Land Rights Agreement — Drafting Framework

v0.3 · working skeleton, not an executable document

Changelog: v0.3 — §5A construction control, BAST handover chain and indemnity. v0.2 — §9A Licence Event regime. v0.1 — initial skeleton. v0.3.1 — §2.7 plot as per aversionem (ad corpus); open questions on area settlement timing.

Status. This is a structural draft for discussion with an Indonesian notary (PPAT) and counsel. Nothing here is legal advice. Every clause marked ⚠ carries a known Indonesian-law constraint that must be verified against the current regulations and the actual master title before any version of this is signed.

Related product pages: hak sewa, leasehold upfront, annual leasehold, hak pakai, hak milik, century index, city development strategy.

0. Threshold requirements (apply to every track)

Bilingual execution — mandatory. ⚠ Law No. 24/2009 requires agreements involving an Indonesian party to be executed in Bahasa Indonesia. English-only instruments have been annulled by Indonesian courts. Execute bilingual, with an express clause stating which language prevails on discrepancy (Indonesian text customarily prevails; the parties may agree otherwise but should not assume it will be honoured).

Notarial form. Land leases are executed as akta sewa before a notary/PPAT. Private signature agreements are enforceable in principle but weak in practice and unusable for any later BPN procedure.

Anti-nominee. ⚠ Both parties represent that no part of this arrangement is a nominee structure (perjanjian pinjam nama). Nominee arrangements violate the Basic Agrarian Law and Art. 1320 Civil Code and are void. Nothing in this framework may be used to simulate freehold for a foreign party.

Master-title subordination. ⚠ No right granted may exceed the remaining term of the Landowner's HGB. Every term, renewal and option below is expressly capped by, and conditional on, the subsistence and renewal of the master title. This must be disclosed to the counterparty, not buried.

1. Parties and definitions

2. Part A — Base grant: Hak Sewa (all Holders)

The default product. Available to Foreign and Indonesian Holders alike, with no residency requirement and no minimum-value threshold.

2.1 Grant. The Landowner grants the Holder the right to use and occupy the Plot for [residential / mixed] purposes for an initial term of [25] years from [date], subject to §0 subordination.

2.2 Nature of the right. ⚠ Hak Sewa is a contractual right under Indonesian civil law. It is not registered at BPN as a land title and does not appear on the certificate. The Holder is to be told this in the recitals, not left to discover it.

2.3 Consideration. [Lump sum for full term / annual rent], payable [schedule]. Tax treatment: lease income attracts PPh at [10%] on lease value; withholding responsibility allocated at §12. For multi-year schedules indexed by the century index, the payment formula and model annex live in that instrument (contract theses T1–T8).

2.4 Renewal. The Holder has an option to renew for a further [25] years, exercisable between [24] and [12] months before expiry, at a price determined by the formula in Schedule E. ⚠ The formula must be arithmetic — an index, a benchmark, or a defined valuation method with a named appointing body. "To be agreed" is the single most common defect in Bali leases and renders the option unenforceable in substance.

2.5 Transfer. The Holder may assign by akta cessie / akta pengalihan hak sewa, subject to: written notice, the assignee's accession to the Design Code and Community Rules, [right of first refusal / transfer fee of __%], and no residency test on the assignee.

2.6 Subletting / short-term rental. [Permitted / permitted with Landowner consent / prohibited]. If permitted, the Holder must operate under the applicable accommodation licensing; the Landowner's own licences do not extend to the Holder's activity by default. Estate take on sublease income, if any, follows the area-revenue rule in hak sewa (area tax 10%, or 5% if the district is net self-sufficient, plus a thin settlement fee) — not a management commission.

2.7 Plot as a single unit (per aversionem / ad corpus). ⚠ The Plot is leased as one contiguous parcel defined by its boundaries, not by a certified area number.

