Implications of buying PROPERTY from foreign owned PMA company ?

[Balilongtime]

Hi Guys,

I know of 2 separate Foreign PMA companies who are offering a house / villa for sale that is located within Land owned by their set up PMA Company.


Both these PMA companies have set up tourist accommodation on their large parcels of land which this is their primary business,
..., and I am guessing perhaps their cash flow is either a bit weak, and decided to sell off a portion of property to re-coup some money,
..., or perhaps they see their villa/land offer as a good profiteering exercise ? ..., either way ...,


Before giving further serious consideration to a purchase and seeing the professional help of a Notaris ..,

I just want to see if anyone has and knowledge , or experience regarding the legalities and pitfalls (ie; pros and cons) of buying property under these conditions ?


My main concerns are (I am a KITAP holder BTW) : what if the PMA company dissolves, or fails to pay taxes , or simply the director dies, or disappears .., or perhaps they go and upset the locals in some way (God forbid) ?
- What happens to my house/property (that I purchased from their PMA Company) .., if any of the above was to happen ?


I am not sure what my legal ownership arrangements will legally be under this "Buy from a PMA Company deal" actually entails ..., and,
I do not know under what legal arrangement exactly the PMA companies in question has to actually allow them to sell land/property under their entitlement ?

and .., what about the sharing of amenities arrangements if the PMA changed hands ?


Note : I am aware of the usual way of purchasing land
ie ; Indonesian citizens can buy / own via hak milik .., or
- foreigners can lease (hak pakai) etc , or use a nominee (which has dangers and is actually illegal)

.., but I don't know anything about the ramifications and legalities of buying from a PMA company ?

 

[jstar]

I know of 2 separate Foreign PMA companies who are offering a house / villa for sale that is located within Land owned by their set up PMA Company.

This is a contradictio in adjecto, Balilongtime.

 

[jstar]

Well, let's assume for the sake of argument, that this PT PMA has the right to use the land, to build on there and that they own the houses.

In fact there is a same risk with any apartment block and the purchase of a unit.

If a developer goes bankrupt, lands in jail, i.e. can no longer perform his duties on maintaining the global parts of the property and the tasks like daily management (waste disposal, reception, ...), the apartment owners have the same problem.

So your guess is as good as mine if that company is capable and serious. I would check ther track record; have they done this before? Are they just some people with nice ideas but no experience? Etc.

On the latter; I have seen some projects for housing for (mainly retired Dutch/Indo) expats on Java, completely fail. Because of mismanagement and all the concerns you have expressed, the houses are empty and falling into decay. So look before you leap.

I will post some pictures etc. later on one of these projects but now I'm too tired.

 

[Balilongtime]

Well, let's assume for the sake of argument, that this PT PMA has the right to use the land, to build on there and that they own the houses.

In fact there is a same risk with any apartment block and the purchase of a unit.

If a developer goes bankrupt, lands in jail, i.e. can no longer perform his duties on maintaining the global parts of the property and the tasks like daily management (waste disposal, reception, ...), the apartment owners have the same problem.

So your guess is as good as mine if that company is capable and serious. I would check ther track record; have they done this before? Are they just some people with nice ideas but no experience? Etc.

On the latter; I have seen some projects for housing for (mainly retired Dutch/Indo) expats on Java, completely fail. Because of mismanagement and all the concerns you have expressed, the houses are empty and falling into decay. So look before you leap.

I will post some pictures etc. later on one of these projects but now I'm too tired.

Hi Jstar,
Thank you for your reply.

Yes , there is not much of a track record from either of these PT.PMA companies .., both are a couple of years old .., and have both set up tourist accommodation in quite remote locations in Nusa tengara
.., and visiting tourist numbers are not that great to be honest and rather seasonal at that.

One of the offerings (from one of the companies) is priced just beyond what I am expected to pay - and the other is nicely priced with my budget for it's beautiful location and views .., so I will concentrate on that one,



Their PT.PMA company consists of just 3 young foreigners (whom I presume one of them is a director)
- and this enables them to employ a foreigner (who is currently on location) and those other 3 (apparent share owners) are now back doing their regular day jobs in their respective home countries . There are also a few locals employed on site for cleaning rooms , and maintenance etc ...,

- Their business is just a homestay type setup near the beach .., with about 6-8 budget / backpacker style rooms which share a common 'hang out' area , and they do not run a restaurant on site, but guests may use the share kitchen facilities if needed - there are warungs etc not too far away.

