Articles

Principle Regulations Governing Batam Island and Its Effect on Property Sector

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Batam has a strategic geographical location as the closest island to Singapore and Malaysia, which strategically located in the international shipping route. As the special zone for multinational trade area, Batam has a special treatment from the Government of Indonesia. This specialization can be seen from the several regulations on Batam status, which are as follows:

Batam Island as the business area of Bonded Warehouse regulated in the Presidential Decree of Republic of Indonesia Number 41 of 1978 as amended lastly by the Presidential Decree of Republic of Indonesia Number 25 of 2005.Batam, Rempang and Galang (which also declared as an Industrial area), is developed to serve several main functions, namely: industrial, warehouse, trade, and transshipment.
Free Trade and Free Port Zone regulated in the Government Regulation Number 46 of 2007 on the Free Trade Zone and Free Port Zone Batam.Batam has been determined as a Free Trade Zone (“FTZ”) and Free Port Zone (“FPZ”) which it gives the guarantee and the protection for all investors to conduct their business in Batam.
Tax liberation regulated in the Government Regulation Number 2 of 2009.Batam was not only determined as place of warehousing, but also for place of processing with the liberation for Import Duties (Bea Masuk), Customs and Excise (Bea Cukai), Value Added Tax (PPN), and Luxury Goods Tax (PPnBM) which can be enjoyed by the entrepreneur who has obtained permission in Batam.
Economic Cooperation regulated in Joint Statement by the President of the Republic of Indonesia and the Prime Minister of the Republic of Singapore.On June 25, 2006, the President of Republic of Indonesia and the Prime Minister of Republic of Singapore committed the joint statement of the Framework Agreement on Economic Cooperation between the Government of the Republic of Indonesia and the Government of the Republic of Singapore in the Islands of Batam, Bintan and Karimun.

The stipulations of Batam in becoming a free trade area have been attracting the investors both of foreign and local investors. A large amount in the investment flows on Batam also gives a large impact in some businesses in Batam. With regards to the development of Batam island as a FTZ and FPZ, Batam would need a high-quality infrastructure for supporting the investment development; such as residential, entertainment facilities and other supporting facilities. Furthermore, one of the potential businesses in Batam is in the property area.

The great amount of business opportunities in Batam invites many entrepreneurs to establish their business in Batam. There are new properties projects in Batam, with many types and segmentation, such as:

1. Very low-class and middle-class housing development;

2. Low-class houses;

3. Middle-class apartment;

4. The trade center;

5. Luxurious trade center and a high-class apartment in the certain location;

6. Condominiums.

In order to maintain the local and foreign investment in Batam, the Government always assures the legal certainty in the use of property services. There are a several Government Regulations to support the investment itself, which are as follows:

The Government Regulation Number 46 of 2007 on Batam Free Trade zone and Free Port Zone On the Management and the Usage of Land in the Industrial Area of Batam Island;In this regulation, the Government gives the authority to Free Trade Zone and Free Port Zone Management Body (Badan Pengelolaan Kawasan Perdagangan Bebas dan Pelabuhan Bebas) for developing investment, including regulating the allocated land permit or business permit.
The Government Regulation Number 40 of 1996 on Right to Cultivate, Right to Build and Right to Use of Land and the Government Regulation No. 41 of 1996 about residences ownership by foreigners who are domiciled in Indonesia;
Regulation of State Minister of Agrarian/Head of National Land Authority No. 8 of 1996 about changes on Regulation of State Minister of Agrarian/Head of National Land Authority No. 7 of 1996 about the conditional residences ownership by foreigners who are domiciled in Indonesia.
Circular letter of State Minister of Agrarian/ Head of National Land Authority No. 110 –2871 of 1996 about the implementation of Government Regulation Number 41 of 1996.
The Government determines the rights of land which can be owned by foreigner who wish to stay in Batam in order to maintain and manage their investment.

All of these things reflect the commitment of the Indonesian government to fully support the development of Batam island. The development of Batam Island as FTZ and FPZ also make Batam one of a strategic investment area on property and real estate projects in Indonesia.

