On 12 February 2020, the Representative Council has received an academic paper and a draft of the Employment Creation Law for further discussion. The draft of Employment Creation Law consists of 174 articles and 79 affected laws and one of the amendments in the draft is Law No. 20 of 2011 on Condominium ("Law No. 20/2011").
The amendment of Law No. 20/2011 is to provide facilities for the public, especially business actors in obtaining Business Licensing and ease of investment requirements from the public works and public housing sector. This writing will focus on the changes to Law No. 20/2011 concerning the area of public condominium construction, construction standards, drawings and descriptions of condominium, building approvals, function and utilization plans, Feasible-Use Certificate, condominium infrastructure, preliminary agreements for sale and purchase, management of condominium and sanctions.
Area of Public Condominium Construction
Developers of the construction of commercial condominium must provide public condominium at least 20% of the total floor area of commercial condominium built. Based on the draft bill of Employment Creation Law, these obligations can be implemented:
- outside the area of commercial condominium within the same regency/city;
- outside the area of commercial condominium within the same district/city.
Further provisions regarding the obligation to provide public condominium mentioned above will be regulated further in a Government Regulation. To this date, the Government has enacted government regulation on the implementation of housing and settlement which is Government Regulation No. 14 of 2016 on the Implementation of Housing and Settlement (“PP No. 14/206”) and under the PP No. 14/2016 it does not specifically stipulate the obligation to construct public condominium as mentioned above. Nevertheless, the obligation to realize the balanced occupancy is already in place. It is already regulated in Minister of Public Housing Regulation No. 7 of 2013 concerning amendments to the Minister of Public Housing Regulation No. 10 of 2012 concerning Implementation of Housing and Settlement Areas with Balanced Occupancy ("Permen PR No. 7/2013"). Permen PR No. 7/2013 regulates that the obligation can be implemented only within the same regency/city and specifically for DKI Jakarta the implementation can be conducted outside the same regency/city but within the DKI Jakarta province.
The draft of Omnibus Law mandates that the government regulation as well as the implementing regulation from the amended laws under the Omnibus Law shall be adjusted in no later than 1 (one) month after the Omnibus Law is enacted. Hierarchically, Omnibus Law will be the first reference of regulation, however this means that if PP No. 14/2016 and Permen PR No. 7/2013 are not immediately adjusted when the Omnibus Law is promulgated, this could lead to confusion over the implementation of the obligation to build public condominium.
Condominium Construction Standards
The draft of Employment Creation Law changes the requirements for the construction of condominium to become the standard for building condominium. But the other provisions remain the same as Law No. 20/2011 which are i) administrative requirements, ii) technical requirements and iii) ecological requirements. The draft of Employment Creation Law adds a new provision, namely that further provisions regarding the standard for the construction of condominium will be regulated in a Government Regulation.
The draft of Employment Creation Law does not provide detailed definitions or arrangements regarding the intended standard. However, if refers to the provisions in the amendment to Law No. 28 of 2002 concerning Buildings in the draft of Employment Creation Law, it can be concluded that what is meant by the standard is a technical standard prepared by the Central Government as a guide for developers to build buildings in accordance with their functions and classifications, which contain regulations including the maximum number of floors of buildings, building height and free space between buildings. If the building is planned not in accordance with these technical standards, the developer needs to get approval from the Central Government.
Drawings and Descriptions of Condominium
The developer is obliged to separate the unit of condominium from the joint equipment, joint facility and joint land. This is done in order to provide clarity on the boundaries of parts that can be shared and parts that are privately owned. This separation must be contained in drawings and descriptions of condominium as a basis for establishing proportional ratio values (NPP), certificates of right of ownership over condominium unit (SHM sarusun) or certificates of ownership of building (SKBG sarusun) and preliminary agreements for sale and purchase. Afterwards, the drawings and descriptions will be used as the basis for determination of NPP, SHM sarusun or SKBG sarusun and the preliminary agreement for sale and purchase, and the drawings and descriptions above must be stated in the form of a deed of separation.
The draft of Employment Creation Law removes the provisions regarding the basis for the determination of NPP, SHM sarusun or SKBG sarusun and the preliminary agreement for sale and purchase above and to date there is no implementing regulation that regulates this matter. If this provision is not clearly regulated both in the bill and in the implementing regulations, this can cause confusion regarding the determination of ownership limits and also the price of the unit sold becomes unclear on the basis for its determination.
Furthermore, the draft of Employment Creation Law changes the authority authorized to ratify the deed of separation of drawings and descriptions of condominium. In Law No. 20/2011 the authorized party is the regent/mayor and specifically for DKI Jakarta it is by the governor. In the draft of Employment Creation Law all ratification of the deed will be carried out by the Central Government. This change is made to realize the purpose of the establishment of Employment Creation Law, namely centralizing licensing so that this is expected to facilitate developers in carrying out the construction of condominium.
Building Permit (IMB) in Law No. 20/2011 is changed to be Building Approval in the draft of Employment Creation Law. Building Approval is a follow-up to the fulfillment of technical standards implemented by business actors, and approval is issued by the Central Government. Further provisions regarding the requirements and procedures for obtaining the Building Approval will be regulated in a Government Regulation.
Condominium Function and Utilization Plans
The developer is obliged to carry out the construction of condominium in accordance with their functions and uses and get permission from the Central Government. The permit application is submitted by attaching the following requirements:
- certificate of land rights;
- letter of district/city plan;
- site plan drawing;
- drawings of architectural plans that contain plans, views, and pieces of condominium that clearly show the vertical and horizontal boundaries of the condominium;
- drawings of structural plans and their calculations;
- plan drawings clearly showingthe joint equipment, joint facility and joint land; and
- drawing of a general utility plan and installation along with its equipment.
