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Purchasing Land in Bali? Know What You Are Buying

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Buying land in Bali is a dream for many. However, acquiring property is not as easy as you’d like to think – there are plenty of pitfalls that can turn your property deal in Bali into a living disaster.

How do you know the person selling the land is the rightful owner? Are there competing, hidden claims on the land?
How about the variety of hidden fees that may emerge further down the process?

Read this list of key steps to take before you get into buying land in Bali.

#1 Check out the true owner
The first, and one of the most important things, to determine is whether you are dealing with the correct and rightful landowner. Many land certificates in Bali are outdated and may not have the current, rightful owners listed. It is very common to find out that the land certificate is in the name of a person that has already passed away.

It’s surprisingly common for this to be opaque or misleading. There are two ways to verify land ownership in Bali;

First, you can ask the landowners to update the land certificate. In practice, however, it doesn’t happen often because the process is costly as well as time-consuming.

The second way is to check the inheritance documentation. This way, you can make sure that you enter into an agreement with the correct people and avoid problems that can jeopardise your property deal as you move through the process, such as excluding one of the actual landowners from the transaction.

#2 Know your zone
Zoning laws in Bali prevent commercial activities in many regions of the island. Having the wrong zoning can hold several negative consequences.

For example, it is possible to buy land in a residential or tourism zone in the name of a company and acquire a “Right to Build” (Hak Guna Bangunan – HGB) certificate. However, as foreigners cannot obtain business licenses in residential areas, you will not be able to run any commercial activities.

Green zoning, which preserves land for agriculture, does not even allow the buying of land in the name of a company and does not permit construction activities either.

To avoid having to discover that the land you purchased is useless, it’s important to make sure your planned business activities comply with local zoning laws for the property you are considering.

#3 Past tax payments
An essential part of any land purchase in Bali is to check whether the previous owners have paid their land taxes. If the land has outstanding charges, you cannot apply for a building permit (IMB) or any other documents until you have settled the debts.

If the previous owner hasn’t paid land taxes for years, it should also lower the purchase price and can be a point of negotiation when discussing the transaction.

Checking the state of tax payments will also give you an idea of how much you will pay in land taxes in the future.

#4 Absence of disputes
Indonesia does not have a central notary system. Thus, the standard due diligence undertaken by a notary may not give you a complete picture of the legal and financial situation at a property.

For example, there is a chance that several notaries could be simultaneously handling the lease transaction for the same land, and they might not even be aware of it. Or, there may be a dispute about the rightful owner of the land involving an inheritance process.

For this reason, it is essential to confirm the absence of disputes with the courts.

#5 Land borders
Determining the actual size of the prospective plot of land and if there are any overlapping property boundaries is important. You need to confirm the integrity of your land transaction. Even one overlapping metre can lead to claims and disputes between the landowner and their neighbours.

In Bali, expats purchasing land often neglect to check the legality and certainty of an access road in particular, especially if the property is shared, or gifted.

Over time, the owner may start to demand compensation for the access road. As a villa owner, assuming that the access road was part of the original deal can quickly lead to frustration and conflict with the neighbouring landowner.

Bonus tip: don’t buy land in Bali under a local person’s name
Foreigners cannot own land in Bali, but it is common practice to buy land using an individual Indonesian nominee.

In these situations, the land is registered under a local person’s name and layered with multiple agreements that are often vague and act as a “protection” for the true owner or investor.

However, this ownership structure is based on blind trust and human relationships, which can deteriorate or evolve over time. Should the “registered” owner decide to go against what was originally agreed, the true owner has no legal protection.

One of the safest ways to obtain property or to lease land in Bali is by setting up a foreign company (PT PMA) and acquiring a Right to Build (HGB) certificate. The process can take longer and is initially more costly, but it is a wiser choice in the long run.

Want more tips on how to buy land in Bali safely? Contact us [email protected] 

Photo: Wayan Parmana on Unsplash

See: You’ve Decided to Become an Expat in Bali – Where to Start?

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