Real Estate Law
Execution of The Mortgage

Execution of The Mortgage

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Background
Mortgage regulated under the Law No. 4 of 1996 on Mortgage (“Mortgage Law”). Under the Mortgage Law, it is regulated that guarantee repayment of debt through mortgage provides a feature which is called the preferred creditor/ kreditur preferen. Preferred creditor is a creditor who has priority/ privilege right more than other creditor for the debt repayment of debtor in the case of failure events receivable. The holder of mortgage lender who is also separatist creditor has separated position than other creditor in condition of bankruptcy of the personal or legal entity. It is regulated under the Law No. 37 of 2004 on Bankruptcy and Suspension of Payment.

Execution

According to the Great Dictionary of Indonesian Language (Kamus Besar Bahasa Indonesia), execution is “Pelaksanaan putusan hakim; pelaksanaan hukuman badan peradilan atau Penjualan harta orang karena berdasarkan penyitaan.”

Under the Mortgage Law, there are 3 (three) types of the mortgage execution:

1. Executorial Title

Is execution according to irah-irah “Demi Keadilan Berdasarkan Ketuhanan Yang Maha Esa”. The method of that execution is performed by institution of parate executie. It is based on the Code Civil Law. This type of execution has the same strength with court decisions that already have permanent legal force.

2. Execution of The Own Power / Eksekusi atas kekuasaan sendiri

Under The execution of the rule itself has to be settled in previous agreements. According to Article 20 (1) a jo. Article 6 of Mortgage Law, if the debtor defaults then the first mortgage lender has the right to sell the mortgage object on its own power through a public auction and taking the payment of claims from the proceeds.

3. The Underhand Execution/ Eksekusi Dibawah Tangan

The object of the underhand execution is regulated under Article 20 (2) and (3) of the Mortgage Law. The essence of this clause is the existence of an agreement between the giver and the mortgage holders that the sales of the underhand object will obtain the highest price which will benefits all parties. The underhand sales can only be done after 1 (one) month notice in writing by the mortgage holders to the interested parties and it should be published in at least 2 (two) newspapers which circulating in the relevant area and there is no objection from any parties.

Ivan Ari & Ivan Setiady

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Covenants Stipulated in Deed of Granting of Mortgage

Covenants Stipulated in Deed of Granting of Mortgage

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Introduction

As we already have known, according to Law Number 4 of 1996 on Mortgage of Land along with Properties Related to the Land (“Law 4/96”), the granting of mortgage is conducted by making the Deed of Granting of Mortgage (“Deed”) by the Land Conveyancing Officer (“Pejabat Pembuat Akta Tanah/PPAT”) in accordance with the prevailing laws and regulations. It is also regulated in Law 4/96, particularly in Article 11 paragraph (2) that the Deed may stipulate some covenants, considering the effort to keep the good value of the mortgage object, especially at the time of the execution. The covenants are facultative, means that it has no effect to the validity of the Deed. The parties concerned are free to determine whether or not they will stipulate the covenants in the Deed. However, in the event that the parties concerned are stipulating the covenant in the Deed and registering the Deed at the land office, such covenants shall be binding to the third party.

Covenants Stipulated in the Deed

According to Article 11 paragraph (2) of Law 4/96, the covenants that may be stipulated in the Deed are as follows: [More…]

covenant which is limiting the competency of the mortgage provider to rent out the mortgage object and/or determine or change the lease term and/or receive the rent money in advance, unless with the prior written approval of the mortgage holder;
covenant which is limiting the authority of the mortgage provider to change the form or structure of the mortgage object, unless with the prior written approval of the mortgage holder;
covenant which is giving authority to the mortgage holder to manage the mortgage object according to the stipulation of chairman of the district court which jurisdiction covers the location of the mortgage object, in the event that debtor is in default;
covenant which is giving authority to the mortgage holder to save the mortgage object, if it is necessary for the enforcement of the execution or to prevent the abolishment or cancellation of the rights as the mortgage object, due to the non-fulfillment or violation of the provisions of law;
covenant that the first mortgage holder has the right to sell, on its own authority (power), the mortgage object if the debtor is in default;
covenant given by the first mortgage holder that the mortgage object will not be cleared from the mortgage;
covenant that the mortgage provider will not relinquish its right of the mortgage object without prior written approval of the mortgage holder;
covenant that the mortgage holders will acquire all or the part of the compensation received by the mortgage provider as the settlement of the loan concerned in the event that the mortgage object is released by the mortgage provider or revoked for public interests;
covenant that the mortgage holder will acquire all or the part of the insurance money received by the mortgage provider for the settlement of the loan concerned, if the mortgage object is insured;
covenant that the mortgage provider will vacate the mortgage object at the time of execution;
covenant that the certificate of land right(s) as the mortgage object will be held by mortgage holder.

