There is a system for land title registration in Indonesia, and upon registration the land title holder will be issued the relevant land certificate. However, large areas of land that have not been registered and certificated still exist in many rural areas. The rights to this land are still governed by adat (customary) law. They are usually recorded in a land book maintained by the Head of Village or Head of Sub-District.
A land certificate guarantees the title holder the rights over such land, although the law grants interested third parties a certain period of time to challenge the validity of the land certificate after its issuance. Pursuant to Government Regulation No. 24 of 1997 Regarding Land Registration (8 July 1997), third parties may challenge the validity of a land certificate within five years after the date of its issuance.
Uncertified land is more prone to challenge and dispute, particularly if the landowner does not maintain complete and proper underlying documentation evidencing their ownership, or if the relevant Head of Village or Head of Sub-District does not properly maintain the land book. Thus, for the acquisition of uncertified land, the buyer will generally require the seller first to register and certify the land.
The granting of lease over land or a building is not registered with the land office or recorded in the land certificate. Rather, it is based on a contractual arrangement between the lessor and the tenant. The lease agreement is therefore what guarantees the tenant’s right over the leased property.
A form of security interest over real estate is security right, which is use d to secure land with certain land titles and all the fixtures attached to the land. The security right must be registered, otherwise the security is invalid and cannot be executed. There may be more than one security right encumbered over one land certificate to secure more than one indebtedness, and the rank will be based on the date of its registration. Security right cannot be encumbered over uncertified land. To do so, the land must first be registered and certified.
For more information, contact:
Denny Rahmansyah, Partner
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