- They also offer a few scooters for guests to rent.

- Within the same property they also have an upmarket (for the area) 3 bedroom complete villa which they also rent out (per day) at a premium price.




The Land and their Deal :

Further away (still on their land) is about 1.5 hectares of land , to which they envisions selling up to 8 plots (each being about 1600Sq meters) which they hope to have 'like minded people' buy from them.
There is One house already completed by them , and this is the house I am 'sort of' considering to buy as a permanent residence.

They intend to have these plots share in the cost of 24 hour onsite security , and also plan a common area shared between them for a BBQ area etc .

They also have caveats in place for their property ..., which include ...,

- They get to have the final say in who can or cannot buy into their plan to avoid conflict of interests
- They get the final say into 'who can or cannot buy your property if you decide to sell , and they get the first option to buy you out if you do decide to sell.

.., and have also placed caveats on what you can and cannot do with the property...,

EG; no major renovations allowed,
- no minor renovations without prior approval,
- No outside contractors allowed onsite without their prior approval.

They suggest (if you want) to air B&B your place out if you are not there (for a %) but that is only if their accommodation facilities are already full (which over a year is not very often)

.., and water and power is apparently metered and billed to you , but ultimately the power and water lines feed their property.



They only have one place built so far that is being offered for sale.
.., It is crude by design (typical indo construction) and very - very basic 2 bedroom - 1 bathroom size . There is also no landscaping of any sort as present , just dirt .
.., I highly doubt there will be any further development expected to take place on the property until they sell that first plot due to their (suspected) cash flow issues.



As for their (the P.T PMA) experience in business ????????
..., I think they are just young people who used all their savings to follow up a dream of an endless summer - and cash flow must be and issue , as they are all back in their home countries working their regular day jobs - and all perhaps hoping to get a chance to get back to ' living their dream' their again.



.......(if purchased by me) ........, As I intend to live there full time .., (I have a building contractors background)

- maintaining (my house - if purchased) will be my responsibility - not theirs , and shouldn't be a problem for me to handle over the years..., and,
- sharing the cost of 24hr onsite security will be part of their purchase agreement - (they estimate security budget of 2 juta a month to be shared between the 6-8 plots)




I just need to find out what the legal ramifications are to MY PURCHASE ....., (ie; if I decided to buy one of their plots of land - with villa)

ie; - if their PT.PMA current business - either ...,

- sold their business or the whole property ,
- died
- broke the rules of either immigration, manpower and their P.T PMA agreements
- went bankrupt,
- failed to taxes .., and all the other 'belly up' issues their PT. PMA company may face in the forwarding years to come.



... as ATM .., I would be having intentions to spend the rest of my days living in it ?
... As always , If I later feel serious about the purchase (after gaining as much info from here etc) .., I will surely be paying for professional legal advice before leaping in.

Thx guys

 

[jstar]

 

[jstar]

The point I was trying to make in post #2 is that the PT PMA can not own the land. So who would be selling it? Is there an official kavling plan?

Also, they seem to have all the cards in their hands; if they decide that the monthly contribution for water, electricity, security etc. will increase to 6 juta, who can stop them?

 

[Balilongtime]

The point I was trying to make in post #2 is that the PT PMA can not own the land. So who would be selling it? Is there an official kavling plan?

Also, they seem to have all the cards in their hands; if they decide that the monthly contribution for water, electricity, security etc. will increase to 6 juta, who can stop them?

correct .., although I do believe a PT.PMA can

- purchase land for the 'right of use' but as you / we know ..,
- this is only when the the P.T PMA is abiding by all the rules .., and what happens if that PMA has issues , or worst dissolves completely ? - then who owns the land (as you mentioned)

They do claim the water (PDAM) and electricity (PLN) is metered .., so I'd only pay the metered current PLN & PDAM rates.
Of course I would not invest a cent if there are future threats to my ownership .., and all the work is in due diligence and planning (this is my starting point at least)

Wow Jstar .., those photos you posted show a real ghost town setup eh ..,

I see places like those everywhere (here in Bali - even in the estate I am living in now) where they are purchased by local investors and they are flat out just repaying loans etc that they can't maintain anything at all . They also want to sell , but here in Bali the land prices have been shooting up and up , so they hang out hoping to re-coup on the inflated land price increase

..., but now those land prices have already peaked , and are now dripping slowly back to reality , and no one wants to buy a Beirut bomb site either