Furthermore, Article 12 of Law 4/96 clearly expresses that if there is covenant which is giving the authority to the mortgage holder to own the mortgage object if the debtor is in default, such covenant is null and void. Such provision is stipulated in order to protect the interests of the debtors and other mortgage providers, especially if the value of the mortgage object exceeds the amount of the debt that is being collateralized.

Ivan Setiady

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Debt Secured by Mortgage

Debt Secured by Mortgage

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Background
Referring to Law Number 4 of 1996 on Mortgage of Land along with Properties Related to the Land (“Law 4/96”), particularly Article 10 paragraph (1), it is stated that the granting of mortgage is preceded by a covenant to provide mortgage as the security for settlement of certain debts, which is set out in and as an integral part of the debt (loan) agreement concerned or other agreement which causees such debt. Mortgage is accessoir, which means that the granting of a mortgage should be a follow-up of the principal agreements i.e. agreement that gives rise a legal relation of such debt in which its settlement is secured. Therefore, it can be said that the existence of a mortgage is always agreed upon and follow (accessoir) the principal agreement.

Settlement of Certain Debt

According to Article 3 paragraph (1) of Law 4/96, the debts, in which its settlement can be secured are as follows: [More…]

debt which is already existed at the time of the granting of the Mortgage;
debt which has not yet been existed but has been agreed.

Furthermore, it is also regulated that the amount of the debt which its settlement is secured with the mortgage can be determined at the time agreed (agreed in the related agreement) or determined at the time of the execution petition is filed, under the debt (loan) agreement or other agreement that give rise to the related debt relation.

Article 3 paragraph (2) of Law 4/96 states that the mortgage can be encumbered upon a debt due to a legal relation or upon one or more debts due to several legal relations. Based on that, Rachmadi Usman, S, H., M.H. interprets that the granting of a mortgage is possible upon:

several creditors who combine in providing loan to a debtor under a legal relation (loan agreement);
several creditors who provide loan to a debtor under several and different legal relations (loan agreement) for each creditors.

Ivan Setiady

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The Legal Meaning of Mortgage

The Legal Meaning of Mortgage

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Background
To maintain the sustainability of the national economic development, it needs large amount of funds. The more increase of development activities, the more of the needs of availability of funds, whereas such funds are mostly obtained through credit financing activities.

Considering the importance of the position of credit financing in the property development, it is reasonable enough for the creditor and the debtor and other related parties to obtain protection through an institution of security rights and who can provide legal certainty for all parties concerned, which can
encourage public participation in national development to realize
a prosperousand fair society. In order to realize that purpose, the government already arranged provisions in relation to such security rights, particularly for security rights of land as set forth in Law Number 4 of 1996 on Mortgage (Hak Tanggungan) along with Properties Related to the Land (“Law 4/96”).

Mortgage (Hak Tanggungan) of Land
In Article 1 of Law 4/96, a mortgage is a security right over right(s) of land, along with or without other properties that constitute a unity with such land, for the settlement of certain debts, which gives the preferred position to certain creditors against other creditors (“Mortgage”). Mortgage cannot be split, unless otherwise agreed in the Deed of Granting of Mortgage.

Rights of land that can be encumbered with Mortgage are right of ownership, right to cultivate, right to build, and right of use over state’s land (“Object”). An Object can be encumbered with more than one Mortgage in order to guarantee the settlement of more than one debt. If an Object is encumbered with more than one Mortgage, the rank (level) of each Mortgage is determined by the date of their registration at the Land Office.

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Granting and Registration of Mortgage of Land

Granting and Registration of Mortgage of Land

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Background
Mortgage (hak tanggungan) of land is a security right over right(s) of land, along with or without other properties that constitute a unity with such land, for the settlement of certain debts, which gives the preferred position to certain creditors against other creditors (“Mortgage”). In this regard, there are procedures for granting, registration and transfer of Mortgage as stipulated in Law Number 4 of 1996 on Mortgage of Land along with Properties Related to the Land (“Law 4/96”).

