Sun, 12 Jul 2015
Many Australians, thinking they had circumvented Indonesia's ban on foreigners owning freehold land, have signed illegal nominee deals.

The story sounds Kafkaesque. Susi Johnston has lost everything; her beloved husband, their $3 million Bali home, the peaceful retirement she had planned.

Johnston, and her late husband, Bruno Piazza, had poured their dreams and life savings into a spectacular modernist villa near the coastal village of Canggu?, a hub for artists and expats. But Johnston discovered, shortly after Piazza's death from cancer, that their land "ownership" had been documented illegally.

She says gangsters attacked her home, she faced two deportation attempts and drugs were planted in her car leading to her arrest and detention.

As court after court found against her, following what Johnston describes as "highly suspicious judicial irregularities", she realised this was not a battle she was ever going to win. Advertisement

"The mafia is going to take over my house. This has cost me my entire life savings. I'm still suffering post-traumatic stress disorder. I can't sleep, I have panic attacks, I can't concentrate."

Johnston's nightmare in paradise – which has spooked expats across Bali – provides a textbook example of what can go horribly wrong when foreigners try to own a home in Indonesia. Susi Johnston has fought her case all the way to the Indonesian Supreme Court and lost.

Susi Johnston has fought her case all the way to the Indonesian Supreme Court and lost. Photo: Fairfax

At its 2013 regional conference, the Australian Property Institute described Bali as "Perth's northernmost suburb". The Island of Gods, with its emerald rice paddies, coconut-fringed beaches and tropical climate, has long been a magnet for everyone from surfers to FIFO (Fly-In Fly-Out) miners to retirees.

"In recent years there has been significant growth in the number of Australians buying and building homes in Bali," the institute said in its conference press release. But there is a hitch.

Under Indonesia's strict foreign investment laws – a backlash against centuries of Dutch rule – foreigners are prohibited from owning freehold land. There are legitimate ways to lease land for up to 30 years, with options to extend.

However, Australians are used to owning land, making leaseholds unattractive to many investors. So to circumvent the law, many foreigners are advised to put the name of an Indonesian nominee on the freehold land title. They then sign an agreement with the nominee which states the foreigner paid for the property, and the nominee therefore grants them all rights over it.

This was the structure of ownership recommended to Johnston's late husband by lawyers and a notary when he sold his house in Brussels in 1999 and bought land in Canggu. Piazza was not a "wheeler and dealer", Johnston stresses. "You can't blame people who were fooled, and are still being fooled, that there are ways to validate nominee agreements and associated mortgages. Not a single one of these papers has any legal legitimacy."

More than 10,000 properties are understood to be held in Bali using nominee arrangements. Authorities turned a blind eye after the Bali bombings, when the island was desperate for investment.

But although common, the nominee process is against the spirit of the law, which is designed to keep Indonesia for Indonesians. It is also fraught with risk. The Indonesian nominee is the legal owner if the relationship sours or the nominee dies and their family does not honour the agreement.

Australian writer Phil Jarratt?, the author of Bali: Heaven and Hell, says the so-called "nominee ownership crisis" gripping Bali is nothing new. He had a 25-year leasehold that was ripped up on a "dodgy technicality" a few years into it in the early 1990s.

"Then and now, if you think you hold land in Bali (or anywhere in Indonesia) through a local nominee, you'd better make sure you stay on the right side of the local, because you can't win in court," Jarratt writes in swellnet. "In recent years ageing Baby Boomer hippies and surfers have been thrown onto the streets as their nominees die and the next generation claims the property or demands double the money."

Preadi Ekarto, the deputy chairman of Real Estate Indonesia, says expatriates are usually law-abiding people. "They bought property with legal papers because they use the service of a notary and lawyers."

But Preadi says the nominee process is "improper" because it means foreigners do not pay luxury tax and allows them to "own" property for a long time. "The law says foreigners' right to land use is limited to 70 years."

Agus Sekarmadji, a law expert from Airlangga University in Surabaya, describes the nominee process as "very regrettable". "We cannot always blame foreigners, in this case quite often it is the Indonesians who persuade foreigners. It's absolutely illegal but it's easy to find it around us. That's a fact of life."

Johnston was in Europe settling Piazza's estate, when unbeknown to her, the nominee took her to court. Johnston says her nominee was seriously in debt with criminals, and the mafia decided to use her home as a way to get their money back.

"She (the nominee) said she was the owner of the land. She claimed she was Bruno's lover and common law wife and I murdered him." When Johnston returned to Bali, still grieving Piazza's loss, she learned the Denpasar District Court had already ruled the nominee owned her land.