Grace Tobing

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Summary of Government Regulation No. 41 of 1996 on Residences Ownership by Foreigners Who Are Domiciled in Indonesia

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The purpose of the Government Regulation No. 41 of 1996 (the “GR No. 41”) is to give a legal certainty for foreigners who own property in Indonesia. Foreigners who are domiciled in Indonesia are foreigners who give benefits for national development.

The requirements of property ownership by foreigners who are domiciled in Indonesia are as follows:

1. Property which is built on a land:

Having a Right to Use (Hak Pakai) over a state land;

Having a Right to Use which based on an agreement between the foreigner and the holder of rights over land (for example: Rights to Own or Rights to Build)

2. Strata title units which are built on a land with Right to Use over a state land.

The agreement between foreigner and the owner of the land must be made in writing, with a deed made by a land official (Pejabat Pembuat Akta Tanah), registered in the book of land (Buku Tanah) and certificate of Right to Use. According to the Law of Principles of Agraria, the agreement between foreigner and the owner of the land is not a lease agreement or cultivated agreement. The agreement is made with the terms agreed by the parties but shall not exceed 25 (twenty five) years time period. The term of the agreement can be extended with a new agreement which shall not exceed another 25 (twenty five) years time period, provided that the foreigner is still domiciled in Indonesia.

If the foreigner is no longer domiciled in Indonesia, in a period of one year, the foreigner must release or transfer their rights over the property to other who is eligible. If the foreigner did not release or transfer it, then the state will take over and sell it through a tender. For property which is built over a land owned according to an agreement with the owner of the land, then the property will belong to the owner of the land. The results from the tender of house and land held by the Government will be returned to the foreigner after deducted by tender fee, stuffs and other fee.

Handy Samot

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Legal Aspects of Building in Indonesia

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Buildings are made to support people’s need of spaces. Building has many functions such as work space, business place, education place, recreation place and many more. In developing countries, especially for small countries, building is used to maximize the use of spaces.

In Indonesia, building is regulated in the Law No. 28 of 2002 on Building (“Law of Building”). According to Law of Building, the definition of building is a physical form of construction works which integrate with the land it stands on, partly or wholly stands over and/or under ground or water, having a function as a place for people to do their activities, either for residence or place to live, religious activity, business activity, sosial activity, culture or any specific activity.

Construction of building is held with the principle of utility, safety, balance, also the harmony between building with its environment. The regulation for building is intended for:
1. Materializing a functional building and suitable with the construction building order which is harmonious and balance with its environment;
2. Materializing an orderly execution of building that ensures technical reliability in terms of safety, health, comfort, and convenience.
3. Materializing a legal certainty in the execution of bulding.

As for building function, according to Paragraph 1 of Article 5 Law of Building, building functions consist of residential function, religious, business, social and cultural, as well as special function. Paragraph 7 of Article 5 stipulated that one building can have more than one function.

Basically, Law of Building is regulating the requirements of a good and fully functional building. As for the implementing regulation of Law of Building is Government Regulation No. 36 of 2005 on Implementing Regulation of Law No. 28 of 2002 on Building (“GR No.36 of 2005”).

The purpose of GR No. 38 of 2005 is to materialize the implementation of orderly buildings, both administratively and technically, in order to materialize a building that is functional, reliable, which ensures safety, health, comfort, and ease of use, and balance and in harmony with its surroundings.

Some of the provisions in GR No. 38 of 2005 still need guidance and technical standard as the guidance to construct buildings. To do so, Minister of Public Works issued the Minister of Public Works Regulation No. 29/PRT/M/2006 on Guidance on Building’s Technical Conditions (“Minister Regulation”). This regulation includes everyone so that every party, person, legal entity and also government body, in constructing building shall fulfil the technical conditions set out in the Minister Regulation.

Retno Anggraeni

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Parties That Can Be Involved In Legal Conflicts in Condominium

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A life in condominium is different from life in ordinary house. Tenants not only have next door neighbours but also have upstairs and downstair neighbours. In condominium there is also a governing body that regulates the management of the condominium environment, maintenance and the construction of environmental infrastructure and social facilities for the purpose of living together with all tenants in condominium.

