To purchase a freehold property in Bali and Lombok, you need to pass by a public notary. However it is difficult to find a fluent notary in Indonesia. Furthermore, most notaries are not acting as lawyers but are supposed to be an independent party in the deal and act as a witness of the transaction.
Property transactions with a notary in Indonesia
Leasehold transaction
Most of the transactions are done in Bali through a leasehold contract. For a leasehold a public notary is not mandatory. Indeed it is a private contract between 2 parties with terms, conditions and clauses negotiated by the parties. However some leaseholds over 25 years should be registered at the land office of the Kapubaten (BPN). Unfortunately most of the transactions are not registered by the notary. It is important to request from the notary a proof of registration.
Freehold transactions
Public notaries are the one in charge to prepare the sales and purchase agreement between 2 parties looking to purchase and sell the property. The notary is responsible for checking the validity of the document of the PT PMA of the buyer or seller and ensuring the land title can be transferred from the seller to the buyer. Once the sales and purchase agreement is signed (PPJB), the notary will follow up with the BPN to transfer the land title to the buyer.
Notary cost for property transactions in Bali and Lombok
The cost of notary varies depending on the amount of the transaction and the location. The common amount is 1%. However ILA can offer you 0.5% to 0.75% depending on the amount of the transaction. The higher the price of the transaction will be, the lower the percentage of the notary fee will be.
On some islands like Lombok, some notaries offer a fixed fee. This fix fee is usually in small amounts to ensure the notary has its work covered.
How to find an Independent Notary
The common concern for a buyer is to find an independent notary having no connection with the seller. Indeed most developers make a deal with a notary to sell their properties. The price is usually higher and the notary doesn’t challenge the seller on its contract or during the due diligence to avoid losing the deals in the future with the developer for each future transaction.
For example the notary will issue the result of the due diligence but will not explain the result that the location cannot be used for short term rental, or that the developer did not obtain yet the building permit. From our experience we saw so many transactions signed by notaries while the developer did not even obtain the PBG (Building permit). This is misleading. Indeed the notary did not lie but the notary did not conduct its duty to inform the other party.
Perform a due diligence with an independent lawyer and notary
Based on the reason above, we strongly recommend you to use your own legal advisor, lawyer or notary. At ILA we offer this service to ensure to protect your interest and perform independent legal support, due diligence, review your contract and suggest adaptation. It is not mandatory to use the notary of the seller. IF the seller pushes to use its notary it is usually a red flag as the common practice is to use the notary of the buyer.
Can you use two notary
Indonesia has no common practice to use 2 notaries like it can be done in France for example. However it is possible to appoint your own notary as witness of the transaction. However the freehold transaction will be signed only by one notary.
What is the process to buy a property with notary and lawyer
The process to purchase property varies a little depending on the type of transactions (Leasehold versus freehold).
Leasehold property
The process to purchase a leasehold property is usually done in 3 steps.
- ITP (Intention to purchase), MOU (memorandum of understanding), reservation agreement. Whatever it is called, the first step is to negotiate the terms and conditions of a pre-agreement. The purpose of this step is to agree first on how the deal will be done, price, period, renewal, permit, construction and open a due diligence period performed by a notary or an independent lawyer. We also recommend to pay a deposit on the escrow account of the notary and never on the account of the seller to ensure the deposit can be recovered if the due diligence fails in the next step
- Due diligence period. This period is to ensure that the land title, the location, the tax, the building permit, road access, the licence of the developer, construction match the regulation and there are no issues.
- Lease agreement. This is usually the last step. The lease agreement contains the same terms and conditions as the ITP except if some issues appear during the due diligence period. This agreement is normally conducted in front of a notary.
Freehold property
The process to purchase a freehold property is usually done in several steps.
- ITP (Intention to purchase), MOU (memorandum of understanding), reservation agreement. Whatever it is called, the first step is to negotiate the terms and conditions of a pre-agreement. The purpose of this step is to agree first on how the deal will be done, price, period, renewal, permit, construction and open a due diligence period performed by a notary or an independent lawyer. We also recommend to pay a deposit on the escrow account of the notary and never on the account of the seller to ensure the deposit can be recovered if the due diligence fails in the next step
- Creation of the PT PMA. Once the buyer and the seller agree on the terms and conditions it is usually the moment to create the PT PMA.
- Due diligence period. This period is to ensure that the land title, the location, the tax, the building permit, road access, the licence of the developer, construction match the regulation and there are no issues.
- AJB (Akta Jual Beli). This is usually the last step. The sales and purchase agreement is signed in front of a notary. This is the final agreement between the parties. This agreement is standard and take back the terms and conditions negotiated during the first step
- Payment of the taxes and transfer of the land title. This step is conducted by the notary to ensure the transfer of the land title. Both parties are responsible for paying the taxes before the land title can be transferred to the buyer
If you want to know more about how to find the best notary in Lombok and Bali and use an independent legal advisor or lawyer, don’t hesitate to reach out for our property consultancy services.
