By Ryan Mandela and Savira Ramadhanty.

 

1. Background

As one of the available ways for business expansion and investment, land acquisition in Indonesia is often viewed by local and foreign investors in developing their business especially with the rampant increase of investment activity in Indonesia. There are certified and uncertified lands in Indonesia and currently, the Indonesian government is implementing a land certification program which has been conducted since 2018 and will continue until 2025.[1] Such program is called Fully Systemic Land Registration/Pendaftaran Tanah Sistematis Lengkap (“PTSL”), along the way of implementing PTSL, the existence of uncertified land would still take place.

In view of such, there are several stages to be done in acquiring either certified or uncertified land in Indonesia with purpose of avoiding or mitigating the potential legal issues over the land as much as possible in the future. Therefore, this article aims to give the readers a basic understanding of some of the important points to be considered in implementing land acquisition for certified or uncertified land in Indonesia as a business entity which go from conducting land due diligence, pre-acquisition and the actual acquisition.

 

1. Land Due Diligence

Firstly, one of the important stages to be carried out during land acquisition for certified or uncertified land by business entity in Indonesia is to conduct land due diligence to ensure that the land to be acquired is free and safe from any legal issues. Following are the aspects of land due diligence for business entity’s land acquisition:

ASPECTS OF LAND DUE DILIGENCE	DESCRIPTION
CERTIFIED LAND
Land Title Assessment	Before deciding to acquire a land in Indonesia as a business entity, it is prominent to conduct a prior checking over the land’s title and its validity period. There are several numbers of land title in Indonesia allowable to be possessed by a business entity with various validity period and purposes. ·         Right to Cultivate/Hak Guna Usaha (“HGU”): maximum period of 35 (thirty five) years, extendable for a maximum period of 25 (twenty five) years and renewable for a maximum period of 35 (thirty five) years.[2] The purpose of HGU is to cultivate the land for agriculture, fishery or farming business.[3] ·         Right to Build/Hak Guna Bangunan (“HGB”): maximum period of 30 (thirty) years, extendable for a maximum period of 20 (twenty) years and renewable for a maximum period of 30 (thirty) years.[4] The purpose of HGB is to build and own buildings over land that are not owned by it.[5] ·         Right to Use/Hak Pakai (“HP”): maximum period of 30 (thirty) years, extendable for a maximum period of 20 (twenty) years and renewable for a maximum period of 30 (thirty) years.[6] The purpose of HP is to collect resources from land directly controlled by the state or land owned by another party.[7]
Completeness of Underlying Documents from Previous Transaction	·         The land to be acquired must have underlying documents such as certificates and other prior land acquisition documents that need to be thoroughly checked beforehand, this is useful to anticipate the risks that may occur if there is any lack of underlying documents from the previous transaction which may have legal implications in the future.
Site Visit	·         Direct visit to the location of the land to be acquired is necessary to see the real condition of the land and to check whether the land’s real condition is in accordance with its underlying documents.
Clean and Clear Land Checking Through National Land Agency/Badan Pertanahan Nasional (“BPN”)	·         This stage requires assistance from the Land Deed Official to issue the Clean and Clear Certificate/Surat Keterangan Pendaftaran Tanah (“SKPT”) from BPN. ·         The clarity of the land’s status with regards to whether the land is in dispute or overlapping is shown through SKPT.
UNCERTIFIED LAND
Site Visit	·         Direct visit to the location of the land to be acquired is necessary to see the real condition of the land and to check whether there will be any possible risks that may arise from acquiring such uncertified land. ·         The requirement to visit the land directly is also important for the land measurement and to reassure whether the land is allowable to be granted with HGU, HGB or HP title.
Completeness of Underlying Documents for Land Certification	·         Acquisition for land which has no title/uncertified must prior go through land certification procedure. ·         The important aspect to be considered before conducting land certification is to have all the complete proof or any complete statement of land ownership in writing before being able to submit such underlying proof of ownership to BPN for land certification.[8]

Table 1: Aspects of Land Due Diligence

 

1. Pre-Acquisition

Once the land due diligence has been conducted, the next stage is pre-acquisition procedure before the final stage of land acquisition transaction takes place. Pre-acquisition procedure goes slightly different for certified and uncertified land.

C.1.                Certified Land

If the parties decide to structure the payment for land acquisition in installment scheme, the next important point is to underlie the transaction with conditional sale and purchase agreement. Apart from accommodating payment structure in installment scheme, conditional sale and purchase agreement is also useful to ensure that the rights and obligations between the parties in the transaction are comprehensively accommodated. The parties should clearly understand each of their rights and obligations that should be fulfilled based on any findings in the land due diligence and prior to the land handover.

C.2.                Uncertified Land

For uncertified land, before the final stage of land acquisition transaction takes place, there should be a land certification procedure beforehand. The complete underlying documents for land certification are all submitted to BPN and BPN will issue a land certificate with the requested title once all the requirements for land certification have been fulfilled. During land certification procedure, do make sure that the land to be certified is not overlapping to avoid further legal issue in the future.

Once the land certificate has been issued, the parties in the transaction can agree on which payment scheme they would like to go for. If they decide to go with installment scheme to acquire the land, then the same requirement to enter into conditional sale and purchase agreement as described in sub-chapter C1 applies.

 

1. Acquisition

As a final step, after land due diligence and pre-acquisition procedures for certified and uncertified land have been conducted, the parties should enter into sale and purchase agreement and change the land ownership name in the land certificate to finalize the land acquisition.

With the sale and purchase agreement being made, this marks that any payment over the land acquisition has been made in full and all of the rights and obligations between the parties in the transaction have also been fulfilled. Sale and purchase agreement also proves that the transfer of land from the previous owner to the new owner has been completed legally. Moreover, the necessary perfection steps for registering the sale and purchase transaction and changing the land ownership title to BPN are also required.

 

F      Conclusion

Based on what have been discussed in the chapters above, there are several stages that should be taken into account for land acquisition by business entity established under Indonesian law. The acquisition procedure also goes differently for certified and uncertified land which in this regard, is feasible to be assisted by our team for more details on land acquisition for certified and/or uncertified land. We hope that this gives the necessary basic understanding on the implementation of land acquisition to the readers.

 

 

[1] https://prospeku.com/artikel/ptsl-adalah—3221 and Article 1 paragraph (2) Minister of Agrarian and Spatial Planning Regulation/Head of the National Land Agency Regulation Number 6 of 2018 regarding Fully Systemic Land Registration

[2] Article 22 paragraph (1) Government Regulation Number 18 of 2021 regarding Right to Manage, Title Over Land, Flat Units, and Land Registration

[3] Article 28 paragraph (1) Law Number 5 of 1960 regarding Basic Agrarian Regulations

[4] Article 37 paragraph (1) Government Regulation Number 18 of 2021 regarding Right to Manage, Title Over Land, Flat Units, and Land Registration

[5] Article 35 paragraph (1) Law Number 5 of 1960 regarding Basic Agrarian Regulations

[6] Article 52 paragraph (1) Government Regulation Number 18 of 2021 regarding Right to Manage, Title Over Land, Flat Units, and Land Registration

[7] Article 41 paragraph (1) Law Number 5 of 1960 regarding Basic Agrarian Regulations

[8] Article 24 Government Regulation Number 24 of 1997 regarding Land Registration