However, legal conflicts often arise in living in a condominium. The parties involved in are as follows:

a. Developer;
Developer acts as condominium manager until a Tenant Association is established. Article 65 of Government Regulation No. 4 of 1988 on Condominium regulates the period of condominium management by the developer, at least three (3) months and a maximum of one (1) year since the establishment of Tenant Association.

Problems that often arise from the interests of developer are:
1) Developer decides on the charge of condominium management fees. Potential conflicts that arise are objections to the number of the fee that will be charged towards the tenants, who may feel that it is too high.
2) Developer basically has the principle of getting profit in constructing condominium, and it can be applied by determining service charge or management fees one sidedly.

b. Tenants Association;
Tenants Association is a representative of tenants, it takes care the interests of condominium tenants. Potential conflict that might arise is the decisions made by the Tenants Association which are not necessarily in the best interests of the tenants. This is happened often because there are strongholds that support or oppose the management of a Tenants Association. This has happened in some places.

c. Owner and Tenant;
Owners and tenant as the parties who are using a strata title unit and its environment, have an obligation to comply with disciplinary or house rules in accordance with the Article of Association and Bylaws, to pay management fees and sinking fund, to pay fire insurance premium, and to maintain the strata title unit and its surroundings. Potential conflict that may arise is if there are violations againts the rules, committed by the owner and/or tenants, and also disobedience of the owner and/or tenants in paying the management fees.

Conflicts that are possible to arise as described above are the result of the absence of detailed regulations as a legal protection for regulating the management and condominium’s life in Indonesia. Although there are Law No. 16 of 1985 on Condominium (the “Law of Condominium”) and Government Regulation No. 4 of 1988 on Condominium, but these rules cannot comprehensively accommodate the problems that can arise in living in condominium.

Ways that can be done to accommodate the problems above are as follows:
a. Toset a proper regulation and the provisions in the Article of Association and Bylaws which govern the things that might potentially inflicting legal conflicts;
b. Socialization from the housing agency or Regional Government about life in a condominium;
c. Guidance and instruction on how to manage condominium properly and effectively.

Ardhityo Rompas

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Legal Status of a Property over the Right to Manage

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Not all land has a pure rights over land. There is a Right to Manage (Hak Pengelolaan Lahan – HPL) over some lands, like in some areas in DKI Jakarta, for example Senayan, Kemayoran, Pulomas, etc.

HPL is not a right over land and is not regulated in the Agrarian Law but it is regulated in the Goverment Regulation No.8 of 1953 on Control Over State Lands and Agrarian Minister Regulation No. 9 of 1965 on the Implementation of the Conversion of Control Over State Lands and Provisions on the Subsequent Policy.

HPL object is agricultural land and non agricultural, whereas the subject or the holder of HPL in general is Provincial Government (“PEMDA”), State-owned Corporation (“BUMN”), and Provincial-owned Corporation (“BUMD”) according to the goverment regulation as referred above.

HPL has no ownership period and is given only on state land controlled by PEMDA, BUMN, and BUMD with the purpose to control zoning and land use, so it is suitable with its zoning plan.

HPL is essentially a right concerning authority as stated in Article 1 paragraph 1 Regulation of the Minister of Domestic Affairs No.1 of 1977 on the Application Procedure and Resolution of Grant of Rights Over Parts of the Right to Manage and its Registration, as follows:
to plan the use of the land;
to use the land for the purpose of implementing its business;
to deliver some parts of the land to the third party, according to the requirement specified by the rights holder company, which includes its purpose, use, time period and financial, provided thatthat the grant of right of the land is conducted by the authorities, in accordance with the applicable laws and regulation.
Some kinds of rights of land such as Right to Build (HGB), Right to Cultivate (“HGU”), Right to Use (“HP”) can be issued over the HPL, but in practice and in accordance with Article 7 paragraph (2) of Law No.16 of 1985 on Condominium, a Right to Build is more often issued over HPL based on the agreement between the holders of HPL and the third party. For example, a Right to Build is issued over HPL with a purpose of building an apartment for residence. Therefore, every Rights to Build granted to third party must be approved by the HPL holder and as long as there is no change of use of a HPL land, then such approval shall be granted to third party. Thus, it is clear that an approval serves as a control function and is not an absolute authority from HPL holders.

