Voluntary release by the owner• The land is abandoned• An Indonesian who released the nationality, therefore the Right of Ownership is automatically revoked by law• Transfer of right through sale-purchase, exchange, bequest, inheritance directly or indirectly to foreigner.2. The land is vanished. 8
  9. 9. RIGHT OF OWNERSHIPEncumbrance The Right of Ownership can be used as a security which encumbered by mortgage 9
  10. 10. The transfer of Right of Ownership can be conducted by:• Sale and Purchase;• Exchange;• Granting;• Capital Participation (only to certain legal entity that was appointed by government); and 10
  11. 11. Other type of transfers based on the prevailing law and regulation• By an auction, which can be proven by the minutes of auction made by Auction Officials;• By Inheritance;• By Merger or Consolidation of company or cooperatives (only for certain legal entity that was appointed by government). 11
  12. 12. RIGHT TO CULTIVATE Is a right to operate the land which owned by States, withDefinition certain period of time, for agricultural, fisheries or farming. 12
  13. 13. RIGHT TO CULTIVATE Subjects who are able to hold Right to Cultivate• Indonesian citizen• Legal entity established based on Indonesian law and domiciled in Indonesia 13
  14. 14. RIGHT TO CULTIVATE Time period of Right to Cultivate Maximum 35 years May be extended for maximum 25 years After the period and the maximum length of time is expired, right holder may be given renewal for the same land 14
  15. 15. RIGHT TO CULTIVATEEncumbrance of Right to Cultivate  Right to Cultivate can be used as a security which encumbered through mortgage  Mortgage shall be removed when the Right to Cultivate is revoked. 15
  16. 16. RIGHT TO CULTIVATERight to Cultivate shall be revoked due to: The expiry period of time as stipulated in the decree or its extension. Nullified by the authorized officer due to:  The right holder did not complete the obligations  The right holder did not conduct the terms and obligations which stipulated in the decree or in the agreement  Court stipulation with binding legal force Revocation by Law No. 20 of 1961 on Revocation of Rights of Land and The Objects Above The Land Voluntary release by the rights holder before the expiry period. The land is vanished The land is abandoned by the right holder The right holder no longer meets the requirement as the right holder. 16
  17. 17. RIGHT TO CULTIVATERight to Cultivate can be transferred to another partyThe transfer of Right to Cultivate can be conducted by:a. Sale and Purchase;b. Exchange;c. Granting;d. Capital Participation;e. By Inheritance;f. By an auction, which can be proven by the minutes of auction made by Auction Officials;g. By Merger or Consolidation of company or cooperatives. 17
  18. 18. RIGHT TO BUILD Is a right to establish and own buildings over the land which belong to otherDEFINITION subjects 18
  19. 19. RIGHT TO BUILD Subjects who are able to possess Right to Build• Indonesian citizen• Legal entity established based on Indonesian law and domiciled in Indonesia 19
  20. 20. Time period of Right to Build• Maximum period of time 30 years• For particular request from right holder and able to be extended for maximum 20 years• Can be renewed 20
  21. 21. RIGHT TO BUILD The expiry period of time as stipulated in the decree or in the granting agreement. Nullified by the authorized officer due to:  The right holder did not complete the obligations  The right holder did not conduct the terms and obligations which stipulated in the decree or in the agreement  Court stipulation with binding legal force Revocation by Law No. 20 of 1961 on Revocation of Rights of Land and The Objects Above The Land Voluntary released by the rights holder before the expiry period. The land is vanished The land is abandoned by the right holder The right holder no longer meets the requirements as the right holder. 21
  22. 22. RIGHT TO BUILDEncumbrance of Right • The Right to Build can be used as a security which encumbered through mortgage • Mortgage shall be removed when the Right to Build is revoked. 22
  23. 23. RIGHT TO BUILDLand that can be granted with Right to Build is as follows:1. State Land2. Right of Management land3. Right of Ownership land 23
  24. 24. RIGHT TO BUILDRight to Build can be transferred to another partyThe transfer of Right to Build can be conducted by:a. Sale and Purchase;b. Exchange;c. Granting;d. Capital Participation;e. By Inheritance;f. By an auction, which can be proven by the minutes of auction made by Auction Officials;g. By Merger or Consolidation of company or cooperatives. 24
  25. 25. RIGHT TO BUILD• The transfer of Right to Build over Right of Management land requires a written approval from the holder of Right of Management.• The transfer of Right to Build over Right of Ownership land requires a written approval from the holder of Right of Ownership. 25