Working English formulation (final wording through the notary):

The Object is demised as a single land parcel (per aversionem / ad corpus) within the boundaries described in Article […] and Schedule B, and not by unit of area. Any figure of approximately [1,000] m² is indicative only. The Parties agree to set aside Articles 1588, 1589, 1590, 1591 and 1592 of the Civil Code (KUHPerdata), and there shall be no price adjustment, compensation, or rescission if a later BPN cadastral survey yields a larger or smaller area.

Indonesian sense-text for notary drafting:

Objek disewakan sebagai satu kesatuan bidang tanah (per aversionem) dalam batas-batas sebagaimana diuraikan dalam Pasal … dan Lampiran …, bukan berdasarkan satuan luas. Luas ±[1.000] m² bersifat perkiraan. Para Pihak sepakat mengesampingkan ketentuan Pasal 1588, 1589, 1590, 1591 dan 1592 KUHPerdata, dan tidak ada penyesuaian harga, kompensasi, maupun pembatalan apabila pengukuran kadastral BPN di kemudian hari menghasilkan luas yang lebih besar atau lebih kecil.

Boundary description is mandatory. Without it the clause is empty. Schedule B must define boundaries by physical marks (patok), adjoining owners by name, and GPS/UTM coordinates; the peta bidang / sketch is annexed and initialled by both parties so that the Plot is determinable without reference to area.

What this clause does not do:

1. It does not bind BPN. Surat Ukur and any later hak pakai certificate will carry whatever figure BPN measures. The clause protects against monetary revision between the parties; it does not buy the number "[1,000]" onto the certificate.
2. It does not bind third parties. The deed operates inter partes. Overlap with a neighbour's certificate, or land falling into sempadan sungai / subak / jalan desa, is outside this clause. Real boundary fixation is asas kontradiktur delimitasi: Berita Acara Persetujuan Batas signed by all adjoining owners at the BPN survey.
3. It does not create land. If the ground is physically 900 m², the Holder receives 900 m² and has already waived claims for the shortfall.

Timing. ⚠ Do not lock a pure per aversionem waiver while an already-known shortfall is still unsettled. Signing "no revision" while the parties know the Plot is short donates the difference to the Landowner. Order of operations: first settle the known difference (price recompute / term extension / conversion costs), then in the same addendum fix per aversionem going forward.

Asymmetric option. If the Holder wants downside protection without losing upside surprise: exclude revision on area increase, and on decrease only down to a floor (e.g. 850 m²); below the floor, retain a right to pro-rata reduction. Landowners often accept this more readily than a full bilateral waiver.

3. Part B — Track F: upgrade to Hak Pakai (Foreign Holders)

Optional, at the Holder's request and expense.

3.1 Eligibility. ⚠ Requires the Holder to hold a valid KITAS/KITAP for the duration of the right, and the transaction to meet the regional minimum-value threshold. If the permit lapses and is not renewed, the title is exposed.

3.2 Mechanics. Conversion from the underlying title in the Holder's name; term 30 + 20 + 30 years. Requires pemecahan of the Plot from the master title first.

3.3 Trade-offs to be disclosed. Hak Pakai is a registered right and stronger on paper, but: it is residency-dependent; the resale pool is limited to foreigners who themselves qualify, or requires reconversion to a citizen-held title; and it removes the flexibility of §2.5. Many Holders are better served by the base lease. This section exists so the choice is informed, not assumed.

3.4 Costs. Splitting, conversion, BPHTB, notarial and administrative costs borne by the Holder. Upgrade fee to Landowner: [amount].

4. Part B — Track I: upgrade to title (Indonesian Holders)

4.1 Step 1 — Plot split and sale. On request, the Landowner procures pemecahan sertifikat of the Plot and transfers the resulting HGB to the Holder by AJB before the PPAT. Purchase price: [amount / formula], credited [in whole / in part] against sums already paid under Part A.

