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Understand the Perjanjian Jual Beli

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When it comes to buying real estate in Indonesia, making sure you fully grasp the property sales contract is essential.

Indeed, not fully understanding the document you will sign can lead to financial losses, including the forfeiture of deposits, payment of penalties, unexpected costs, legal expenses, and potential poor investment decisions.

We've heard countless stories of people making costly mistakes when signing their property agreement in Indonesia. We want to help you avoid the same experience.

We'll give here a very brief overview regarding the property sales contract in Indonesia ; if you want a full checklist, please check our property pack for Indonesia.

What is the Perjanjian Jual Beli in Indonesia?

In Indonesia, the property purchase agreement is a crucial document in real estate transactions, locally known as "Perjanjian Jual Beli" (PJB).

This agreement outlines the terms and conditions of the sale and purchase of property. It's a legally binding contract between the buyer and the seller, ensuring that both parties adhere to their commitments.

The PJB works as a guarantee for both the buyer and the seller.

For the buyer, it ensures that the property will be transferred to their name upon completion of payment and fulfillment of other conditions.

For the seller, it guarantees that they will receive the agreed payment in the stipulated timeframe.

One key aspect of this agreement is its role in protecting the interests of both parties.

For instance, it includes details like the property description, sale price, payment schedule, and any other conditions agreed upon. It's essential for the PJB to be clear and comprehensive to avoid any misunderstandings or disputes.

For international buyers or non-residents, the process has additional layers. Indonesia has specific regulations regarding foreign ownership of property.

Foreigners are generally not allowed to own freehold property; instead, they can acquire property under a leasehold agreement or through a nominated Indonesian representative. The PJB for international buyers should reflect these unique aspects and comply with Indonesian property laws for foreigners.

The signing of the PJB usually occurs after both parties have agreed on the terms and before the final transaction. This stage often involves a deposit, which is a percentage of the total purchase price.

The deposit amount can vary, but it's typically around 10%. This deposit is an assurance for the seller and is usually non-refundable if the buyer decides not to proceed with the purchase.

The PJB in Indonesia might differ from property agreements in other countries, especially regarding regulations for foreign buyers and the types of property ownership available.

For example, in many Western countries, foreigners can own property outright, which is not the case in Indonesia.

Additionally, the legal framework and property rights in Indonesia might be different, necessitating a thorough understanding of local laws and practices.

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What should be included in the property purchase agreement in Indonesia?

In Indonesia, the property purchase agreement, or "Perjanjian Jual Beli" (PJB), is governed primarily by the Indonesian Civil Code (Kitab Undang-Undang Hukum Perdata).

This legal framework sets the standard for what a PJB should contain and how it should be executed.

The PJB must include several mandatory clauses to be legally valid. These include the identities of the buyer and seller, a detailed description of the property (including its location and size), the agreed-upon sale price, payment terms and schedule, and the rights and obligations of both parties.

It must also state the conditions under which the agreement can be terminated and the consequences of such termination.

Beyond these mandatory clauses, there are additional clauses that can be included to address specific needs or concerns.

For example, a clause might stipulate that the sale is contingent upon the buyer obtaining a mortgage or the seller completing certain repairs before the sale.

These contingencies provide a level of protection for both parties and can be customized based on the particular transaction.

The PJB often includes conditions or contingencies that are specific to the property or the parties involved. Common conditions include the completion of a satisfactory property inspection, the verification of clear property titles, or the fulfillment of certain legal or regulatory requirements before the transaction can be finalized.

In Indonesia, it is mandatory for the PJB to be authenticated by a notary. This notarization process ensures that the document is legally binding and enforceable.

The notary also plays a role in verifying the identities of the parties involved and ensuring that the terms of the agreement are clear and lawful.

The role of the real estate agent in the process of drafting and executing the PJB can vary.

While they might assist in negotiating the terms and bringing the parties together, the legal aspects of the agreement are typically handled by legal professionals, such as notaries or lawyers.

The real estate agent's primary role is often more focused on facilitating the transaction rather than drafting the legal documents.

What's the signing process like?

In Indonesia, the signing process of a property purchase agreement, known as "Perjanjian Jual Beli" (PJB), is a detailed and structured procedure, ensuring the legality and validity of the real estate transaction.

The PJB is a bilateral agreement, meaning it requires the signatures of both the buyer and the seller. It's common for either party to consist of multiple people, such as a couple buying a home or a group of investors purchasing a property.

In such cases, all individuals representing the buyer or seller must sign the agreement to signify their consent and involvement.

Regarding the required documents and information, both parties need to provide personal identification (such as KTP for Indonesian citizens or passports for foreigners).

Additionally, the seller must provide documents proving ownership of the property, like a land title (SHM or SHGB), and the buyer needs to present proof of their financial ability to purchase, which could be a bank statement or mortgage approval.

The signing process typically follows these steps:

Step Description

Drafting the Agreement

The PJB is prepared, often with the help of a notary or lawyer, to ensure it meets all legal requirements. This stage includes negotiations and finalizing the terms of the sale.

Review and Finalization

Both parties review the PJB, ensuring all terms are clear and agreed upon.

Signing Ceremony

The actual signing of the PJB is often conducted at a notary's office. All parties involved must be present for the signing, although in some cases, power of attorney can be used if one party cannot attend. The notary witnesses and authenticates the signatures.

Payment of Deposit

Usually, the buyer pays a deposit (often around 10% of the purchase price) as a commitment to proceed with the purchase.

Notarization

After signing, the notary formalizes the document, making it legally binding.

Registration with Local Authorities

The signed PJB is then registered with local land authorities, which is crucial for the legal transfer of property ownership.