  26. 26. RIGHT OF USEIs a right to use and or to take the production of a land whichdirectly controlled by state or a land which belong to otherperson, who grants authority and obligation that is stipulatedby authorized officer or stipulated in the agreement with thelandlord. 26
  27. 27. RIGHT OF USE • Indonesian citizen • Foreigner domiciled in Indonesia; • Legal entity established in Indonesia based on Indonesian law and domiciled in IndonesiaSubjects who are • Foreign legal entity that has a representative able to hold office in Indonesia Right Of Use • A religious and social entity • Representative from foreign country and International Organizations bodies • Department, Government bodies Non- Department and Regional Government 27
  28. 28. • Maximum 25 yearsTime period of • Extended for maximum 20 years Right of Use • For particular circumstances, indefinite time period given. 28
  29. 29. RIGHT OF USERight of Use may be revoked due to: The expiry period of time as stipulated in the decree or in the granting agreement. Voluntary released by the rights holder before the expiry period. Nullified by the authorized officer due to:  The right holder did not complete the obligations  The right holder did not conduct the terms and obligations which stipulate in the decree or in the agreement  Court stipulation with binding legal force Revocation by Law No. 20 of 1961 on Revocation of Rights of Land and The Objects Above The Land The land is vanished The land is abandoned by the right holder The right holder is no longer meet the requirement as the right holder. 29
  30. 30. RIGHT OF USEEncumbrance of Right Right of Use over State Land and over the Right of Management land can be used as security which encumbered through mortgage 30
  31. 31. RIGHT OF USELand that can be granted with Right of Use is as follows:1. State Land2. Right of Management land3. Right of Ownership land 31
  32. 32. RIGHT OF USETransfer of Right of Use• The Right of Use that was granted over State Land with certain period of time and Right of Use over Right of Management can be transferred to another party.• The Right of Use over Right of Ownership can only be transferred if it is provided in the agreement of the granting of Right of Use over the related Right of Ownership. 32
  33. 33. The transfer of Right of Use can be conducted by:a. Sale and Purchase;b. Exchange;c. Granting;d. Capital Participation;e. By Inheritance;f. By an auction, which can be proven by the minutes of auction made by Auction Officials;g. By Merger or Consolidation of company or cooperatives. 33
  34. 34. RIGHT OF USE• The transfer of Right of Use over Right of Management land requires written approval from the holder of Right of Management;• The transfer of Right of Use over Right of Ownership land requires written approval from the holder of Right of Ownership; 34
  35. 35. DefinitionIs an agreement by which one party binds himself to give the other the enjoyment of a goodsfor a definite period in exchange for a price payment, which payment has been agreed by thelatter party.(1548 Indonesian Civil Code)A person or legal entity is regarded to have the Right of Lease over land, if he has a right touse other people land for the purpose of building, by paying to the owner a sum of money as arent. (Article 44 Paragraph (1) Law No. 5 of 1960 on Principal Provision of Agrarian) 35
  36. 36. RIGHT OF LEASE • Indonesian citizen • Foreigner domiciled in Indonesia;The holder of • Legal entity established inRight of Lease Indonesia based on are: Indonesian law • Foreign legal entity having its representative office in Indonesia 36
  37. 37. Time period of The period of time of lease isRight of Lease stipulated in the agreement between parties 37
  38. 38.  • • 38
  39. 39. RIGHT OF MANAGEMENTDefinitionIs a right of control of the State where its implementation authorityis partly conferred to the holder 39
  40. 40. RIGHT OF MANAGEMENT Subjects who are able to hold Right of Management Government institution including Local Government State Owned Enterprise Local Government-Owned Enterprise Limited Liability Company (Persero) Authority Body (Badan Otorita) Other government institution appointed by government 40
  41. 41. RIGHT OF MANAGEMENT in accordance with the decree Right of of the granting of Right ofManagement Management which is issuedTime Period by the government. 41
  42. 42. RIGHT OF MANAGEMENTRight of Management comprises the authorities to:• Plan the purpose and utilization of land concerned• Utilize the land for business interest• Hand over parts of the land to the third party according to the terms required by the rights holder, which cover the purpose, utilization, period of time and financial with a condition that the grant of land of right conducted by the authorized officials based on the prevailing law. 42