4.2 Step 2 — Holder's own conversion to Hak Milik. ⚠ The Holder may then apply to BPN to upgrade HGB → Hak Milik. This is the Holder's own application; the Landowner facilitates documents but gives no warranty of outcome. Conditions the Holder must satisfy:

• Indonesian citizenship, natural person;
• the Plot is used as rumah tinggal — evidenced by PBG or a keterangan from the village head. A bare, unbuilt plot does not qualify. Practice varies between land offices; verify with BPN Buleleng before promising this to anyone;
• plots up to 600 m² follow the simplified route; above 600 m² a constatering report is required;
• the Holder declares holdings of no more than 5 residential parcels or 5,000 m² in aggregate.

4.3 Plot sizing. Plots should be dimensioned with §4.2 in mind: [500–600] m² sits inside the simplified regime.

4.4 Continuing obligations. ⚠ Conversion to Hak Milik does not release the Holder from the Design Code, Community Rules or Association membership. These must therefore be secured by instruments that survive the title change — covenants recorded in the AJB, easements over access and utilities, and Association membership as a condition of the sale. Draft this before the first sale; it cannot be imposed retroactively.

5. Building rights and PBG

5.1 Who builds. The Holder builds at its own cost and risk. The Landowner constructs no Improvements.

5.2 Permits. ⚠ PBG is issued to the holder of the land title. For Foreign Holders on Part A, the applicant is therefore the Landowner. Allocation: the Holder prepares and funds the application, the Landowner applies and cooperates; the Holder indemnifies the Landowner for all consequences of the works. SLF to be obtained on completion.

5.3 No works before permit. The Holder shall commence no construction before PBG issuance. Breach is a material default with immediate cessation rights, because enforcement action against unpermitted structures runs against the title holder, not the occupant.

5.4 Ownership of Improvements. Indonesian law recognises horizontal separation — buildings may be owned separately from land. The parties record that Improvements are owned by the Holder for the term. Consequences at termination: §10.

5A. Construction control, handover and indemnity

The Landowner does not build, yet remains the title holder and the PBG applicant. This section closes that gap: control proportionate to retained liability.

5A.1 Design and contractor approval. No works until the Landowner has approved (a) the design package for Design Code compliance, (b) the identity of the main contractor, (c) the construction programme. Approval is limited to those matters and creates no design or engineering warranty by the Landowner — say so expressly.

5A.2 Contractor qualification. ⚠ Under UU 2/2017 on Construction Services, construction services must be performed by a qualified provider (penyedia jasa) holding a valid SBU and the corresponding KBLI, and the client (pengguna jasa) is obliged to engage such a provider. The Holder shall engage only a contractor meeting this standard and shall furnish copies of SBU, licences and the construction contract before commencement.

5A.3 Supervision. An independent construction supervisor (pengawas / MK) is appointed [by the Landowner, at the Holder's cost / by the Holder from a Landowner-approved panel], with authority to inspect, to require rectification, and to stop works on material non-compliance. Stage inspections at: foundation, structure, roof, MEP, completion.

5A.4 Insurance. For the construction period, procured by the Holder, naming the Landowner as co-insured / loss payee: Contractors' All Risks (CAR/EAR), third-party liability, workers' accident cover (BPJS Ketenagakerjaan for the workforce). Certificates delivered before commencement; lapse is a stop-work event.

5A.5 Security. [Deposit / bank guarantee] of [__] to secure completion, rectification of defects, and reinstatement if works are abandoned. Released in tranches on the handover milestones below.

5A.6 Handover chain — the documents that move risk. ⚠ Each transfer of risk must be evidenced by a dated Berita Acara Serah Terima (BAST) with photographic and inventory annexes. Absent a BAST, risk is presumed to remain where it was.

5A.7 SLF. Application follows the PBG applicant, therefore the Landowner. The Holder shall fund the process, deliver as-built drawings and test certificates, procure the contractor's cooperation and provide access to the inspecting commission. No occupation or use of any Improvement before SLF issuance. Periodic SLF renewal is treated the same way.

