Indonesia Mandatory Disclosures: Latent Defects & Zoning

Pursuant to the Indonesian Civil Code (Kitab Undang-Undang Hukum Perdata), adopted in 1847, there is a set of mandatory disclosures regarding the history of the property and its legal status that must be communicated by the landlord to avoid future liability for latent defects or regulatory non-compliance.

Proving Valid Ownership Rights (Land Certificates)

An inseparable element to prevent the danger of land/building brokers or shadow intermediaries, landlords with integrity must openly show copies or prove their power of rights:

• Certificate of Ownership (Sertifikat Hak Milik - SHM): This is the strongest and most comprehensive land title, granting full, permanent, and transferable ownership rights. It is exclusively for Indonesian citizens.
• Building Use Right Certificate (Sertifikat Hak Guna Bangunan - HGB): Grants the right to construct and own buildings on land for a fixed period (typically 30 years, extendable).
• Certificate of Ownership over Multistory Housing Units (Sertifikat Hak Satuan Rumah Susun - SHMSRS): This certificate proves ownership of an apartment unit or other types of buildings constructed on shared land. The SHMSRS holder also owns a portion of the land on which the building stands, with the land typically following HGB status.
• Valid Power of Attorney: If an agency or property relative conducts the lease on behalf of the original owner.

Building Form Permit

A PBG (Persetujuan Bangunan Gedung) is a mandatory permit for any construction, renovation, expansion, or demolition of all types of buildings, including residential properties. It serves as a formal authorization for building design and construction in accordance with spatial, technical, and environmental regulations. The PBG replaced the former IMB (Izin Mendirikan Bangunan) under Law No. 11 of 2020 on Job Creation and Government Regulation No. 16 of 2021.

Outstanding Billing Balances (PBB, IPL, etc.)

Arrears in Land and Building Tax (Pajak Bumi dan Bangunan - PBB) are the responsibility of the property owner. Any arrears in PBB from the past duration must be addressed by the owner.

Regarding utility bills (Electricity/Water/IPL), the responsibility for payments (e.g., electricity, gas, water, trash collection) is a critical aspect of residential lease agreements and should be clearly outlined in the lease document to avoid disputes. While there is no explicit statutory mandatory disclosure requiring landlords to declare all past utility debts to prospective residential tenants as a legal disclosure requirement, the principle of good faith (Itikad Baik) generally implies transparency in contractual relationships.

Substantive Legal Guidance in Indonesia

Article 1552 of the Civil Code protects tenants from 'hidden defects' (cacat tersembunyi). The landlord is liable for all kinds of defects on the leased object that hinder its utilization, even if the landlord was unaware of those defects at the time of executing the lease agreement. If such defects result in a loss for the tenant, the landlord must pay compensation. In the event of a dispute, the District Court (Pengadilan Negeri) will prioritize the 'consensus' (musyawarah) principle.

Additionally, the role of stamp duty (Bea Materai) is paramount. It is a tax imposed on documents with legal significance, including lease contracts. The current fixed rate for stamp duty is IDR 10,000 per document, and electronic documents are also subject to e-Materai. While the absence of stamp duty does not invalidate an agreement, documents without proper stamp duty may be considered inadmissible as evidence in court proceedings unless the stamp duty and administrative penalties are paid.

Compliance Strategy for Indonesia Property Managers

When managing properties in the Indonesian market, one must prioritize the 'Itikad Baik' (Good Faith) doctrine as stipulated in Article 1338 paragraph (3) of the Civil Code, which states that agreements must be executed in good faith. This legal principle means that contracts are interpreted by the mutual intent and fairness between the parties, requiring honesty, transparency, and refraining from causing harm. Judges have the power to supervise agreement implementation to ensure it does not violate propriety and justice. Landager's compliance tools are designed to simplify this tracking, providing time-stamped logs of communications and payment history that can be directly presented in court.

How Landager Helps

Landager tracks lease terms, automated somasi reminders, and Indonesian tax compliance - making it easy to stay compliant with Indonesia regulations.

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