  43. 43. RIGHT OF OWNERSHIP OVER CONDOMINIUM UNITRight of Ownership Over Condominium Unit Right of ownership of condominium unit which has individual character separated by common rights of common equipment, common facilities and common land. 43
  44. 44. Time PeriodCondominium can be built over the land which has:a. Right of Ownership;b. Right to Build or Right of Use over the State Land; andc. Right to Build or Right of Use over the Right of Management. Therefore, the time period of the Right of Ownership Over Condominium Unit follows its underlying right of land. 44
  45. 45. RIGHT OF OWNERSHIP OVER CONDOMINIUM UNIT Issued by District/City Land OfficeCertificate of Right of Ownership over Condominium Can be used as a security which encumbered by mortgage 45
  46. 46. RIGHT OF OWNERSHIP OVER CONDOMINIUM UNITThe transfer of Right of Ownership Over Condominium Unit, and its registration is conducted by delivering these documents:a. Deed of Land Deed Official (PPAT) or Minutes of Auction;b. The related Right of Ownership Certificate;c. Article of Association and By-Law of tenant association;d. Others documents that required for the transfer of rights. 46
  47. 47. RIGHT OF OWNERSHIP OVER CONDOMINIUM UNIT Right Of Ownership Over Condominium Unit may be revoked if:a. The land right is revoked in accordance with the prevailing laws and regulations;b. The land and building is vanished;c. The fulfillment of the cancelation term;d. Release the right voluntarily. 47
  48. 48. RIGHT OF OWNERSHIP OVER CONDOMINIUM UNITIn case the Right Of Ownership Over Condominium Unit is revoked as mentioned inthe previous slide, every owner of the condominium unit has the right to obtain thecommon ownership as follows: Right over common equipment Calculated based on Proportional Comparison Value (NPP), based on Right over common the actual fact. facilities Right over common land 48
  49. 49. RIGHT OF OWNERSHIP OVER CONDOMINIUM UNITCertificate of Right of Ownership over Condominium consistsof:  Copy of book of land and measurement letter of common land in accordance with the laws and regulations  Floor sketch picture at the level of the condominium concerned which shows the owned condominium unit  Title of division regarding the size of the parts of rights upon common equipment, common facilities and common land. 49
  50. 50. LAND REGISTRATION IN INDONESIALand Registration objects are:1.Right of Ownership2.Right to Cultivate3.Right to Build4.Right of Use5.Right of Management land – Right of Management can be granted to:  Government Institution  State-owned enterprise  Local government-owned enterprise  Limited Liability Company (Persero)  Authority Body (Badan Otorita)  Other government institutions appointed by government 50
  51. 51. 6. Right of Ownership over unit of condominium Right of Ownership toward condominium is an individual right over unit of condominium separate by the common equipment, common facility and common land (Article 46 Condominium Law)7. Waqaf land Based on Law No 41 of 2004 on Waqaf , Waqaf is a wakif legal act to separate and/or handover part of his assets to be utilized for good or for period of time for public utility or syariah interest8. Security Right Based on Law No 4 of 1996 on Security Right Include Objects Related to Land :Is security right which encumbered over rights of land as stated in Principal Provision of Agrarian Law, include or exclude the objects that united to the land, for certain payment of debt, that prioritize particular creditors towards other creditors.9. States land Is a land completely controlled by states and does not have any rights over such land. 51
  52. 52. LAND REGISTRATION IN INDONESIACertification  The land registration would generate a written evidence in form of certificate.  Certificate define as an evidence of rights for right of land, right of management, waqaf land, right of ownership over unit of condominium and security right. (government regulation No 24 of 1997) 52
  53. 53. LAND ACQUISITION IN INDONESIAThe land acquisition in Indonesia is implemented through some ways suchas:• Sale and purchase;• Exchange;• Capital injection (inbreng);• Bequest;• Inheritance;• Auction;• Merger or Consolidation. 53
  54. 54. SALE AND PURCHASE Sale and Purchase of land is conducted by signing the Deed of Sale and Purchase which is prepared by the Land Conveyancing Officer (“PPAT”). The PPAT uses the form of Deed of Sale and Purchase as provided by the prevailing law and it is signed before the PPAT 54
  55. 55. EXCHANGE The exchange of land is conducted by signing the deed of exchange. The deed of exchange is prepared by the PPAT and using the form as provided by the prevailing law. The deed of exchange will be signed before the PPAT. 55
