New rules needed to clarify property titles

JAKARTA (JP): The latest rulings on property titles contain limitations that need supporting regulations, experts say.

Maria S.W. Sumardjono, dean of the law school at Yogyakarta- based Gadjah Mada University, said here yesterday that the new rulings -- Government Regulations No. 40/1996 (PP40) and No. 41/1996 (PP41) -- did not address some things that required regulating.

"At least 14 items need to be regulated through presidential decrees, besides other technical matters which have to be addressed by specific regulations," Maria said at a seminar on legal certainties of land use for investment, hosted by PT Dhafira Dutagraha.

Regulation PP40 governs the rights of exploitation (Hak Guna Usaha), rights of building (Hak Guna Bangunan) and rights of use (Hak Pakai) land titles. While PP41 regulates the ownership of residential property by foreigners residing in Indonesia. Both the regulations support Law No. 4/1996 on security rights of land.

Maria said the regulations contradicted each other, especially regarding the rights of use title which needs further clarification.

Gary W. Christian, the President of CS Consultant, said that the regulations helped to clarify the basis by which land may be used with mixed forms of title; like strata-title developments. He said the regulations gave foreigners some certainty when purchasing.

A major breakthrough, Christian said, has allowed land holders to receive rights of building titles without releasing their original land rights. This has enabled land holders to use their land as collateral.

Dilemma

"Surprisingly, however, the regulation does not permit the holder of Hak Guna Bangunan to grant a Hak Pakai by agreement," Christian said.

He contended that such a limitation caused the developers of strata-title projects, especially residential properties, a dilemma.

Developers must hold land under rights of building titles, which stops them from marketing to resident foreigners, or they must hold land under rights of use titles, which hinders their marketing to Indonesian citizens -- who will usually be the majority of potential purchasers.

"Unfortunately, PP41 does nothing to remedy this problem. On the contrary it underscores the understanding that the eligibility of purchasers of individual units to own those units will be determined by their eligibility to own the underlying land," he said.

A further limitation contained in PP41, Christian said, means that if a house or a residence is on land under a right of use title on state-owned land or is based on an agreement with a landowner, it must be sold or transferred to another eligible person within one year if a foreign owner ceases to be a resident of Indonesia.

"Interestingly, this provision does not include strata-title units... In terms of legal basis, it would appear that there would be just as much logic in requiring the surrender of title to a strata-title unit as to a house," Christian said.

Agreeing with Christian, Maria said that the new ruling on property ownership by foreigners was inflexible, compared with those in Singapore and Thailand.

"PP41 focuses only on foreign individuals but not foreign legal bodies which have a representation in Indonesia, although the latter also need residential housing for their managers and employees," Maria said.

Unlike Indonesia, both Singapore and Thailand allow foreign individuals and legal bodies to own residential property. But both countries set certain limitations on property ownership.

Maria suggested that the government give more clearer limitations on property ownership by foreigners; for instance, limitations on the type of houses or strata-title units that can be purchased, on their sales and on leasing or renting by foreign owners.

She also suggested there be certain mechanisms to control property ownership by foreigners and that there be an institution responsible for them. (rid)