The draft of Employment Creation Law removes articles regulating these requirements and will further be regulated by the Government Regulation. This also applies to changes in the planned function and use of condominium. All permits must meet Business Licensing from the Central Government. Meanwhile, so far there are no implementing regulations that specify in detail the implementation of the function and utilization plan so that if the provisions are removed from Law No. 20/2011 then the arrangements must be clearly stated in the implementing regulations of the Employment Creation Law or make adjustments to PP No. 4/1988. This needs to be done so that the developer gets clarity regarding the requirements for obtaining a permit for the function plan and the use of the apartment development.
The developer is required to submit a certificate of feasible-use (SLF) after completing all or part of the construction of condominium. Submission and issuance of SLF is submitted and issued no longer by the regional government but by the Central Government.
Condominium Infrastructure and Public Facilities
Developers are required to complete the condominium environment with public infrastructure, facilities and utilities (PSU). Provisions regarding the PSU will be regulated further in a Government Regulation and will no longer refer to Ministerial Regulations. The government has issued implementing regulations for the construction of the PSU through Minister of Public Works and Public Housing Regulation No. 03/PRT/M/2018 of 2018 concerning Amendment to the Minister of Public Works and Public Housing Regulation No. 38/PRT/M/2015 concerning Assistance for Infrastructure, Facilities and Public Utilities for Public Housing ("Permen PUPR No. 03/2018"). Permen PUPR No. 03/2018 specifically only regulates the construction of PSUs for public condominium where the construction is assisted by the Government. For this reason, at the time the Employment Creation Law is enacted, it is necessary to have a Government Regulation governing this matter.
Preliminary Agreements for Sale and Purchase
Under the UU No. 20/2011, condominium that has not been completed can be sold through a preliminary sale and purchase agreement (PPJB) by meeting the requirements of:
- land ownership status;
- Building Approval;
- Availability of infrastructure, facilities and public utilities;
- Building at least 20%;
- Agreed matters.
The draft bill removes the provision regarding the 20% minimum construction of condominium building as mentioned above and will regulate it further by the Government Regulation. The obligation to build 20% for condominium has been regulated in Article 10 paragraph (1) of Minister of Public Works and Public Housing Regulation No. 11/PRT/M/2019 concerning the Preliminary House Purchase Agreement System ("Permen PUPR No. 11/2019"). With the amendment to the PPJB requirements for condominium, the Government Regulation for the Employment Creation Law needs to elaborate further on these requirements because the provisions in Permen PUPR No. 11/2019 will be no longer relevant.
Management of Condominium
The draft of Employment Creation Law regulates that management of condominium must be carried out by a legal entity, except for leased public condominium, special condominium and state condominium. The business license for the management body referred above is no longer issued by the regent/mayor or governor for DKI Jakarta, but rather must meet Business Licensing from the Central Government. Further provisions regarding Business Licensing will be regulated by the Government Regulation. To date the provisions regarding the business license of management body of condominium have been regulated in Minister of Public Works and Public Housing Regulation No. 23/PRT/M/2018 of 2018 concerning the Association of Owners and Residents of Condominium ("Permen PUPR No. 23/2018"). Article 31 paragraph (3) of Permen PUPR No. 23/2018 stipulates that the management body of condominium must be in a form of legal entity and obtain business license from the regent/mayor and specifically for DKI Jakarta is issued by the governor. Therefore, with the change of authority for issuing business licenses for the management body of condominium as mentioned above, when the Employment Creation Law is enacted, the provisions in Permen PUPR No. 23/2018 is no longer valid and the management body is obliged to refer to the implementing regulations of the draft of Employment Creation Law.
Article 107 of Law No. 20/2011 regulates that any person who violates the provisions in Law No. 20/2011 will be subject to administrative sanctions. The form of administrative sanction is already regulated in Article 108 of Law No. 2011/2011 but the draft of Employment Creation Law removes this article and will regulate the form of administrative sanction further in a Government Regulation.
Furthermore, the draft also amends the provisions of sanctions for developers in the construction of commercial condominium that do not carry out their obligations to provide minimum 20% of public condominium as stipulated in Article 97 of Law No. 20/2011. In Law No. 20/2011 this violation is subject to criminal sanctions in the form of a maximum of 2 years imprisonment or a maximum fine of Rp 20,000,000,000 whereas the draft bill makes these sanctions lighter by turning them into stages which is administrative sanctions in a form of penalty amounting Rp 20,000,000,000. In the event that the offender does not meet the administrative sanctions as mentioned above, the offender will be punished with a maximum imprisonment of 2 years. This provision is also applied to violations of i) PPJB requirements, ii) provisions for the location of condominium, iii) designation of locations, functions, and utilization of condominium, but with the same nominal as stipulated in Law No. 20/2011.
One of the objectives of the Government in drafting the Employment Creation Law is to encourage the investment ecosystem in the form of simplifying licensing and for that Law No. 20/2011 is amended to follow the new legal framework proposed in the draft of Employment Creation Law, such as Building Approval and technical standards. On the other hand, the draft also changes a number of important provisions such as for drawings and descriptions of condominium which are the basis for determination of NPP, SHM sarusun or SKBG sarusun and the preliminary agreement for sale and purchase, and constructing condominium for 20%. In addition the government also provides relief for sanctions against violations committed by developers.