5A.8 Indemnity. The Holder indemnifies the Landowner against all claims, penalties, orders and costs arising from the Holder's works and from the Holder's occupation and use, including: unpermitted works, deviation from PBG, breach of zoning or environmental rules, accidents to workers or third parties, and damage to neighbouring land. The indemnity survives termination for [__] years.

5A.9 What the Landowner cannot delegate. ⚠ Regardless of the above, the following follow the title and remain with the Landowner as against the authorities: enforcement action for unpermitted or non-conforming structures; standing as PBG/SLF applicant; and answerability for structural safety. The Holder's indemnity operates between the parties — it does not move public-law liability. This is precisely why 5A.1–5A.5 exist.

6. Construction timeline

• Commence within [12] months of grant; complete within [36] months.
• Remedy for failure: [escalating holding charge / Landowner's option to repurchase the interest at formula price].
• Purpose: prevent speculative idle plots and permanent construction sites inside a small community. State the purpose in the recital — it helps enforceability.

7. Design Code (Schedule C)

Binding on all Holders, all tracks. Covers at minimum: footprint ratio, height, setbacks, roof form and colour, permitted materials and palette, landscaping and retained vegetation, water management, lighting, fencing, renewables and waste.

⚠ Bali-specific overlays to be reflected: provincial building-height limits, architectural requirements, slope and ravine setbacks, water-catchment restrictions. These bind regardless of what the Design Code says. Estate policy stack: zoning system, soil policy, water policy, light policy, sound policy, air policy, carbon policy.

Amendment: [Landowner with Association consultation / Association supermajority]. Grandfathering of completed Improvements.

8. Association and shared infrastructure

• Constitution, membership (compulsory, all tracks, survives title upgrade), voting.
• Service charge: basis, cap, escalation, audit rights.
• Landowner's obligations for access roads, drainage, water and power connection points — define precisely, since a Plot without legal access and connections cannot obtain PBG regardless of the lease.
• Long-term: whether shared infrastructure is retained by the Landowner, transferred to the Association, or handed to the municipality.

9. Representations

Landowner: valid title, no encumbrances beyond those disclosed, zoning permits the intended use, KKPR status disclosed, licences held (including KBLI [68111]) and their locational scope. Holder: identity and status, source of funds, no nominee arrangement, ability to fund construction.

⚠ Disclose honestly: master-title term and renewal risk, zoning status and any pending change of designation, and that Hak Sewa is unregistered. Non-disclosure here is the fastest route to a void agreement.

9A. Licences — warranty and Licence Event regime

9A.1 Warranty. The Landowner warrants that at the date of this deed it holds a valid NIB and the business licences required for the activity contemplated here, including KBLI [68111] covering the location of the Estate, and undertakes to use reasonable endeavours to maintain them and to file required periodic reporting (including LKPM).

9A.2 Definition. A "Licence Event" means the suspension, revocation, non-renewal or material restriction of any licence of the Landowner necessary for the activity contemplated here.

9A.3 No automatic termination. ⚠ A Licence Event does not of itself constitute a material breach and does not give the Holder a right to terminate, provided the Holder's quiet enjoyment and actual use of the Plot continue undisturbed.

Rationale — put this in the recitals, not only in counsel's file: the Landowner's right to grant this lease derives from its land title, not from a business licence; a licence is an administrative requirement whose breach is sanctioned against the Landowner by the authorities, and the parties intend that such an administrative matter shall not cascade into the simultaneous collapse of every agreement across the Estate.

9A.4 Holder's remedies, tiered by actual impact. On a Licence Event the Landowner shall notify the Holder within [14] days, stating cause and cure plan, and:

9A.5 Landowner's obligations during a Licence Event. Diligent pursuit of cure; [quarterly] progress reporting to the Holder or the Association; no new grants over the Estate while the impediment subsists if making them would aggravate the position.

9A.6 Carve-out. ⚠ §§9A.3–9A.4 do not apply where the Licence Event results from the Landowner's fraud, wilful misconduct, or failure to remedy after repeated written warnings from the authorities. Protection against administrative accidents is legitimate; a shield against neglect is not — and a clause drafted as the latter invites a court to disregard the whole of §9A.

