Before jumping into buying a piece of land in Indonesia, you must conduct land due diligence to at least determine that the land seller is the legal owner and has the sole selling rights.
Indonesia's heavenly islands have long been a desirable destination for many foreigners to buy land and settle down for good in Indonesia. However, buying a piece of land means that you will also have to face certain legal risks. Many unforeseen issues can arise and may turn your dream of land acquisition into an ordeal.
Most foreigners encounter some common problems while buying land in Bali, Lombok, and Indonesia: land-use restrictions, eviction issues, legal owner issues, unnecessary hidden fees, etc.
In this article, you will read more about the things you need to validate in your due diligence before closing a land acquisition deal.
BUYING LAND IN BALI OR LOMBOK: WHAT TO VALIDATE
1. Rightful Owner with Valid Certificate
First of all, you must ensure that the person who is selling you the land is the correct landowner.
Then, you need to identify their truthfulness by asking the landowner to show the updated and valid land certificate; or you can also check the inheritance documents.
2. Tax Payments
One of the most critical parts of land acquisition in Indonesia is to know whether the former owner has paid their land taxes before you finish the transaction.
Unpaid taxes means that you are not allowed to apply for a building permit IMB unless you settle the payments. Some documents needed by a notary for making the transaction;
PBB tax payment, called SPPT PBB. This represents the payment of the current building and land tax. This document is important in order to identify the tax applicable for the transaction. You will find out how much the seller should pay, and how much tax you should pay as the buyer.
Seller’s "NPWP" taxpayer number.
Buyer "NPWP". They need a copy of Buyer's taxpayer number in order to validate the tax applicable to this transaction.
3. Zoning Verification
Under zoning regulations, commercial activities are actually prohibited on some areas of the island. Therefore, your land could be useless if you have the wrong zoning for your business activities.
4. Building Permit
If there is a building on the land you are going to buy, you must also make sure that you possess the building permit IMB. To avoid any litigations, the building’s classification and function must all be in compliance with the zoning laws.
Buildings that do not meet the zoning requirements or do not have an IMB will be demolished by the government.
5. Land Infrastructure and Land Border
It is important to determine the land’s actual size as well as whether there are any overlapping property boundaries with due diligence. This gives you confirmation regarding your land transaction integrity. A tiny overlapping unit can eventually give rise to disputes between the two parties: the landowners and their neighbors.
In addition to that, expats are encouraged to check the legality of an access road because some access roads may be privately owned or publicly owned by the local community. This condition can also affect the value of your purchased property.
6. Limited Property Access
It is common that foreigners who purchase a villa will also get usage permission of road access from the previous owner who possesses the land linked to the foreigner’s purchased villa.
However, after some time, the landowner may change their mind and would want to collect fees from foreigners for using their land as road access. This can quickly lead to disputes and maybe costly court cases. Thus, foreigners need to know beforehand that the road access comes as “free” is not actually free.
7. Sale and Purchase Agreement
Your intention to conduct a sale and purchase transaction must be written in the form of an agreement. It’s called a Sales and Purchase Agreement (SPA). Both the seller and the buyer must be present to sign the SPA. You must come with your spouse if you're married.
A valid document like a marital agreement must be presented as well in the event you have a separation of property in your marriage. A prenup or postnuptial can serve as the document that you require with no assistance from your spouse. With this document, your spouse doesn't have to come with you to sign the SPA.
A valid SPA must be lodged at the land registry office in order to transfer the title from the seller to the buyer. One thing you need to be aware of is the payment of the current year’s taxation must be settled before the title is being transferred. A tax validation will be carried out before the title transfer is conducted.
DUE DILIGENCE WITH US
It is essential to have a clear understanding of your land acquisitions in Bali, Lombok, and Indonesia. BuildBali offers quality due diligence that will help you gain insights into the land value and potential issues, giving you confidence in making a final decision for closing a deal.
As a leading land due diligence service provider in Indonesia, Our due diligence team is made up of highly-trained examiners to provide you with a detailed analysis of all pertinent aspects for land transaction and ownership. Let our experienced team assist you in buying your prospective land before making a huge commitment.