As for the timeline, the whole process from drafting to signing can take a few days to several weeks, depending on the complexity of the transaction and the readiness of both parties.

The duration during which the contract is valid depends on the terms agreed upon within it, often tied to the completion of payment and transfer of ownership.

Remote signing isn't standard practice in Indonesia, especially because notarization usually requires physical presence. However, technological advancements and legal adaptations may allow for more flexibility in this aspect in specific cases.

There isn't a universal deadline for signing the PJB, as it depends on the agreement between the buyer and seller. However, it's essential to adhere to the timeline stipulated in the PJB to avoid any legal complications or loss of deposit.

After the PJB is signed, making amendments is not straightforward. Any changes typically require agreement from both parties and may need to be notarized again.

The timeframe for completing all necessary paperwork and approvals after signing depends on various factors, including the efficiency of the local land offices and the complexity of the property's legal status.

It can range from a few weeks to several months.

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How is the payment handled when signing a property purchase contract in Indonesia?

Understanding the financial aspects of a property purchase agreement in Indonesia involves several key components, from initial payments to potential taxes.

When signing a sales agreement for property in Indonesia, you're typically required to pay a deposit or down payment. This amount can vary, but a common practice is for the down payment to be around 10% to 30% of the total property price. This percentage can sometimes be negotiated with the seller, depending on market conditions and the seller's urgency.

There are usually upfront fees associated with signing the sales agreement.

These can include notary fees for drafting and authenticating the agreement, and possibly real estate agent fees if an agent was involved in the transaction. These costs are generally separate from the down payment and might need to be paid at the time of signing or shortly thereafter.

The payment is commonly made directly to the seller, but in some transactions, especially those involving larger sums or when a mortgage is used, the payment may be made to an escrow account. This is a safeguard to ensure that funds are only released when all conditions of the sale are met.

The due date for the payment typically depends on the terms agreed upon in the sales agreement.

In many cases, the down payment is due at the time of signing the agreement, with the remaining balance due at a later specified date, often upon completion of the property transfer.

There are tax implications to consider.

The buyer is usually responsible for paying a property transfer tax (Bea Perolehan Hak atas Tanah dan Bangunan, BPHTB) and a notary fee. The seller, on the other hand, may be liable for income tax on the sale of the property.

Negotiating the down payment amount is possible, though it largely depends on the seller's flexibility and the state of the real estate market. If the sale falls through, the fate of the down payment depends on the terms of the agreement.

It might be refundable under certain conditions, such as a failed inspection or if financing falls through.

However, if the buyer backs out without a stipulated contingency, the down payment could be forfeited.

Using a mortgage loan for the down payment is not typically standard practice. The down payment is usually expected to come from the buyer's personal funds, demonstrating their commitment and financial stability.

The role of an attorney or real estate agent in handling the payment process can vary.

They may offer advice and ensure that all legal requirements are met, but the actual transfer of funds is usually a direct matter between the buyer and seller, or handled through a bank or escrow service.

You have the right to request a receipt or confirmation of payment for the down payment. This serves as proof of transaction and is crucial for maintaining clear records.

Finally, in terms of tax implications for both parties, as mentioned earlier, the buyer typically handles the property transfer tax, while the seller is responsible for any applicable income tax on the sale.

What are the potentials risks and pitfalls?

You might be interested in reading our article about the common risks and pitfalls surrounding a property transaction in Indonesia.

In Indonesia, the property purchase agreement, known as "Perjanjian Jual Beli" (PJB), comes with specific risks and conditions regarding withdrawal and the fulfillment of obligations.

Withdrawal from the agreement is possible, but the circumstances under which either the buyer or seller can withdraw are typically outlined in the PJB.

There's no standardized cooling-off period in Indonesian real estate transactions, unlike in some other countries. This means that once the PJB is signed, both parties are legally bound to its terms unless specific conditions for withdrawal are included in the agreement.

If either party withdraws without a valid motive as per the agreement, they may face penalties. For instance, if a buyer backs out without a stipulated contingency, they might lose their deposit.

In contrast, if the seller withdraws arbitrarily, they might have to return the deposit along with additional compensation.

A buyer can back out if they are unable to secure financing, but this is usually only without penalty if a financing contingency clause is included in the PJB. Without such a clause, the buyer could forfeit their deposit.

If one party fails to fulfill their obligations, the other party may seek legal remedies. Penalties for non-fulfillment should be clearly outlined in the PJB and can include financial compensation or legal action to enforce the agreement.

In terms of the money, if a party withdraws or fails to fulfill their obligations, the handling of any funds paid (like deposits) will depend on the terms of the PJB. These terms should specify whether deposits are refundable and under what conditions.

Comparing to other countries, real estate transactions in Indonesia might have fewer buyer protections, such as the lack of a standard cooling-off period.

Additionally, the process of legal recourse in case of disputes can be lengthy and complex in Indonesia.

Potential risks and pitfalls in the agreement include unclear or incomplete terms, failure to properly inspect the property, not verifying the seller's right to sell the property, and not accounting for all possible legal and financial contingencies.

Disputes during the agreement are not uncommon and can arise over issues like undisclosed property defects, delays in fulfilling obligations, or discrepancies in the property's legal status.

These disputes are typically resolved through negotiation, but if an agreement can't be reached, legal action may be necessary.

The process for resolving disputes involves negotiation between parties, mediation, or, as a last resort, litigation. Involvement of legal professionals is often required to navigate these disputes.

If the property is discovered to have defects or issues after signing, the buyer's recourse depends on the terms of the PJB. If the agreement includes warranties or guarantees about the property's condition, the buyer may seek compensation or repairs from the seller.

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.