  56. 56. CAPITAL INJECTION• Under article 34 paragraph (1) of the Law Number 40 of 2007 on Limited Liability Companies (“Company Law”), “Share capital may be paid up in the form of money and/or in other forms”. In the elucidation of article 34 paragraph (1) of Company Law, the shares will be paid up in some other form whether tangible or intangible goods, which have a monetary value and which are in fact received by the company.• In the event that the shares capital is paid up in some other form, the valuation of the share capital paid up shall be specified based on a reasonable value determined in accordance with market prices or by an expert not affiliated with the company. 56
  57. 57. CAPITAL INJECTION (Cont’)• Further, it must be accompanied by detail giving the value or price, type or kind, status, domicile as considered necessary for the sake of clarity regarding such paying up.• The shared paid up in the form of immoveable property must be announced in 1 or more newspapers within a period of 14 days after the deed of establishment is signed or after the general meeting shareholders resolves on such paying up of shares. 57
  58. 58. DONATION• According to Article 1666 of Indonesian Civil Code, a donation is an agreement by which the donor during his life irrevocably transfers at no cost some properties to the benefactor who accepts the delivery.• It must be conducted before the PPAT and using standard form as set out in the regulation. 58
  59. 59. INHERITANCE• In the matter of assignment of registered land and the Right of Ownership over condominium unit, the registration of assignment of land must be submitted by the heir to Land Office by delivering the certificate of land, dead certificate of a person whose name is registered in the certificate of land and the evidence letter as the heir. The evidence letter as the heir can be:  testament; or Court decision; or Court order; or 59
  60. 60. INHERITANCE (Cont’d) (1) for local Indonesian citizen, the reference letter of heir is drafted by the heirs in front of 2 witnesses and it is confirmed by the village chief and sub district head of the ancestor’s domicile when the ancestor past away. (2) the notarized deed of inheritance for Indonesian citizen of Chinese descendant (3) the reference letter from inheritance bureau (balai harta peninggalan) for Indonesian citizen of eastern foreigner descendant 60
  61. 61. INHERITANCE (Cont’d)• However, the heir also has to hand over following documents if the assignment of land is for unregistered land: - The evidence letter of conversion of old right over land such as written evidences, statement of witnesses and/or the statement of the reliable related party, or the statement letter from the regent which states that the related party controls the land; or - The reference letter from the Land Office which states that the related land is an uncertified land. For the land which is located distance away from the Land Office, the reference letter is able to be obtained from the regent.
  62. 62. INHERITANCE (Cont’d)• If the heirs are more than one person and there is particular demand of land distribution from the ancestor, the registration of assignment over land or the Right of Ownership over the condominium unit will be based on the testament and the deed of distribution of inheritance.• The land will be registered as the common right of the heirs if the deed of distribution of inheritance has not been issued when the heirs register the assignment of land. 62
  63. 63. AUCTION• The registration of acquisition of land through auction method is able to be registered by delivering following documents: o Minute of auction; o (1)The certificate of the Right of Ownership over the condominium unit or certificate of auctioned land if it has been registered; or (2) the letter from the Chairman of auction officer stating the reason of undelivered certificate in point (1) if the certificate in point (1) has not been handed over to buyer; or (3) if it is an unregistered land, the requirement must comply with the requirement as follows: o The identity of the auction buyer; o The evidence payment of selling price 63
  64. 64. AUCTION (Cont’d)• At least 7 days before the auction is conducted by the auction officer, the officer must request the physical and juridical data from Land Office relating to the auction land, that will be auctioned.• The Chairman of auction refuses to conduct auction, if:  In the matter of registered land or the Right of Ownership over condominium unit The original certificate of land is not submitted to the auction officer, except in the case of execution auction that can still be implemented even if the original certificate is not obtained by the auction officer from the right holder of the land; or 64
  65. 65. AUCTION (Cont’d) The certificate does not conform to the existing data in the Land Officer; or In the matter of unregistered land, the Chairman of auction does not receive:  The evidence letter of conversion of old right over land such as written evidences, statement of witnesses and/or the statement of the reliable related party, or the statement letter from the regent which states that the related party controls the land; or
