Question about owning land

steveandpenny

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Ok I know there is no way a expat can outright own land in Indonesia but was told by a expat aussie couple that they own the mortgage on some land in Bali. Is this legal ? The deed is in a Indonesians name but they say they he can't sell or do anything with the land because of the mortgage. The mortgage is a ridiculous high amount so no one could pay it back and take the land.. is this legal? I have questions about weather a foreigner can hold a mortgage on land here.

If its legal would be a good way to own (kind of) land here. Or is this just another way you can get in trouble? They said it was all on the up and up and registered but I've heard that before.

Has anyone heard of this before?
 

dafluff

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Of course it's not legal. It's just one of those workarounds. It's actually pretty commonly included in a nominee agreement. There are several problems with this:

1. The mortgage could be "ridiculously high" now, but knowing the Rupiah, will it be "ridiculously high" in 20 years? 25? 40?
2. The legal owner could still cause a lot of problems by refusing to sign for a sale at a later time (if the "real" owners want to sell).
3. The money trail obviously won't match, if the mortgage is a made up number.
 

steveandpenny

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Of course it's not legal. It's just one of those workarounds. It's actually pretty commonly included in a nominee agreement. There are several problems with this:

1. The mortgage could be "ridiculously high" now, but knowing the Rupiah, will it be "ridiculously high" in 20 years? 25? 40?
2. The legal owner could still cause a lot of problems by refusing to sign for a sale at a later time (if the "real" owners want to sell).
3. The money trail obviously won't match, if the mortgage is a made up number.
On number one after 20 years I'm sure it will be sold by the person holding the mortgage.

On number two can't you just foreclose if you own the mortgage if you wanted to sell it. Make it a on demand mortgage.
 

waarmstrong

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In a country were the rule of law is a limp noodle, if the nomine decides to screw the bule, you are pretty much screwed. In the real world, your fake mortgage is essentially worthless.
 

Jamu

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It would be interesting to know whether the mortgage is actually registered as a charge against the property (eg, it appears on the land title certificate), or is just a contract between the actual owner and the nominee. If it's the latter, then I'm afraid it won't offer much protection.
 

centurion

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Without removing the mortgage, if the mortgage is in the Land Certificate, nobody would buy the land. So it is some level of protection, better than none.
 

dafluff

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On number one after 20 years I'm sure it will be sold by the person holding the mortgage.

If the legal owner doesn't beat them to it first, and pays off the "mortgage"?

On number two can't you just foreclose if you own the mortgage if you wanted to sell it. Make it a on demand mortgage.

You could, but depending on how much trouble the legal owner wants to make. Foreclosing involves courts, etc.

I think @waarmstrong has the right idea in post #4 above...
 

snpark

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the mortgage owner owns the land, whether thats a person or more likely the bank, so no "they" don't own it, maybe they have a right to lease it or something but same as a car when you have a car loan, the car is owned by the bank until you paid off the debt, same with land and property in effect
 

Ruserious

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I would be worried that somehow the land gets taken and the mortgage is still payable. Like a double bad situation.....
 

steveandpenny

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It would be interesting to know whether the mortgage is actually registered as a charge against the property (eg, it appears on the land title certificate), or is just a contract between the actual owner and the nominee. If it's the latter, then I'm afraid it won't offer much protection.
They say it is registered as a charge against the property and is on the land title.
 

steveandpenny

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the mortgage owner owns the land, whether thats a person or more likely the bank, so no "they" don't own it, maybe they have a right to lease it or something but same as a car when you have a car loan, the car is owned by the bank until you paid off the debt, same with land and property in effect

My main question is as a foreigner can you own the mortgage. If to own the mortgage you in reality own the property.
I'm sure if someone really wanted to srew you they could or at least try too . It just a interesting way that you might be able to protect yourself in some degree above and beyond just trusting who ever name is on the deed.
 

steveandpenny

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I would be worried that somehow the land gets taken and the mortgage is still payable. Like a double bad situation.....
I dont belive you would have to pay yourself back on the mortgage , I think you misunderstand ...you all ready pa yed for the land but on paper you are giving a mortgage to whoever name is on the deed. It's like you are loaning the money to the person to buy the land (on paper)
 

snpark

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Yes but who is going to give a bule a mortgage on land here? And even just a "loan" even from an overseas bank, to buy the land it still will not be in your name, it has to be registered still in Indonesia name / company name?
 

waarmstrong

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The judge might be inclined to enforce a loan obligation, but against the mortgagee rather than the mortgagee's buyer. To do otherwise would require the judge to acknowledge that the loan holder can seize the collateral. In other words, take title to the land in contradiction of the constitution. That's unlikely. Enforcing the mortgage against the mortgagee is a looser, as well. He is most likely long gone with all the free money he got selling the property.
 

waarmstrong

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Even if the judge is inclined to grant a judgement against the mortgagee, good luck, Mr. Bule, enforcing it.
 

steveandpenny

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Yes but who is going to give a bule a mortgage on land here? And even just a "loan" even from an overseas bank, to buy the land it still will not be in your name, it has to be registered still in Indonesia name / company name?
I guess I wasnt clear, the so called loan or mortgage is from the expat to the name on the deed. The expat paid for the land in full but since he can't own it , he using the deed and land that has been register collateral for so called loan in the form of a mortgage. Since the deed has a lean on it , it can't be sold or transferred with out paying off the so called mortgage. The expat then leaves land from the local at a very small agreed price.
This is not my idea but one that someone else did. And yes I'm sure it would be a mess in court if it ever came to that. But agin what I'm asking can a expat legally set a mortgage up with the land as collateral. He wont really own the land but no one can sell it with a lean on the deed without paying off the mortgage.

I hope I made it a little more clear. It goes one step farther then just trusting your freind who's name is on the deed. Kind of like putting a lock on the gate it might not keep out a bad guy but it will keep out most people.
 

Davita

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I understood your question from post #1 Steve....others have become a little confused thinking you were asking about getting a mortgage on Indonesian Freehold (Hak Milik...HM).

If an Indonesian citizen buys HM and gets a mortgage from a financial institution this is annotated on the Sertipikat Tanda Bukti Hak (Title Certificate).

If a foreigner gets a nominee to sign a mortgage for the amount paid then I do not think that can be annotated...it needs to be a financial institution, bank, registered mortgage lender etc.
I've heard many (mainly realtors ) say differently but I've never witnessed such title document with a foreigner owning a mortgage over HM property.
However, in addition to the HM title, there is an Akta Pernyataan (deed of statement) that the notary draws which can include anything the buyer/nominee wish to include. One inclusion could be a contract of mortgage that the nominee must revert to the foreigner if the property is sold. A contract is different to a registered mortgage in the land office and, if disputed, I doubt will have the same legal weight as reneging on a registered mortgage.

I have two nominee (family) owned properties, and there is no doubt the nominee is the owner, but the Statement has given my wife and I permanent right to reside in them free of any rent.
 
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snpark

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What help do you want? Your Aussie friend got screwed, end of story, it is not possible legally and it is extremely unlikely that the grey way they have done it will work, they have no legal recourse if it goes tits up
Obviously as an informal option between mates, ok yeh maybe, but they might as well consider it a gift and be grateful if they get their money back. They don't and cannot own the land.
 

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