Cases of Nominees (sample #1)

Here are some samples of nominee cases those happened in Indonesia those harm investor / expatriate those buy land / property with nominee system or nominee solutions.

• Mister B, a USA citizen bought a land as much US$ 2.000.000,- in the name of his beloved Javanese girl friend in 1999 for the land in Pecatu, Bali. In 2000 they got married and make an agreement that the land will be inherited to their children in Notary Office. They have 2 children and their children have Indonesian Citizen. In 2004 they are divorced and Mister B could not claim the land because the land is hold by his wife Mrs C with freehold. In 2005 Mrs C sold the land and enjoy all the money without watching the agreement that they made in Notary. In 2006 until today Mr B claim the land in the court and bloc the certificate in the Land Department based on the agreement that they made in Notary that the land belong to their children but he lost. 

Mistakes those Mr B made for the case above:

1. Mr. B mixed his business with his feeling of love to Mrs C and blind with love by put 100% of his money in the name of his love without thinking of the future or possibilities those could be happened in the future. 
2. Mr. B did not make a pre-nuptial agreement that contents all the property is not mixed although they got married, by this way indeed Mr. B can prevent the problem by make a new agreement about the property although they got married. 
3. Mr. B does not make any agreement that could hold the land in order to Mrs C could not sell the land to the other party in this case he does not make a mortgage agreement that value as much as the price of the land. This agreement is not made cause Mr. B made mistake by not making number 2 above that could be basic of making mortgage agreement.
4. Mr. B did not know that his wife is so smart in property business with expatriate, his wife knows that if he got married without making a pre-nuptial agreement, means that the property is also belong to his husband (expatriate) with freehold, and according to the law (Article 21: 3 UUPA or Agrarian Law) if in one year this property is not transferred to the other party, the land will be owned by the state as Tanah Negara or Land of the State.
5. Mrs C known very well about her right as her name is written in the certificate,  and has power to sell with the reason for the children interests and will have no problems in the future for all her actions as it is her reason is ruled by the law.

Solutions that could be founded by Mr. B:

1. Blocking the land in the Land Department (BPN) while disputing in front of the Court. 
2. Finding the other clue in the court where the land located if Mrs. C has sold the land with the reason of children interest has already agreed or not by the court, by proving the agreement that made in front of the notary to the court. 
3. Showing the other proofs that the money that used to buy the land is belong to Mr. B. 

Although the solutions above is not strong enough to get the money back, but by this way Mr. B have a chance to claim Mrs C by CIVIL Code or KUH Perdata by abusing the agreement that they made in Notary without informing her action to her ex-husband.

Package of agreements for Nominee's System

As written some weeks ago, there is no rule either law arranged about nominee's system for ownership of the land in Bali. Better says, nominee system is a system of abusing the law to make everything is possible although that system has many risk and weakness between the parties. To prevent either decreasing the risks of this agreement the parties who make agreement must keep their trust during the agreement is executed. 

In Nominee system, normally used some agreements where all of them have a same purpose either intention to make the property is "owned" by the expatriate as a freehold although in fact that property never to be owned by the expatriate because in the land certificate is written the name of the nominee. 

The package of the agreements those used to be "certificate" of the land are: 

• The Loan Agreement or the Debt Agreement, the other version could be The Acknowledgement of The Indebtedness that secured with guarantee. 
• The Power of Attorney to Sell (with substitution), in Indonesian Agrarian Law it is not allowed. 
• Power of Attorney to Use and To Build
• The Statement and Power of Attorney
• The Land Lease Agreement. 

Indeed all of those agreements above are useless caused those agreements are nothing for security of the ownership of the land in Indonesia by the Expatriate because all of them abuse the law (UUPA) and breaking the law (KUHPerdata or Civil Code of Indonesian). 

This package of agreement is used just to make the expatriate feel "happy" because they feel they are secured although they are never secured. This joke is used many people to make all transaction run rapidly as all people want to have what they want instantly like noodle. 

So, what is the solution for this game? 

1. If the expatriate want to invest in Indonesia, please follow the rule or the Indonesian Law, indeed the process is simple if all papers are already completed. 
2. All the process need time, better a little bit long in advance than sorry for eternally. 
3. Don't mix your business with your love, in Bali there are group of girls who always searching the expatriate to be their victim for money, they don't care with the process as their final purpose is the property and the money of the expatriate. 
4. Make a foreign company to get property securely in HGB Right, by this way no nominees needed to be the land or property holder caused all will be belong to the company. 