  66. 66. AUCTION (Cont’d)  The reference letter from the Land Office which states that the related land is an uncertified land. For the land which is located distance away from the Land Office, the reference letter is able to be obtained from the regent. There is an order from the court to not carrying out the auction in connection with a dispute over the land. 66
  67. 67. MERGER OR CONSOLIDATION• The registration of acquisition of right of land, right of management or Right of Ownership over the condominium unit through merger or consolidation of company or cooperative without any prior liquidation, is able to be registered after it is legalized by the authorized officer based on the deed of merger or consolidation of company or cooperative. 67
  68. 68. GENERAL REGULATION OF LAND ACQUISITION IN INDONESIAArticle 37 paragraph (1) of GR No. 24/1997 on LandRegistration Land acquisition in Indonesia can only be registered to Land Office if it is proven by deed from PPAT except for auction 68
  69. 69. GENERAL REGULATION OF LAND ACQUISITION IN INDONESIA (Cont’d)Article 38 of GR No. 24/1997 stipulates • Preparation of the deed of land acquisition is attended by the parties who conduct the acquisition of land and it is witnessed minimum by 2 witnesses. • The form, content and the procedure of drafting the PPAT’s deed is governed by the Minister 69
  70. 70. PPAT’s REFUSAL OF LAND ACQUISITIONPPAT may refuse to notarize the land acquisition due to:• The original certificate of land is not submitted to the PPAT or the delivered certificate does not conform to the book of land that are available in the Land Office; or• In the matter of unregistered land, the PPAT does not receive: – The evidence letter of conversion of old right over land such as written evidences, statement of witnesses and/or the statement of the reliable related party, or the statement letter from the regent which states that the related party controls the land; or – The reference letter from the Land Office which states that the related land is an uncertified land. For the land which is located distance away from the Land Office, the reference letter is able to be obtained from the regent. 70
  71. 71. PPAT’s REFUSAL OF LAND ACQUISITION (Cont’d)• One or the parties who will conduct the acquisition or the witness do not fulfill the requirement to act for the acquisition; or• One or the parties act based on the absolute power of attorney letter which is essentially contain a legal act of transferring right from the authorizer to the authorized. The absolute power of attorney means the authorization which cannot be revoked by the authorizer, so in essence it is a legal action to transfer a right; or• The legal act to conduct the acquisition has not obtained approval from the authorized officer, if the approval is required by the prevailing law; or• The related object has been in dispute regarding the physical data and/ or juridical data; or• Another requirement is not fulfilled or violation of prohibition which is specified in the prevailing law. 71
  72. 72. PPAT’s REFUSAL OF LAND ACQUISITION (Cont’d) For such case, PPAT will give written notification to the related party if the PPAT refuses to prepare the deed of land acquisition. 72
  73. 73. CHAIRMAN OF LAND OFFICE’s REFUSAL OF LAND ACQUISITIONChairman of Land Office may refuse to register the land acquisition, if:• The certificate or the reference letter concerning the condition of land does not conform with the existing data in the Land Office;• There is no deed of land acquisition from PPAT for land acquisition through sale and purchase, exchange, capital injection (inbreng), bequest, inheritance and merger or consolidation. In the matter of auction, there is no minute of auction, except for the special situation for example, province where there is no PPAT. This special situation will be determined by the Minister.• The required documents for the registration of land acquisition is incomplete; 73
  74. 74. CHAIRMAN OF LAND OFFICE’s REFUSAL OF LAND ACQUISITION (Cont’d)• Another requirement based on prevailing law is not fulfilled;• The related land is on dispute;• Legal act which has been approved by the deed of PPAT is void or nullified by the court.• Legal action which has been made through deed of PPAT is cancelled by the parties before it is registered in Land Office 74
  75. 75. CHAIRMAN OF LAND OFFICE’s REFUSAL OF LAND ACQUISITION (Cont’d) The Chairman of Land Office will give written notification to the parties concerned. The Chairman of Land Office also will return the form with the copy to PPAT or Chairman of auction office. 75

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