Common Problems Under Condominium Law

1. COMPANY PROFILE
Condominium Law Perspective

2. Outline
• Pre-Development
oTitle Division
oEnvironmental
oTraffic
oParking
oElectricity
oZoning
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3. Outline – Cont’d
• Development
oPublic Condominium
oPre-sale
oCommunity
• Post-Development
oHandover
oP3SRS
oManagement
oB3 Waste Management
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4. Title Division
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5. Title Division (Pertelaan)
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• Title division is made in advance
• Marketing cannot be initiated before the government
has legalized the title division
• Momentum for marketing may be lost since the
government is slow to approve and legalize the title
division
• It is mostly not performed by developers
• For mixed-use, extremely hard to prepare the title
division since the project is gradually built and may
be re-adjusted

6. Title – Cont’d
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• Determination of Comparative Proportional Value
(NPP) is clear but not necessarily implementative
• NPP is a number showing comparison between
condominium unit and joint equipment, joint land,
and joint facility, calculated based on the
condominium unit’s value against the total
condominium’s value at the time the developer
initially calculates the total construction costs to
determine the sale price

7. Title – Cont’d
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• Development of few condominiums in one plot of
land is possible as long as it does not change the NPP
• If the NPP is increased, P3SRS is notified
• If the NPP is lowered, P3SRS has to approve the
adjustment. If P3SRS does not approve, the local
government will give decision final and binding
• The adjustment of NPP needs to be re-legalized and
re-registered

8. Environmental
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9. Environmental
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• Analysis of Environmental Impact (AMDAL) is
obligatory prior to obtainment of building
construction license
• After AMDAL, the developer requires to obtain
environmental license
• Scope of AMDAL will depend on the mixed-use
properties. Some type of property produce Hazardous
and Poisonous Material (B3) waste, some are not
• Will be discussed further on B3 Waste Management

10. Traffic
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11. Traffic
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• Mixed-use project most-likely raises the traffic
congestion
• Traffic impact analysis is obligatory prior to
obtainment of location license or building
construction license
• Developer has to sign statement letter promising the
performance of all obligations prior to, during, and
after project completion
• Violation  administrative sanction

12. Traffic – Cont’d
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• Three warning letters. Duration: 30 calendar days
each
• Does not remedy the default  temporary suspension
of activity for 30 calendar days
• Penalize of 1% of obligation value
• After the lapse of 90 calendar days after penalty, the
location license or building construction license is
revoked

13. Parking
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14. Parking
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• Parking can be a material issue on mixed-use
• Difference on parking plot ratio (satuan ruang
parkir) on every type of building
• Parking plot ratio for mixed-use is not regulated
• Parking division and flow according to building
function in the mixed-use development

15. Electricity
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16. Electricity
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• Applying for the business license of electricity supply
is obligatory
• Developers are confused since many do not comply
with the regulation
• New regulation and not socialized
• Differences on tariffs
• Reason of dispute between tenant and management
• There is a criminal sanction  imprisonment 3 years
maximum and fine of Rp2 bio maximum

17. Zoning
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18. Zoning
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• Having a mixed-use project does not necessarily
mean that the zoning is for mixed-use
• Sometimes it is for commercial or office purpose,
where just next to it, it may be for residential
• Developer needs to combine its plan with the zoning
zoning

19. Public Condominium
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20. Public Condominium
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• Developer has to provide public condominium at
least 20% of the total floor area of commercial
condominium that is built
• 20% out of sold units or total? What if not all units
are sold? Would it be applicable?
• Conflict with regulation of DKI Jakarta stating there
may be a compensation for public condominium
obligation
• Unclearness on land, developer or government’s
obligation?

21. Public – Cont’d
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• It is occasionally not implementative
• The government tends to interpret that the developer
should provide the land
• Unclearness on the profits out of sale of public
condominium
• Minister reported many developers to District
Attorney for violations
• There is a criminal sanction  imprisonment
maximum 2 years or maximum fine of Rp 20bio
(±US$2mio)

22. Pre-Sale
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23. Pre-Sale
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• Pre-sale is subject to certain requirements
• 20% has to be built out of the marketed condominium
• This is not an issue, but important point to note
• The mixed-use plan is 100,000m2, will be built in
several stages, marketed is 30,000m2, then 20% is
calculated from the 30,000m2 i.e. 6,000m2

24. Community
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25. Community
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• Every mixed-use development has higher risk of
claim by the community
• Any party that suffers losses as a result of
condominium development may claim the developer
• Developer needs to maintain good relationship with
the surrounding community

26. Delivery of Unit
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27. Delivery of Unit
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• Owners and Tenants Condominium Association
(P3SRS) is established maximum 1 year after first
delivery of unit
• Title division has to be ready before formation
• Example: 3 towers will be built @ 100 units each.
Currently, only 1 tower is built (=100 units).
Assuming the NPP is the same between units, then 1
unit will have 1/300 NPP. One tower built, meaning
developer has 2/3 of voting rights

28. P3SRS
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29. P3SRS
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• Unclearness of the formation
• Formed by the deed, legalized by Regent or Mayor
and for DKI Jakarta, by the Governor
• Unclearness creates disputes
• Different forms of Articles of Associations and By-laws
are used and legalized by the official
• Mixed-use development involves different
stakeholders with their own interests

30. P3SRS – Cont’d
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• No standard forms of Articles of Association and By-laws
for P3SRS
• Formation of P3SRS needs to be properly
implemented to avoid later dispute

31. Management
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32. Management
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• Condominium law is silent on the management of
mixed-use development
• One building manager for similar building function
e.g one BM for apartment, one BM for shopping
center, one BM for office
• The practice is one P3SRS but with several BMs
managing the buildings according to its functions

33. Management – Cont’d
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• Tenancy regulation in one type of building Vs
regulation for the whole complex
• In mixed-use development, tenancy regulation for the
building and complex has to be regulated in advance
through related agreements
• P3SRS can set the regulation in their By-laws later
• It is however essential during the 12 months
operation before P3SRS is formed

34. B3 Waste
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35. B3 Waste
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• Hospital needs to have license on B3 waste
management
• Important point to note for mixed-use development
having hospital as one of its facilities
• Strict liability concept for environmental damage

36. www.lekslawyer.com

37. Concluding Remarks
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Pre-Development
• Title Division: not easy to obtain legalization of title
division in advance, government needs to cooperate,
change of NPP needs to be re-legalized and re-registered
• Environmental: AMDAL and environmental license are
obligatory to obtain construction license
• Traffic: essential obligations to obtain construction
license and risks of non-compliance
• Parking: difference on parking plot ratio and its division
• Electricity: unclearness of regulation, risks
• Zoning: creatively combine the zoning

38. Concluding – Cont’d
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Development
• Pre-Sale: 20% of the marketed building areas
• Community: risk of claim, maintain good relationship

39. Concluding – Cont’d
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Post-Development
• Delivery of Unit: to form P3SRS max 1 year after
delivery
• P3SRS: formed properly to minimize later dispute
• Management: tenancy and complex regulation are
agreed in advance
• B3 Waste: obtain license, strict liability

40. Leks&Co
Menara Palma 17th Floor, Suite 1702B
Jl. HR Rasuna Said Blok X2 Kav. 6
Jakarta, Indonesia
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