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. Permission can be made to authorize someone, such as a real estate agent or bank, to act on the owner’s 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.

INDONESIAN LAND OWNERSHIP

Land ownership in Indonesia is regulated by Law Number 5 of the Year 1960 on the Basic Agrarian Principle, where the Certificate of Property Rights (Surat Hak Milik/SHM) is considered the strongest set of rights of a property. Unfortunately, the certificate can only be granted to Indonesian citizens and is unavailable to legal entities. The historical reason behind this may be caused of Indonesia has ruled for many years, so only Indonesian people are permitted to buy land there. Therefore, it would have been illegal for a foreigner to purchase a home.

Different from older times, foreigners can now buy flats and office space in Indonesia if the building has a strata title status, according to new rules passed in the late 1990s. Hence, a foreigner might own the apartment or office building but not the land it is built on. 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, only Property Rights can be used to make a place to live for foreigners.

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LAND CERTIFICATE TYPES

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

  1. 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;

  2. Certificate of Cultivation Right (Sertifikat Hak Guna Usaha/SHGU):

    This type of property document is stipulated in Article 30 of the Basic Agrarian Principle, which is defined as 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. The cultivation right is not granted for protected forest areas and conservation forests. This certificate is granted for an area of at least 5 hectares and a period of 25 years;

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

    This type of property document is stipulated in Article 36 of the Basic Agrarian Principle, which 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;

  4. 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. These documents that are recognized by the Indonesian land regulations are as follows:

  1. Girik:

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

  2. 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.

  3. 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, Letter C is still often used as an identity for land ownership and is proof of land sale and purchase transactions.

  4. 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 the leased land will not be used by the Surabaya City Government.

  5. 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

  1. Identify a suitable property investment;
  2. Arrange financial preparation;
  3. Make an offer (through the property agents) and negotiate the commercial terms (using an agent or an evaluator to ensure the right price);
  4. Prepare the terms for the parties' legal advisors;
  5. Appoint legal advisors;
  6. Wait for Due diligence (conducted by a surveyor);
  7. Get the report from Legal advisors for the transaction;
  8. 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:

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

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

  1. 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;
  2. Signing and dating the lease (where a new lease is being granted) and making any necessary payments under the lease; and
  3. Payment of Stamp Duty Land Tax and registration at the Land Registry.

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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 and will ensure the client’s rights are protected 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:

  1. Sale of Property; and
  2. Purchase of Property.

CONVEYANCING SERVICE BENEFITS

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

  1. 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 helps the client reduce stress and be assured through legal processes.

  2. 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.

  3. 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 CAN WE 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

Property is an instrument that can be traded. You can buy and sell a property when you need funds or property. Before conducting a transaction, one must pay attention to the things that must be considered 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 also be mentioned 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.

    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.

    After the agreement’s contents have been discussed, 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.

    Thank you for sharing

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