Foreigners interested in buying land in Bali should undertake proper due diligence to ensure the transaction is both legal and free from issues. This includes utilizing the services of a reputable Public Notary.
A notary is a Government-appointed official who serves as an impartial witness for the signing of important documents. The position is similar to a Justice of the Peace found in other countries throughout the world.
Services provided by notaries in relation to property transactions include:
- Processing transfers of land titles
- Legalizing and certifying civil and commercial agreements, e.g. property lease
I’m ready to buy land in Bali. Where to start?
Firstly, you should ensure you undertake proper due diligence. If this is successfully completed, then a notary should be appointed to make the land transaction. A notary’s duty is to ensure the legality of the upcoming land transaction. When signing a land lease deed, the notary should:
- Check land certificates are originals (not copies)
- Check the identity and legal capacity of the person entering the transactions
When buying land in Bali, it is important to check the land certificates which are often out of date and land on official documentation can be in the names of deceased. In these instances, the notary must also check inheritance documents and ensure you will make the transaction with the rightful owners.
Land acquisition and what to expect
Foreigners hoping to purchase land in Bali often assume that because a notary is a public official, they must follow the law. Unfortunately, the legality of transactions and the professionalism of all notaries cannot be taken for granted.
The quality and integrity of notaries can vary greatly. Like in any profession, there are good notaries and bad ones. A bad notary may cost you dearly if they fail to follow proper processes during transactions.
What can go wrong in land transactions
Be ready for some damage control if the following occurs:
- The notary does not check the original documents and makes a transaction based on copies. In this case, transactions can be made based on falsified documents or outdated documents and are void.
- The notary does not check inheritance documents. In this case, you risk making the transaction with a person who is actually not a landowner (rightful owner), so you as a buyer don’t receive the rights to the land and the transaction is void.
- The notary makes mistakes. This may include providing wrong translations. In the case of subleases, often the original lease states that the consent of the landowner is in the Bahasa version, whereas the English translation may state notice. These slight differences have very different meanings in a legal context.
- The notary transfers money deposited to the notary’s deposit account without the client’s prior approval.
- Hacking the notary’s email account and sending out invoices with wrong account details – this results in loss of deposits for the buyer.
In theory, it is possible to claim damages from a notary in court but this can be a very cumbersome and expensive process, and there have not been many cases where buyers have been successful in receiving compensation related to bad transactions.
Assumptions to avoid when buying land in Bali
Note that a notary is not a legal advisor and it is not their obligation to do anything outside of their legal responsibility in a transaction. Things that do not fall within a notary’s usual role include:
#1 Checking land zoning and the payment history of land taxes for you
This is not part of a notary’s duties when making a lease deed. A buyer can request this service and a notary may charge an additional fee. If you plan to use the property for commercial purposes this is crucial as otherwise, you may end up leasing land in a zone where you may not build.
A good notary may point this out but if they do not, there is no breach of their official obligations. It is up to you as the buyer to ensure this is clarified.
#2 Educating buyers about common market practice for land transactions
When leasing land in Bali, lease tax must be paid. Lease tax is the income tax that the person who receives income (the landowner) pays, but differing agreements can be made in official documents. If you not advised about this, you will most probably end up paying the tax on behalf of the landowner. The same applies for land tax.
A notary usually receives their pay based on the transaction occurring. So for some notaries, there may be a temptation to overlook issues such as incompatible zoning so the transaction proceeds and they are paid.
A good notary will look at the purpose of the property and the zoning to ensure it is suitable for their client’s needs. Again, be mindful that if the notary does not give such advice, they have not breached their obligations.
Conduct due diligence when purchasing a property in Indonesia
While a good notary will ensure the legality of documentation relating to your property acquisition or buying land in Bali, a proper due diligence process should also take place prior to the transaction. This could include any further detail, investigation, inquiry, recommendations and specific legal advice.
Emerhub only works with notaries who consistently acquit their services in a professional manner. We can also assist you in undertaking a full due diligence process prior to your land purchase.
If going alone, selecting a notary who follows the law and requirements is crucial to successful land acquisition.
This may seem obvious but it is important to ask your notary if they have references or select one based on the recommendation of someone who has used their services who you trust.
A notary who has conducted business transactions with other foreign businesses and entrepreneurs with positive outcomes will come with a good reputation in the business community.