 

[dafluff]

There are (at least) 2 mechanisms that I know of in these situations:

1) The land is owned (that is HGB title not freehold) by the PT PMA. They then develop it, then split the deed to each parcel, then sell the parcels to customers. In this case, the customer can then convert the title to a higher level (such as Hak Milik/freehold), if they are entitled to it. This is how most large developers of housing operate. In the end, the customer will hold their own title, free and clear. In this situation, the customer is very secure, just as if they were to buy any other piece of land. The problem is as a foreigner you are not entitled to freehold or HGB, so you will instead downgrade it to Hak Pakai, which is essentially a long, extendable lease. You will get your own deed from the government for this, and your position is also quite secure.

2) The land is owned (that is HGB title not freehold) by the PT PMA. They then develop it, then they sell you the right to use it. But they maintain the deed. Some Bali timeshares do this, for example. In this case your position is a bit precarious, depending on the situation of the PT PMA.

In your situation I would inquire about whether the situation will be 1 or 2. I would only be comfortable buying in situation 1.

 

[CaturMuka]

Hi Balilongtime, I don't really have any advice for you but I'm shocked that you're even considering buying into such a place. Almost every point you make in post #4 would be a red flag/deal breaker for me. What's so great about it that you're willing to risk it. Is it the location?

After going through the process of building our own house in Bali, I'd never even consider buying a house someone else had built.

 

[jstar]

^
That's a valid point too of course.

As far as I know, HGB can only be split in maximum 5 plots btw (okay, you can split after split after split...). And it is -even for a long term as 80 years- still a glorified lease of course, only Indonesian citizens can have and convert to Hak Milik. I'm not sure if that will be cheap or even easily possible in the future, which could have a big impact on resale value.

And since the Hak Pakai is between 'buyer' and government, does the 'seller' even have anything to say/decide after the transaction? (I.e. can they even put all these demands on paper, would they be valid?) And what if the government decides to tax you even above the current 10% of the value of the property at its first extension?

 

[Balilongtime]

In your situation I would inquire about whether the situation will be 1 or 2. I would only be comfortable buying in situation 1.

thx dafluff , will certainly be raising the questions.

also .., is HGB> Hak bangunan (ie; the right to build /develop) ?

 

[jstar]

Yes it is.

Hak Milik=full ownership
Hak Guna Bangunan=right to build
Hak Pakai=right to use

 

[Balilongtime]

but I'm shocked that you're even considering buying into such a place. What's so great about it that you're willing to risk it. Is it the location?

After going through the process of building our own house in Bali, I'd never even consider buying a house someone else had built.

Hi CaturMuka .., more romancing the idea than considering at this stage

The location is absolutely breathtaking ., 30 meters above sea level with 330 degree views and high enough to catch all of the breezes , with views of mountains inland.
It's on 16 are's of land (with a house) for the asking price of one single are in Bali without a house or view .., and it is a gentle 50 metre walk (down a hill) to the ocean.

It certainly would not suit everyone, as it's also 1.5 - 2 day journey by land to get there from Bali (sorry not disclosing location) and you'd have to like sticking to a typical local indo type diet as imported type western stuff is not available locally for purchase.
Traffic is non existent though and surprisingly the roads are good , and with as many dokars in the nearby town centre (horse and cart) as there are vehicles and bikes - it's very peaceful, but still has enough amenities nearby to still be comfortable without needing to runs into a big town. But I personally can run "off the smell of an oil rag" and am quite resilient and resourceful , so should be just fine, and I also seem to get on fine with the locals wherever I go

Like I said - just romancing the idea for now , but Bali has changed a lot in the 12 years I have lived here full time, and I am now yearning for some solitude away from the noise and traffic , as it is driving me nuts to point I just want to hibernate at home, as for getting out and about is now too intense for enjoyment where I once used to go all over the island in a day for leisurely bike rides or surf expeditions - these days I just stick close to home because of the mad crazy traffic. I could live in bali's mountainous north but thats too far away from the surf for me (which I love)

I would not miss any of bali's bars and fancy restaurants etc , as I am over that scene these days and just want a simple quiet rural type life - so that is why I am even considering a move to another island away from any glitz and tourist scenes.



