Question about owning land

jstar

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Correct me if I'm wrong Steve, but as far as I understand in this case (as in other nominee structures), there is a mortgage that the official owner got and has to pay. And there is also a power of attorney from owner to WNA which gives the 'foreigner' the right to decide or veto what happens with the land (e.g. when to sell, make kavlings, ....).

The danger would be that the land price increases so much, that it becomes interesting for the official owner to pay back the mortgage in full. And then sell the land without any permission of course.
 

snpark

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Whatever it is, its a mess regardless, beaurocratically, legally and financially
 

centurion

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As I know you do not need to be a resident to give loan and to extend mortgage loan. So if not forbidden by some bylaw, a foreigner can do it (physical person or offshore company).
Nobody usually would buy property under somebody else's mortgage because it means that the land is in dispute and this is a big no-no in Indonesia if the buyer has some brains, for foreigners and Indonesians as well.
However, if not specified in the mortgage notary deed it is sellable if the paper owner has the original Land Certificate in hands. That is why banks, when extending mortgage loan are taking the Land Certificate in their deposit.
A mortgage lender cannot "seize" the property or "become an owner" automatically. Becoming owner against debt if forbidden by the Indonesian Civil Law, which is a derivative of the French Code Civil, parent of all European continental civil laws. It was even forbidden in the Roman Law 2000 years ago because of misuse. The mortgage lender has right to sell the property and collect his loan proceedings, the rest goes to the old property owner who was the debtor.

But, if some judge in some dispute assess the whole construction as a nominee agreement-meaning that there is: a)loan agreement, b)mortgage deed, c)approval to live in the house, rent etc and d)irrevocable right to sell the property, he can rightfully cancel the whole construction and contracts as contrary to the law
 
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jstar

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Yes, in western countries it is often forbidden to sell if there is still an open mortgage (that's one of the jobs of the notary to find out and arrange, and that's also why a seller and buyer both have a notary - which could be the same person).

In Indonesia that is NOT the case (and the mortgage stays 'with the land'). Therefore the mortgage provider almost always has built in a clause in the contract prohibiting sales, and keeps the original certificate.
 

steveandpenny

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Yes, in western countries it is often forbidden to sell if there is still an open mortgage (that's one of the jobs of the notary to find out and arrange, and that's also why a seller and buyer both have a notary - which could be the same person).

In Indonesia that is NOT the case (and the mortgage stays 'with the land'). Therefore the mortgage provider almost always has built in a clause in the contract prohibiting sales, and keeps the original certificate.
As alwas I read all the posts waiting for jetstar to comment ..as always a clear and concise answer with out a bunch of negative spin. Thanks as alwas sir
 

Daniel50

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As alwas I read all the posts waiting for jetstar to comment ..as always a clear and concise answer with out a bunch of negative spin. Thanks as alwas sir
Steve I too have appreciated "jetstars" knowledge and humour.
 

waarmstrong

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.....In Indonesia .... the mortgage provider almost always has built in a clause in the contract prohibiting sales, and keeps the original certificate.
Unfortunately, multiple certificates are not that uncommon. I am suspecting that counterfeit SHMs are more common with properties of significant value changing hands under cercumstances of questionable legality. Comparisons with Western property ownership law are not particularly instructive.
 

waarmstrong

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Yes, I wonder how an American would report the mortgage, a foreign asset, to the IRS on Form 8938. Could there also be FBAR pit falls? I wonder, as well, how the interest on the loan would be reported on the 1040. I wonder if the loan issuer understands the imputed interest rules of the IRS, where interest income whether actually received or not may be taxable income.
 

Hunabku

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As I know you do not need to be a resident to give loan and to extend mortgage loan. So if not forbidden by some bylaw, a foreigner can do it (physical person or offshore company).
Nobody usually would buy property under somebody else's mortgage because it means that the land is in dispute and this is a big no-no in Indonesia if the buyer has some brains, for foreigners and Indonesians as well.
However, if not specified in the mortgage notary deed it is sellable if the paper owner has the original Land Certificate in hands. That is why banks, when extending mortgage loan are taking the Land Certificate in their deposit.
A mortgage lender cannot "seize" the property or "become an owner" automatically. Becoming owner against debt if forbidden by the Indonesian Civil Law, which is a derivative of the French Code Civil, parent of all European continental civil laws. It was even forbidden in the Roman Law 2000 years ago because of misuse. The mortgage lender has right to sell the property and collect his loan proceedings, the rest goes to the old property owner who was the debtor.

But, if some judge in some dispute assess the whole construction as a nominee agreement-meaning that there is: a)loan agreement, b)mortgage deed, c)approval to live in the house, rent etc and d)irrevocable right to sell the property, he can rightfully cancel the whole construction and contracts as contrary to the law

 
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I was kind of surprised by the quote of Ferry: "We will make sure that nothing is done in violation of the law. What is important to note is that it will not disturb their businesses. So those who own cafes or gallery or whatever, the business will go as usual,"

I wonder if those mentioned businesses are not illegal as well. Foreigners working in and/or running small businesses that could be run by Indonesians as well is problematic, I thought - as well as employing Indonesians in that businesses. :unsure:
 

Hunabku

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I was kind of surprised by the quote of Ferry: "We will make sure that nothing is done in violation of the law. What is important to note is that it will not disturb their businesses. So those who own cafes or gallery or whatever, the business will go as usual,"

I wonder if those mentioned businesses are not illegal as well. Foreigners working in and/or running small businesses that could be run by Indonesians as well is problematic, I thought - as well as employing Indonesians in that businesses. :unsure:

Indeed. Then again the nominee trick is applied 😁🙈
 

jstar

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But that Ministry has nothing to say about the matter. Only about land ownership, use and spatial planning.
 

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