9A.7 Holder's own licences. Any licence required for the Holder's own activity on the Plot — including short-term rental or commercial use under §2.6 — is the Holder's responsibility. The Landowner's licences do not extend to it.

9A.8 Severability of consequences. A Licence Event affecting one KBLI or one location does not, of itself, affect obligations under this deed that do not depend on that licence.

10. Termination and end of term

• Default and cure mechanics for both sides.
• Fate of Improvements — the clause most often missing and most often litigated. Choose explicitly: (a) Holder removes; (b) Improvements pass to Landowner without payment; (c) pass with compensation at [depreciated cost / independent valuation]. Different answers may apply at natural expiry, early termination for Holder default, and termination for Landowner default.
• Master-title failure: consequences if the HGB is not renewed — refund formula, abatement, or termination without fault.

11. Dispute resolution

Governing law: Indonesian. Escalation: negotiation → mediation → [BANI arbitration in Jakarta/Denpasar, in English and Indonesian / District Court of Singaraja]. Language of proceedings. Interim relief.

12. Taxes and costs

Allocate expressly: PPh on lease value; BPHTB and PPh on any title transfer; notarial and PPAT fees; splitting and conversion costs; annual PBB; service charge. State whether prices are gross or net of tax.

Schedules

• A — Estate: title, area, cadastral references, zoning status
• B — Plot: boundaries (patok, adjoining owners, GPS/UTM), indicative area, site plan / peta bidang (initialled); baseline for §2.7 and for redelivery under 5A.6 #6 via Schedule H
• C — Design Code
• D — Community Rules
• E — Renewal price formula (and unamortised prepaid return formula under §9A.4)
• F — Utilities and access specification
• G — Permitted-use matrix by Holder class and track
• H — Condition schedule at site handover (baseline for redelivery under 5A.6 #6)

Open drafting questions

• Confirm exact master-title type, remaining term, and renewal position — everything above is capped by it
• Confirm zoning and KKPR status per parcel; confirm no LP2B designation
• Confirm with BPN Buleleng whether PBG alone (without completed building) satisfies the rumah tinggal test for Hak Milik conversion
• Decide whether upgrade tracks are offered from day one or after a residency period
• Decide the covenant mechanism that survives conversion to Hak Milik — this determines whether the community holds together long-term
• Threshold at which the aggregate activity may be characterised as perumahan, triggering the housing-law regime
• Verify KBLI 68111 locational scope covers all intended parcels — the NIB shows a different postcode for 68111 than for the other codes
• Confirm with counsel that §9A survives a challenge under Art. 1320 KUHPerdata (lawful cause) — the risk is a counterparty arguing the whole lease is void for want of licence, not merely that §9A fails
• Decide whether the Association, rather than each Holder individually, is the counterparty for Licence Event reporting
• Confirm whether the Landowner needs its own construction KBLI where it applies for PBG but outsources the works — position taken here: no, provided the contractor holds SBU and the Landowner builds on its own land
• Decide who appoints the construction supervisor, and whether a single approved-contractor panel is imposed Estate-wide
• Settle any already-known area shortfall before locking pure per aversionem under §2.7; then fix ad corpus going forward in the same addendum
• Choose full bilateral waiver of Arts. 1588–1592 vs asymmetric floor (e.g. no claim above [850] m²; pro-rata reduction below)
• Run boundary description and Berita Acara Persetujuan Batas plan with adjoining owners before relying on §2.7

Notes for counsel / PPAT

• Not legal advice. English is the working language of this skeleton; Bahasa Indonesia text for execution is still to be drafted and must prevail under Law 24/2009 unless parties agree otherwise and accept the risk.
• Arts. 1588–1592 KUHPerdata (area shortfall) are dispositive; parties may contract out via per aversionem / ad corpus, provided boundaries are objectively determinable.
• Concrete articles and final wording through the notary — preferably not only the notary proposed by the Landowner alone.