Nominee for the land or property in Bali

Nominee is not known in Indonesian Law. It is more similar as a "forced product" of people who want to settle a problem but it is not arranged yet in Indonesian Law. In Indonesia it is common to be used by people who want invest on property, especially on land but this people does not comply any terms according to the law thus they use this product to settle their problem. 

Nominee came from the word "name", on the property business it is so popular when an expatriate want to have a land with a freehold but the law does not accommodate their needs caused the law does not allow expatriate who does not have Indonesian Citizen to have land with freehold, thus they use / "borrow" Indonesian Name of Indonesian people to be entitled on the certificate of the land/s those they bought, with intention: they can use those lands as they want without wondering any limit time of expired. 

Benefits of using nominee: 

• The borrower (expatriate) could use the land as freehold with "full power" contained in the freehold. 
• Has no limit time of ownership by the nominee. 
• The process of moving or transfer of such land/property is more simple, just by a sign of nominee. 
• Could be burdened with mortgage with simple way. 

Frailty of using nominee:

• All power is held by nominee and nominee's family in case the nominee is dead. 
• The nominee could sell such land/property without any accordance from the "borrower" / expatriate. 
• If the expatriate want to sell / transfer / put mortgage on the land and the nominee is not appeared or doesn't want to come or doesn't want to sign and pressing the expatriate with some price to do such action, the expatriate has no choice neither solutions but paying all nominee's want. 
• Although the certificate already burdened with a mortgage,  if the nominee is cleaver and see the value of the property in his/her name is more than the mortgage inserted on the certificate, the nominee can loan money more with such certificate and put another mortgage and does not want to pay anything until the bank come and take over such property and let the expatriate sleep on the street. 
• Or the nominee loan money as much as mortgage in the certificate and settle / erase such mortgage and go to the other investor and sell such property with copy of the certificate that they can propose to the Land Department.

Thus.... what is the solution to invest in Bali / Indonesia without wondering nominee's problem?

• Use Hak Pakai or other rights those prepared by Indonesian Government according to Agrarian Law (UU Nomor 5 Tahun 1960) those accommodate all investor's need. Although the right has limit period but the secure is trusted and the cost spent is so economic and could be renewed for every 50 years (30+20 or other calculation depend on the option of the rights used). This right could be held by expatriate personally. 
• Use Hak Guna Bangunan (HGB), this right could be held by a company both Indonesian Company or Foreigner Company (PMA), by this way there is no abuse in Indonesian Law to hold the land or property.

Freehold of Land in Bali

Freehold of land or Hak Milik Atas Tanah in Indonesia is ruled by UUPA (Agrarian Law) where in the article 21 (1) of UUPA (UU Nomor 5 Tahun 1960) only Indonesian Citizen could have it or to be have by a legal person who indicated by the Indonesian Government. 

For expatriate / foreigner, it is not allowed to have land or property with freehold (hak milik) caused in the article 21 (3) of UUPA arranged that:

Foreigners who after the enactment of this Act to obtain property inheritance without a will or a mixture of property by marriage, as well as citizens of Indonesia have owned and after the enactment of this Act loss of nationality must relinquish that right in period of one year from obtaining such rights or loss of citizenship.  

If after that time period past the property was removed, then the right is void due to law and the land falls on the State, provided that the rights of others burdens persist.

It is completed by paragraph (4) of this article that arranged:

Over the next person to have Indonesian citizenship of foreign nationality so he can not have property rights and land with him apply the provisions of paragraph (3) of this Article.

So, it is so clearly arranged in Indonesian Law that expatriate could not have land in Indonesia with Freehold if they act as private person, but if they act with Foreign Investing Company or PMA, they can have it with rule of company (PMA) that arranged by the Government. 

The Expatriate is only allowed to use Hak Pakai (Using Right) if they are private person, or Hak Guna Usaha (Business Purpose Right) and Hak Guna Bangunan (Building Purpose Right) where the explanation will be described in the other page. 

The Clue for the ownership of lands in Indonesia with Freehold or Hak Milik is: Indonesian Citizen.