I am also (as an alternative) looking at rental options in those other areas ..,


I am also hearing you CaturMuka regarding trusting a house someone else built - one good thing is an Aussie plumber done the plumbing .., the rest is your standard indo fare (ie; no real concrete slab for a floor , with endered soft red brick between a concrete beam skeleton. I already see the paint is wearing thin and the place is fairly new .., but for the asking price , and flaws in the place would be expected and acceptable without causing me too much of a worry , or I could get one of their other plots and build myself .

But before any decision i will surely not be leaping into anything prematurely .., as I am a stickler for crossing the t's and dotting the I's, while making sure to get all the facts up front, and I also never do anything in halves .

Picking the brains of helpful and clued up fellow forum members is just my starting point .., cheers

 

[CaturMuka]

The location is absolutely breathtaking ., 30 meters above sea level with 330 degree views and high enough to catch all of the breezes , with views of mountains inland.
It's on 16 are's of land (with a house) for the asking price of one single are in Bali without a house or view .., and it is a gentle 50 metre walk (down a hill) to the ocean.

Fair enough, sounds lovely. Good luck with it.

Bali has changed a lot in the 12 years I have lived here full time, and I am now yearning for some solitude away from the noise and traffic , as it is driving me nuts to point I just want to hibernate at home . . .

I hear ya. The last time we went, it took us 1.5 hours to drive from North Denpasar to Pantai Nusa Dua . . . and that's using the the toll road. 3 hours travelling time takes the fun out of a spontaneous beach trip.

I can't complain too much about the modernisation of Bali though. Except for traffic, every other aspect has improved by leaps and bounds.

 

[centurion]

Take the house under Hak Pakai over government land and the companies(sellers) will not be attached anymore to the property.
It is important to cut the ties with the seller so they don`t appear anymore.

 

[Balilongtime]

Take the house under Hak Pakai over government land and the companies(sellers) will not be attached anymore to the property.
It is important to cut the ties with the seller so they don`t appear anymore.

Hi Centurion, yes sounds the go.

I will also have to look into access to land issues.

.., as that is another danger to consider also , as I am not sure yet (until further investigation) if the only access to the property is via the sellers property or not.
- If I don't get a rock solid access point to the land then any 'presumed granted access - contracted or otherwise' that passes across anyone else's private land (ie; the seller or others) can be lost in the future if that PT.PMA Company's property gets eventually sold or encountered some other negative implications.

Another possible pitfall is amenities ...,

.., The property apparently has Town water and Electricity (Pdam & PLN) .. but AFAIK the power line itself (even though metered on the house) branches off from power lines installed to the P.T PMA companies main property.

The Water line from PLN that feeds the house - also branches off from the same P.T PMA company's waterline that feeds their main business property.

My concern would in that case be if those water and power sources were disrupted or closed off for any reasons in the future leaving the property I am considering without water and power ?

 

[Nasigan]

the solution could be solar power, (photovoltaic panels) and for the water, drilling a deep well, since I understand that it is close to the sea that might give problems with the salty taste of the water.

 

[scouser59]

but Bali has changed a lot in the 12 years I have lived here full time, and I am now yearning for some solitude away from the noise and traffic , as it is driving me nuts to point I just want to hibernate at home, as for getting out and about is now too intense for enjoyment where I once used to go all over the island in a day for leisurely bike rides or surf expeditions - these days I just stick close to home because of the mad crazy traffic. I could live in bali's mountainous north but thats too far away from the surf for me (which I love)

I agree with you about bali , I have been scouting out a couple of areas for the same reasons .

 

[El_Goretto]

You should also check the zoning and check the building permits. If they can't provide you with any of it, just let it go. Too much of a risk.

 

[dafluff]

It certainly would not suit everyone, as it's also 1.5 - 2 day journey by land to get there from Bali (sorry not disclosing location) and you'd have to like sticking to a typical local indo type diet as imported type western stuff is not available locally for purchase.

Just a word of caution: Bali has had its share of fraudulent land transactions, but it's nothing compared to the stuff that goes on in Lombok, Sumba, Sumbawa and Flores. Areas east of Bali only recently gained the attention of investors, and it is in a lot of ways a "wild west" area. I know of several people who have lost a lot of money trying to "invest" out there: duplicate deeds, fraudulent paper work, driven out by angry knife wielding locals, etc. Some of those people were Indonesian developers with a lot of experience.

Another guy I know couldn't sell his land for a long time because the only notary in the area was investigated for duplicate transactions and all his files confiscated.

It is definitely not an area I would be comfortable making significant investments in.