Property Transaction Services

PROPERTY TRANSACTION SERVICES

Category: Conveyancing Services
Written by Samuel Sri Kurnia on 06/09/2022
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

Property Transaction Service makes handling property issues easier and faster. A client can buy or sell a house. The client can also look at basic information related to the property. The owner of the property can make a permission to authorize someone, such as a real estate agent or bank, to act on their behalf.

The lengthy procedures of checking and registering the respective property’s information might take an exceptionally long time. Hence it is advised to ask for conveyancers as a client’s extension to provide detailed documents.

With this service, we can help you draft the rights and obligations of the buyers and sellers according to the terms negotiated amongst them. In addition, we make sure the sale and purchase deed meets the legal requirements.

Indonesian Land Ownership

Law Number 5 of the Year 1960 on the Basic Agrarian Principle regulates land ownership in Indonesia. The regulation implies that the Certificate of Property Rights (Surat Hak Milik/SHM) is the strongest set of rights of a property. Unfortunately, only Indonesian citizens can acquire the certificate and it is unavailable to legal entities. The historical reason behind this may be caused by the establishment of Indonesia for many years. As such, only Indonesian people are permitted to buy land there.

Different from older times, foreigners can now buy flats and office space in Indonesia if the building has a strata title status. Hence, a foreigner might own the apartment or office building but not the land. There are also other land ownership certificates that foreigners can use, such as the Certificate of Building Use Rights and the Certificate of Cultivation Right. Building Use Rights and Cultivation Rights are applicable to legal entities that stand according to the applicable law in Indonesia. At the same time, foreigners can only use Property Rights to make their living space.

Land Certificate Types

Based on Law No.5 of 1960 concerning Agrarian Principles, valid land certificates in the eyes of the law are:

Certificate of Property Rights (Sertifikat Hak Milik/SHM)

A certificate of Property Rights is a type of property document with full ownership rights by the deed holder. This land certificate is also the strongest proof of land ownership because there is no interference or possibility of ownership from other parties. The status of SHM has no time limit;
Certificate of Cultivation Right (Sertifikat Hak Guna Usaha/SHGU)

According to Article 30 of the Basic Agrarian Principle, SHGU is the right to cultivate land controlled by the state for a certain time. A state-owned property that can obtain HGU is an area that is included in the category of production forest and subsequently converted into a plantation, agricultural, or livestock land. For protected forest areas and conservation forests, the right is not grantable. This certificate applies for an area of at least 5 hectares and a period of 25 years;

Certificate of Building Use Rights (Sertifikat Hak Guna Bangunan/SHGB)

According to Article 36 of the Basic Agrarian Principle, SHGB is a type of document that allows the certificate holder only to use the land, while land ownership belongs to the state. This document has a deadline of 30 years. After 30 years have passed, the land certificate owners must take care of the renewal of the certificate;

Certificate of Rights of Flats Units (Sertifikat Hak Satuan Rumah Susun/SHSRS)

This type of property document is stipulated in Article 42 of the Basic Agrarian Principle, which is given when the owner of the document lives in an apartment or flat as proof of ownership of a vertical or apartment built on land with joint ownership. This document does not only apply to flats but can also work for offices, commercial stores/kiosks (not owned by the government), or condominiums.

There are older types of documents that the Indonesian people often use as evidence of land ownership. The Indonesian land regulation recognizes the following documents:

Girik

Unlike a certificate as proof of land ownership but rather a reference to a property document showing land tenure for taxation purposes.
Petok D

This document once had a power equivalent to a Certificate of Property Rights before 1960. But after the Basic Agrarian Law came into force, the power of proof ceased to apply. Nowadays, Petok D's letter is only considered as proof of payment of land tax by the land user.

Letter C

This document is proof of land ownership by someone who lives in the village (kelurahan) office. It used to function as a record of tax withdrawal and information about the land's identity in the colonial era. Nowadays, people still use Letter C as an identity for land ownership, proof of sale and purchase transactions.

Green Letter (Surat Ijo)

This document is only valid in the city of Surabaya. It refers to a letter with a status of Land Management Rights (Hak Pengelolaan Lahan/HPL) from the city government to the person who rented the land. The tenant can extend this letter as long as Surabaya City Government doesn't use the land.