Ivan Ari

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Rights and Obligation of Owner and Tenant in a Condominium or Strata Title Unit

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Condominium is a multistory building for residential purpose, which every unit of it can be owned separately. As a residential building that can be owned separately, tenants of condominium have boundaries in making use of spaces and facilities inside of condominium. In a condominium there are common equipment, common facility, and common land. Those things are shared rights of a condominium which cannot be owned individually because they are one functional unit of condominium that cannot be separated.

Owner and/or tenant of a strata title unit has rights and obligations that are regulated by Government Regulation No. 4 of 1988 on Condominium (the “GR No. 4 of 1988”). Some of the regulations are mentioned below.

Article 61 GR No. 4 of 1988,

Paragraph (1)

Every tenant has the right to:
make use of condominium and its environment including common equipment, common facility, and common land safely and orderly;
to get protection as stated in its Article of Association and Bylaws;
to choose and be appointed as the management of Tenant Association.
Paragraph (2)

Every tenant has the obligation to:

obey and execute the regulation in a condominium and its environment in accordance with its Article of Association and Bylaws;
pay the contribution for management and fire insurance premium;
take care of the condominium and its environment including the common equipment, common facility, and common land.
Paragraph (3)

Every tenant is prohibited to:

act or do something which can endanger the security, the order, and the safety of other tenants, building and its environment;
modify the shape and/or adding building parts outside their strata title unit without the permission of the Tenant Association.
Other right which is not regulated in the paragraph mentioned above is that tenant who is also a member of Tenant Association has the right to vote. Tenant can use their right to vote in a General Meeting of the Tenant Association.

The right to vote consists of 3 (three) categories, as follows:

1. Residential Vote (Hak Suara Penghunian)

This is the right of member of Tenant Association to vote in order to determine issues on condominium’s order, the use of facility, and the obligation to pay contribution for management and fire insurance premium for shared rights such as common equipment, common facility and common land. Every owner of strata title unit can only cast one vote.

2. Management Vote (Hak Suara Pengelolaan)

This is the right of member of Tenant Association to vote in order to determine issues on maintenance, renovation, and the development of environment infrastucture, including social facilities, common equipment, common facility, and common land. Management Vote is counted according to its proportional comparative value from every strata title unit.

3. Ownership Vote (Hak Suara Pemilikan)

This is the right of member of Tenant Association to vote in order to determine issues on the relationship between tenant, the appointment of management of Tenant Association, and expenses of strata title unit. Ownership Vote is counted according to its proportional comparative value from every strata title unit.

According to the explanation above, every owner and/or tenant of strata title unit has rights and obligations which have been regulated by law. These regulations has a binding power with legal sanction, especially for obligations, which has to be executed by the owner and/or tenant of strata title unit.

The legal sanction related to tenant’s obligations is regulated under Article 77 GR No. 4 of 1988. Article (1) from the paragraph says, “anyone who violates the provisions of Article 30, Article 31, Article 34, Article 35 paragraph (1) and paragraph (3), Article 38 paragraph (2), Article 39 paragraph (1), Article 61 paragraph (2) and paragraph (3) and Article 67, is charged with a maximum inprisonment of 1 (one) year and/or a maximum fine of Rp.1.000.000,- (one million Rupiah).

Ardhityo Rompas

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Strata Title Ownership for Foreigner and Foreign Entity in Indonesia

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Indonesia as a developing country is one of the investment destination for developed countries to expand their global business activities. That is why more foreigners domiciled in Indonesia to do their business. However, there are boundaries or conditions for foreigner to own a residence especially a strata title, which is going to be discuss further here.

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The Legal Status and Power of Tenant Association

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In a strata title concept, there is unit of strata title that can be owned separately and also jointly common equipment, common facility, and common land in line with the calculation of the proportional comparative value. That is why there should be a regulation on utilization and management by Tenant Association (Perhimpunan Penghuni) as a legal entity that will be responsible to manage the shared interest of owners and strata title tenants.

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