In Reply to: Surrender Hak Milik to get Hak Pakai posted by SurfAddict on Monday, 27. February 2006 at 20:20 Bali Time:
I have just recently completed a land purchase in Tabanan Regency, Bali and have spent considerable time and energy with an attorney deciphering the ins & outs of property ownership by foreigners in Indonesia. I strongly recommend that you do the same before deciding to go forward with any property investment in Bali. Most attorneys will provide you with a free initial consultation where they will explain the various contracts and methods of property ownership (Hak Milik, Hak Pakai, etc.) and the pros & cons of each type of contract. It will be time well spent and most informative, I assure you. I will attempt to answer your questions based on the information provided by my attorney. Yet, I am not an attorney and advise you to seek your own legal counsel.
A Hak Milik is, as I understand it, an ownership certificate (a Title as we call it in the USA) and can only be held by an Indonesian citizen. This requires that you, as a foreign investor, find an Indonesian "nominee" who becomes the actual holder of the Hak Milik or ownership title. Hak Milik is a "freehold" ownership with no time limits or expirations and can be held by the Indonesian national indefinitely. Obviously, this would work out best if you have a nominee with which you have a long term relationship and know and trust well. There are many people in Bali willing to act as nominees for hire and fees for such service begin at around rp5,000,000 up front at the time of purchase and an agreement that the nominee is to receive 1% or more in the event of a future sale of the property.
Through a series of additional legal contracts, your "ownership" can be protected. One such legal vehicle is a document called Hak Pakai or a right of use/right to build, etc. granted to you by the nominee. A Hak Pakai is a relatively new vehicle introduced into law in 2004. A Hak Pakai is a finite agreement with a time limit of 20 years if I remember correctly, which can be renewed or extended. Again, I encourage you to seek counsel for a clear understanding of the laws in this regard. My attorney has advised foregoing the Hak Pakai route in favor of alternative legal vehicles as follows...
When you enter into an agreement to purchase property thru a nominee, you thru the Notaris or attorney or both grant a "mortgage" to the nominee, stating in effect that you have lent the nominee the money for the purchase of the property. This "mortgage is then attached to the new Hak Milik and registered with the land office along with documentation and binding agreements that your nominee cannot sell, mortgage or otherwise encumber the property without your acknowledgement in writing proving your satisfaction. In addition to the mortgage, there are binding agreements put in place requiring that your nominee agrees to assist you should you decide sell the property in the future and also allowing you to change your nominee in the future without additional compensation should you and he/she come to a dispute in the future. As I understand it...all of these contracts/documents are registered with the government land office along with the original Hak Milik as protections against your nominee attempting to sell or mortage your property without your knowledge and approval.
I have been advised by my attorney that this method is extremely safe and defendable in a court of law, however...my 20+ years of experience in dealing with things in Bali, I have learned that when it comes to the rights of foreigners in Indonesia, nothing should be taken for granted.
I strongly suggest you seek a reputable attorney's advice in addition to a Notaris. The Notaris is necessary anyway to register the land documents at completion. The attorney will be much more versed in the ins & outs, the legalities and ways that a foreigner can protect their investment than a Notaris will be.