Preliminary.

Indonesian Land Law is quite different indeed to the laws that apply in most western or developed countries. Foreigners wishing to use or purchase land for whatever purpose need to be aware of these differences and not assume that legal conventions that apply in their home countries necessarily apply in Indonesia.
Legal certainty in Indonesia has always been rather precarious, not least in the realm of land ownership. However, secure land title for foreigners is possible if correct procedures are observed.

Land titles according Indonesian laws.

Land matters except for mining and forestry are under the jurisdiction of the National Land Agency (Badan Pertanahan Nasional) formed to administer all matters relating to the Basic Agrarian Law of 1960 such as the registration of land rights and the granting of rights and various permits to use the land. There are currently only two categorie of land rights:
a) Adat land (customary land) where the land is not registered with the relevant land office. There are 2 individual rights and 6 community rights in this category. All rights held under this category will eventually be converted to certified titles.
b) Certified land, the title to which is governed by the Basic Agrarian Law of 1960 and is registered at the local land office. There are five principle types of land rights held under the Agrarian Law. These are:

1. Right of Ownership (Hak Milik)
This refers to absolute ownership of land and corresponds to a fee simple or freehold title in common law jurisdictions. This right can only be held by an Indonesian citizen, not a corporate entity whether local or foreign. Certain legal entities designated by the government, such as State Banks, agricultural cooperatives, religious bodies, and social foundations may hold this right subject to certain restrictions. This right of ownership is held in perpetuity. It can be sold, transferred, bequeathed, and hypothecated (mortgaged).

2. Right to Build (Hak Guna Bangunan - HGB)
This is the right to construct a building on land for a period of 20 or 30 years (renewable for another term of 20 years). This right can be sold, exchanged, transferred, and mortgaged, and can be held directly by any corporate entity whether it is a local company or a government approved PMA company.

3. Right to Rent (Hak Sewa Bangunan)
This is the right to use land owned by another private party (the lessor) for building purposes. The right cannot be registered at the land office and therefore does not exist in certificate form. The law does not stipulate a period for such lease agreements and whether this can be transferred or not depends on the original agreement between the parties.

This right may be held by a foreigner permanently domiciled in Indonesia or a foreign legal entity having a representative office in Indonesia. It cannot be mortgaged.

4. Right of Use (Hak Pakai)
This is the right to use State-owned or other land by public or private persons or entities for a definite period or occasionally for an indefinite period. This land right cannot be sold, exchanged or transferred unless explicitly provided in its grant or agreement.
This right may be held by an Indonesian individual or entity, certain foreign individuals or a foreign legal entity with a representative office in Indonesia.

5. Right of Exploitation (Hak Guna Usaha)
This is the right to exploit State-owned land for agriculture, fishery or husbandry purposes for a period of up to 35 years with a possible 25 years extension.
This right can be held by Indonesian individuals/entities as well as government approved PMA companies. The certificate can be mortgaged.

How can Foreigners Acquire Property in Bali
Under Indonesian laws foreigners are not permitted to have property title in Indonesia. However, foreign individuals can legally acquire property in Indonesia and enjoy full beneficial rights by one of the following methods :
• Enter into a legal arrangement with an Indonesian nominee, either an individual or PT. Company, where by he/ she/ corporation hold title of the property.
• Make a lease hold investment in the property, usually for 20 – 30 years. Partnership with Indonesian citizen are not required in lease hold transaction. This method does offer complete protection to the foreigners during the term of lease, however once the lease term expired the agreement can be extended or the property reverts to the owner.
• Form a Foreigner Invesment Company ( PMA). Here the foreigner can own the company 100 % and the title of the property will be in company name. However in this case could only last for 20 or 30 years as PMA companies have to re apply to the Indonesian goverment to extend their license.

Procedures for Property Acquisition
All transactions of land rights must be via deeds executed before a land deed official at the local office of the Pejabat Pembuat Akta Tanah (PPAT) where the land is located and must be registered in the regional office of the National Land Agency. The PPATs are privately managed offices (usually run by a notary) authorised by the National Land Agency to handle land acquisition matters.
Although there is no regulation that contracts have to be in Indonesian language, we recommend having contracts and agreements always drawn up and executed in Behasa Indonesia to prevent later arguments that the local partner did not fully understand the content.