Wigendom or Eigendom Verponding

Eigendom Verponding is a land right derived from Western rights, issued during the Dutch era for indigenous people or Indonesian citizens. It is interpreted from the word "Eigendom" which means a permanent property right to land, and "Verponding" which means a tax bill on land or land and buildings in question. Just like other documents, Verponding has changed into a Notification of Land and Building Tax Payable (Surat Pemberitahuan Pajak Terhutang Bumi dan Bangunan/SPPT-PBB).

Steps in Property Transaction

Identify a suitable property investment;
Arrange financial preparation;
Make an offer (through the property agents) and negotiate the commercial terms (using an agent or an evaluator to ensure the right price);
Prepare the terms for the parties' legal advisors;
Appoint legal advisors;
Wait for Due diligence (conducted by a surveyor);
Get the report from Legal advisors for the transaction;
Sign the legal documentation and contracts, as well as the paid deposit of the transaction.

In advance, legal advisors are needed to prepare and negotiate the following transaction documents:

Financial documents;
For a freehold purchase: The sale contract and transfer document;
For the purchase of an existing lease: The sale contract, the transfer document, any necessary landlord's consent, and any lease security documents; and
For the grant of a new lease: The lease, any landlord's consent, and any lease security document.

Afterwards, the procedure continued as follows:

Signing and dating the transfer of the property interest (where the freehold or an existing lease is being acquired) and paying the balance of the price;
Signing and dating the lease (where a new lease is being granted) and making any necessary payments under the lease; and
Payment of Stamp Duty Land Tax and registration at the Land Registry.

Conveyancing Services in Indonesia

A conveyancer is someone responsible for the legal process of buying and selling property. Their role is vital for the sale or purchase to run smoothly. They will also ensure the protection of client’s rights throughout the transaction. They help with the settlement and title transfer process to ensure their client fully understands their legal obligations. Their scope of work primarily focuses on:

Sale of Property; and
Purchase of Property.

Conveyancing Service Benefits

Using conveyancers to handle property transactions could gain several benefits, such as:

Certified Legal Guidance

A conveyancer's job is to ensure that any documents needed during a property transaction are prepared thoroughly. As the document has numerous paperwork, getting a conveyancer assures and helps the client reduce stress throughout the legal processes.
In-depth Research

Aside from the legal documentation, a conveyancer also conducts thorough research on the properties. Whether the property already has a building or is still empty land, the result of this research is delivered to the client to help in future decisions.

Efficient Financial Management

A transaction might need additional costs such as search fees, registration fees, surveyor fees, insurance, and stamp duty. It also requires negotiation during buying or selling process. Conveyancers can assist you in organizing this financial decision, especially when the budget limit is tight.

How We Can Help

Conveyancers are public servants tasked with ensuring that all relevant land documentation is in order before a sale or purchase occurs. They administer land and property transactions. However, their authority is limited to the district they are registered in.

Our alliances of conveyancers ensure properly executed land transactions. When you engage with us, you do not have to worry about any problems that may arise many years after the transaction. We draft the rights and obligations of the buyers and sellers according to their negotiated terms. In addition, we make sure the sale and purchase deeds meet the legal requirements. After signing the sales and purchase deed, we help register changes to the rights holders at the local Land Authority Office.

References

Undang-undang (UU) Nomor 5 Tahun 1960 Tentang Peraturan Dasar Pokok-Pokok Agraria

FAQs

How do we make a deal with a property?

Property is a tradable instrument. You can buy and sell a property when you need funds or property. Before conducting a transaction, one must pay attention to the considerable things in buying and selling the following property, such as:

Filing Sale and Purchase Binding Agreement (Perjanjian Pengikatan Jual Beli/PPJB):

The client must pay attention to the description of property objects such as area, certificate, and related licensing letters in the agreement. The letter of agreement must mention certain conditions, such as affirmation of tax payments. Adding a statement of guarantee from the seller may be necessary. If the land you are going to buy is a joint property of a married couple, then usually, the sale of the land must be through the approval of both.

The authenticity of the ownership certificate:

As a buyer, it is important to check the authenticity of the certificate of ownership.

Where do we make a deal of a property?

As the property buyer, it would be better if the land certificate is made at the Land Deed Making Office (Pejabat Pembuat Akta Tanah/PPAT) located near the land or building mentioned. This makes it easier for you to check the authenticity of the ownership certificate.

Who else can verify a deal of a property?

After discussing the agreement’s contents, the related parties must bring it to the front of the notary. Regarding the cost, an agreement can be made whether it will be borne by both parties or one of the parties only. The cost ranges from about one percent of the price of land or buildings sold. For that, make sure to know the price in advance.

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