Land and Property Ownership in Indonesia

Land and Property Ownership (i.e. Building) in Indonesia is primary regulated by Law 5 of 1960 (Undang Undang Pokok Agraria/ “UUPA”). The law became a modern unifying law that regulates land and property ownership in Indonesia. During the pre-independence era,land and property ownership were regulated by Colonial Law, Native Custom Law, and some Islamic Laws.

The Native Custom Law contributed a horizontal separation principle to the Land Law which makes the ownership of Land and Building separate. Having said that, a land with property on it may be owned fully or partially.

Even though the separation of ownership is regulated by law, however, this subject is not commonly known even by the Indonesians. The lack of implementation of the regulation for the ownership of buildings may be the cause of this.

In this article, we will discuss types of ownership for land and property in Indonesia based on the UUPA.

Land Ownership​

UUPA regulates that land ownership is classified into 5 primary types as follows.

1. Freehold Title (Hak Milik/”HM”)

  • Time Period: No limit
  • Designation: Free as long as it does not conflict with urban planning
  • Holder: Only Indonesian Citizens (and some religious foundation)
  • Used as an Inheritance: Applicable
  • Used as a Collateral: Applicable.

2. Rights to Build (Hak Guna Bangunan/ “HGB”):

  • Time Period: Maximum 30 years and can be extended for maximum 20 years
  • Designation: For building;
  • Holder: Indonesian Citizens and Indonesian Legal Entities
  • Used as an Inheritance: Applicable (Indonesian Citizens)
  • Used as a Collateral: Applicable.

3. Right to Exploit (Hak Guna Usaha/ “HGU”):

  • Time Period: Maximum 35 years and can be extended for maximum 25 years
  • Designation: Agriculture, fisheries, and plantations
  • Holder: Indonesian Legal Entity
  • Used as a Collateral: Applicable.

4. Right to Use (Hak Pakai/ “HP”)

  • Time Period: Maximum 25 years and can be extended for maximum 20 years
  • Designation: Free as long as it does not conflict with urban planning
  • Holder: Indonesian Citizens, Indonesian Legal Entity; Foreign Representatives Foreign Citizens.
  • Used as an Inheritance: applicable (for private persons)
  • Used as a Collateral: Applicable for some type.

5. Lease (Hak Sewa) 

  • Time Period: Subject to the lease agreement
  • Designation: Subject to the lease agreement
  • Holder: Indonesian Citizens, Indonesian Legal Entity; Foreign Representatives, Foreign Citizens, Foreign Entities
  • Used as an Inheritance: Not applicable
  • Used as a Collateral: Not applicable, unless otherwise specified in the lease agreement (using Fidusia security instrument).

Property Ownership

Property Ownership

As mentioned above, property or building ownership is less regulated. This has led to (i) no exact name given to the legal title as the proof of ownership for a property; or (ii) there is a specific property that has a legal title but not classified as a Property Ownership, but Land Ownership (e.g. Strata Title/ Sertifikat Hak Milik Atas Satuan Rumah Susun/ “SHMSRS”).

In practice, a person (private or legal entity) may be acknowledged as the owner of a property if they have an Building License Permit (Izin Mendirikan Bangunan/ “IMB”). Theoretically, a permit is different from a title of ownership, however, an IMB which was originally intended to be a building construction permit is used also as a document to prove the ownership of a property. This does not apply to a property that has legal title of Strata Title/ SHMSRS.

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Reference (downloadable via Google Drive)

Notary’s Role in Indonesia

In Indonesia a notary is a private person who’s appointed by the government as a public official authorized to create an authentic deed.

Notary in one of the oldest legal profession in Indonesia other than the judge, state attorney, and lawyer. In this country, a notary is a private person who’s appointed by the government (i.e. Ministry of Law and Human Right/MLHR) as a public official authorized to create an authentic deed.

As a public official, a notary must be independent of the client’s interest in performing his/her role. Their main role includes creating a deed, notarizing documents, and consultancy.

Deed

Creating an authentic deed is the most common role of a notary in Indonesia. A deed is made based on the request of the client which could either be because (i) the deed is obligatory to be made by the law; (ii) or voluntary​ request by the client even though the legal document is not required to be made in the form of an authentic deed.

Examples of the first type are: Company’s Article of Incorporation Deed; Fiduciary Securities Deed; and Will Deed (Testament).

Examples of the second type are: Loan Agreement Deed; Share Purchase Agreement Deed; and Lease Agreement Deed.

The notable difference between those types are; if the said deed is mandatory to be filed to some government institutions for registration and/or obtaining approval, then it will be categorized as the first type.

For instance, the Indonesian Company Law (Law 40 of 2007) regulates that a Company’s Article of Incorporation Deed is required to be filed to the MLHR for obtaining approval, while Loan Agreement Deed does not have that kind of requirement.

In principle, mandatory filing is required to be performed by the party. However, for some applications, the government hands over the technical matters to a notary.

Having said that, in practice, a founder of a limited liability company (perseroan terbatas) does not need to come to the MLHR to apply for an approval for his/her company’s incorporation, the application will be performed by the notary through MLHR’s online system that could only be accessed by the notary.

(Not Notary Deed)

Even though the Indonesian Notary Law (Law 2 of 2014) gives a notary the authority to create a deed in relation to land and auction, however, in reality, those documents could only be made by other public officials.

Subject to land regulation, deed related to a land is the authority of a Land Title Register Official (Pejabat Pembuat Akta Tanah/PPAT). This official is appointed and supervised by the National Land Agency.

While subject to auction regulation, deed related to an auction is the authority of a Second Tier Auction Official (Pejabat Lelang Kelas II). This official is appointed and supervised by the Ministry of Finance.

Although these professions mentioned above are different, however, they can be carried out by the same person. This is the very reason why we see different name plates for the same person (Notaris, Pejabat Pembuat Akta Tanah, and Pejabat Lelang Kelas II).

Notarization

This is the most misunderstood role of a notary. Many people think that every non-authentic document which has a notary stamp on it will simply be regarded in Indonesia as “legalisir” (legalized), while in fact, as described below- a notary has several roles apart from stamping non-authentic documents.

Authorize signatures and specify the date of the letter under the hand by registering in a notary record (referred as Legalisir/ legalization);

Record a non-authentic document letter in a notary record (referred as waarmerking/ Registration);

Make copies of the original non-authentic document (referred as copie collationnee); and

To certify that a photocopy matches the original letter.

Legalization is requested if the client would like to have the notary witness and confirm the signing of some non-authentic documents. Consequently, the document is not yet finalized when the client appears before a notary. Also, the other documents are required to be prepared before they are delivered to a notary to be administered.

Since in Indonesia all of the services above are commonly called “legalisir”, it is strongly advised to have confirmation from the person/organization that requested the “legalisir” in order to have a clear understanding of which notarization service needs to be performed, especially for the purpose of using an Indonesian document outside Indonesia

Consultancy

In principle, since a notary is a legal practitioner, he/she may also offer consultancy services to clients. The consultation will contain legal matters related to the creation of a particular deed requested by the client.

For instance, when a client requests for the incorporation of a company, a notary may give consultation regarding the legal terms contained in the deed to suit the client’s need. Further, they may also inform the client of the type of licenses required by the company to perform its business activity since this is quite related to the deed made (in relation to the stated company’s business activity). 

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Reference (downloadable via Google Drive)