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For those of you wanting to own a villa in Bali, take heed. The island is far from paradise when it comes to buying a property. In fact, I know of many foreign investors who have been conned millions of dollars in a land fraud deal there.
Last year, I covered a story there involving the owner of a well-known services company, Kantor Kita, who duped investors into transferring money into non-existent escrow bank accounts, on the pretext of buying land, only to have their money embezzled. The owner, Esti Yuliani, is now serving a two-year jail sentence after one of her victims took her to court. The case is still ongoing.
For those of you wanting to invest in Bali, you need to go in with your eyes wide open and understand the laws in Indonesia. Contrary to Western legal practice, an independent lawyer is not the norm for Bali land transactions. Under Agrarian Law, the role is delegated to a notary to represent both parties. The notary is responsible to draft the notarial agreements needed for a property transaction in Indonesia. Specific legal notarial formats are required in order to register the transfer at the land office. Most local Indonesians only use a notary for land transactions. Notaries are under oath to deal with matters fairly, to be independent and not biased in representing both parties. When you use a notary, they must be registered as a land conveyance lawyer (PPAT).
However, many foreign investors end up appointing their own lawyer for land transactions which introduces many risks. Firstly, the local lawyer may not be an expert in land transactions creating confusion and adding complexity. Secondly, the lawyers will need to work with a notary in any event to complete the deal which would incur unnecessary legal costs. Thirdly, entrusting the money to local lawyers is how Esti Yuliani was able to embezzle from her victims as Kantor Kita was promoted as a legal services firm.
Nevertheless, if you still wish to use a legal firm, the following is advised:
1. Check their reputation with clients who have used their services before. You may want to hire a lawyer referred to you by someone who had a good experience with such lawyer. A good lawyer will not act against your interest.
2. Ensure that the legal firm has legal licensing to operate as a law firm and that it employs legally registered lawyers. Such lawyers will have their names followed by the SH title.
3. The legal firm should you hire should have extensive experience in dealing with land transactions.
4. Money should be deposited directly with PPAT notaries under notarial receipt and not directly with lawyers. The concept of an escrow account is non-existent in Indonesia and any lawyer who promotes its use should be guarded against.
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Reader Comments (4 comments)
Buyers should be aware that this situation can also happen to anyone who buys foreign properties, be it in Bali, Jakarta or other countries. Best is to consult a realtor who can advise independently, not just the marketing team that represents the developer.
Tdy's BT and ST reports on foreign ownership in Indonesia further strengthen ASEAN biggest economy positioning. Well very much remains to be seen on Indonesia political front and in near future, some rich Indonesian may be more interested to invest some of their funds in Indonesia property for mid term exit strategy.
Well unfortunate happenings do happen in every country whether its a first or third world country .. what buyers need to do is some research and digging to more information .. even in a supposed to be very safe country like Singapore some lawyers had run away with huge sums of clients money (unpredictable huh !! )
I have been providing property advisory to Indonesian developers as well as investors since 2001. Land Sales are usually reserved for locals, should you invest in Villas & not land sales, you are able to do some bona fide check on the developer/s. This is important. However with the opening of new laws that allows foreigners to purchase apartments this year ( it has never happeend before)....things should look interesting.