"The documents said I must leave immediately or pay $1000 a day for each day I didn't leave, and pay damages of $1.8 million." But Johnston refused to budge. "There are hundreds of cases like this right now but I'm the only one who stood up because I didn't have anywhere else to go. I would be a 55-year-old widow, now unemployable, with no home and no money and no job. Where do I go?"

But Johnston's stubbornness has taken its toll. She says gangsters attacked her property, changing locks and climbing over her walls while she barricaded herself in her home office.

"The third time they came was really horrific; guys vaulted the walls, took everything out of my house and threw it into a truck. They drilled through the bathroom door while I was on the toilet. They took everything, including antiques. It was insane – I was shown guns and machetes."

Johnston wants her experience to be a cautionary tale. She organised a "Land Law Learning Day" in April with law professors, litigators, notaries and business advisers. About 250 expats attended. Many were already alarmed by media reports a month earlier that Ferry Mursyidan Baldan, the Agrarian Minister under the new nationalist Joko government, had announced an audit of foreign land ownership

"Foreigners must not be in possession of even an inch of land in Indonesia. It is a constitutional issue," Ferry was quoted in Kompas.com in March. He said foreigners had been found to own land, particularly in tourist areas such as Bali and Lombok. "We'll convert the title, if he has a wife then it will be on his wife's (ownership) but if not it will be taken by the state," Ferry said at the time.

Ferry tells Fairfax Media he does not want to create anxiety. "We'll do it slowly … what we want to achieve is to put things in order."

Foreign owners will be contacted and their papers checked. "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," he says

The government will check if foreigners have residency permits. "First of all, they have to have a stay permit before owning a property." Secondly, Ferry says, foreigners need property only for the duration of their lives. "Only living people need property, dead people need cemetery, correct? " he says.

"That's the logic and it is the philosophy we use in discussing this issue." He says if a foreigner dies their heir can take over the leasehold, provided they too have an Indonesian residency permit.

Ferry may not want to create anxiety, but off the record, real estate agents say foreign villa owners are panicking and trying to sell. "It's starting to come to a head," says Andrew Gage, the owner and operator of Echo Beach Resort in Canggu. "It could create a property glut where people are desperate to get rid of properties."

Gage, an Australian who has lived in Indonesia for a long time, understands the need for a crackdown. He says foreign ownership of villas has driven up the price to the extent the Balinese can't afford to buy land on their own island.

Expats seldom become involved in village life, pay tax or contribute to the economy beyond employing a small number of local staff. "It's hard to feel upset about the nominee (crisis)," Gage says. "I've been here for 20 years and I've known it's never been legal since the beginning. Whatever way you want to to cut it, anyone who has gone into it knowingly, understands that tomorrow the property could be in the hands of the nominee. A lot of people have made a lot of money over a long period of time."

Investors can convert their titles to leasehold or set up the property as a tax-paying business. "Then you are paying local authorities so everyone starts to become a bit happier," Gage says.

World-renowned tropical garden designer Made Wijaya, who arrived in Bali from Sydney in 1973, often bemoans the "villarisation" of Bali in his satirical e-zine Stranger in Paradise.

"After the Bali bomb, Bali became bargain basement Bali for all the carpetbaggers from Noosa," Wijaya says. "There is too much development, it's out of control."

Wijaya would like to see regulation of "free-range villa building". He says developers should follow zoning laws and not build in rice fields, which ruins the environment and attracts thieves, or flout local laws by building on the beach or river banks. Lawyers who recommended the nominee process were leading people down the garden path, Wijaya says. "I think, if anything, the government needs to crack down a bit. The villa people need to get legitimate and pay taxes."

Meanwhile, cautioning people about the dark side of nominee ownership has become Johnston's raison d'etre. She has fought until the bitter end: "I have lost all the way to the Supreme Court. Foreigners should be spooked. No nominee arrangement is valid."

For more than two years Johnston also pushed for a criminal trial against the nominee and her thugs who smashed up her home. Even the Human Rights Commission got involved.

"In court, all of them were found innocent, despite the evidence," Johnston says. "Sadly this is the reality of Indonesia. I think there are masses more people who could fall into the same trap and probably will."

Now Johnston has nothing left to do but wait for the inevitable. "I am still at home, just waiting to be put in a cell at Polda (Bali police headquarters), then they take over the house and everything in it. I've no idea what to do next."

With Karuni Rompies





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