Granting of Mortgage
Granting of Mortgage is preceded by a promise or covenant to grant the Mortgage as the security of payment of certain debt, which is set out in and as an integral part of the related loan agreement or other agreements that cause such debt.
The granting of Mortgage is conducted by making the Deed of Granting of Mortgage by the Land Conveyancing Officer (“Pejabat Pembuat Akta Tanah/PPAT”) in accordance with the related prevailing laws and regulations. In the event that the object of the Mortgage is the right(s) of land which is derived from the conversion of the previous rights that have been eligible to be registered but the registration has not been done, the granting of Mortgage shall be conducted simultaneously with the application for the registration of such right(s) of land.
According to Article 11 of Law 4/96, a Deed of Granting of Mortgage must include:
name and identity of the holder and grantor of Mortgage;
domicile of the parties. If there are any party that is domiciled outside the territory of Indonesia, to such party, shall also be included a choice of domicile in the territory of Indonesia. In the case that the choice of domicile in the territory of Indonesia is not included, the territory of the Land Convenyancing Office where the Deed of Granting of Mortgage is made, is regarded as the chosen domicile;
the clear determination of the debt(s) which is secured by the Mortgage;
the value of the security;
clear description of the object of the Mortgage.

Registration of Granting of Mortgage
The granting of Mortgage shall be registered at the Land Office. PPAT shall deliver the Deed of Granting of Mortgage and the other warkah to the Land Office within a period not later than 7 (seven) business days after the signing date of such Deed of Granting of Mortgage. Registration of Mortgage is conducted by the local Land Office by making the land book of Mortgage and record it in the land book of such right of land (as the object of the Mortgage) and also copy such record into the certificate of right of land concerned.
As the evidence of the existence of the Mortgage, the Land Office will issue certificate of Mortgage in accordance with the prevailing laws and regulations (“Certificate”). This Certificate has the equal executorial power with the court decision which has permanent legal enforcement. The Certificate shall be delivered to the holder of the Mortgage.

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Establishment of the Tenant Association of Condominium

Establishment of the Tenant Association of Condominium

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Background

Condominium is a building built in an environment which is divided into parts that are functionally structured horizontally and vertically and consisting of units that can be owned individually and can be used separately, particularly for residence, which is completed with common equipment, common facility, and common land. In the condominium, there are private property managed by the owner himself and the common rights which should be used and managed together because it involves the common interest. Utilization and management of condominium and its environment should be arranged and conducted by the tenant association. There are some regulations on the tenant association, such as Law Number 16 of 1985 on Condominium (“Law 16/85”), Government Regulation Number 4 of 1988 on Condominium (“GR 4/88”), and Decree of State Minister of Public Housing Affairs Number 06/KPTS/BKP4N/1995 on Guidance on Making Deed of Establishment and Article of Association of Tenant Association of Condominium (“Decree”).

Tenant Association

According to Article 1 of Law 16/85, tenant association is an association which consists of tenants as its member. Article 19 of Law 16/85 states that tenants of condominium shall establish a tenant association, having the main task to regulate manage, and also to guarantee order, principle of mutual aid, and harmony based on the Indonesian personality, in order to manage the common equipment, common facility, and common land.
Tenant association, by the Law 16/85, is given the status as a legal entity with the deed of establishment and articles of association, therefore, the tenant association may act in and out on behalf of the owner, and with its authority, the tenant association shall realize the comfortability of the environment of the condominium in order. Establishment of tenant association should be executed with a deed that is legalized by Regent, Mayor Head of Region II, and especially in Jakarta, shall be legalized by the Governor Head of Special Capital City Region of Jakarta

Establishment Meeting

Refer to the Decree, it is stated that in the establishment of tenant association, firstly, the owner and/or tenant of condominium shall convene the meeting of establishment of tenant association (“Meeting”), and the result of such Meeting shall be stated in the minutes of Meeting. In the Meeting, it shall appoint some of the member/participant of the Meeting, and such member/participant shall be given the power of attorney to appear before the Notary to make all of the statements as the result of the Meeting. Furthermore, in the Meeting, without prejudice to the permission of the authorities, shall decide and arrange the article of association of the tenant association in accordance with the Decree.

On the tenant association, its membership was chosen based on the family principle by and for the member of tenant association through the general meeting of tenant association which held especially for that necessity, provided that the board of tenant association at least shall consist of a chairman, a secretary, a treasurer, and a management supervisor.

The person who can be the member of the tenant association is a legal subject who has, or use, or rent, or lease or utilize unit of condominium concerned, having status as a tenant. Establishment of tenant association is very important, because it has a main task and authority to manage and maintain the environment of the condominium, and arrange the regulation on tenancy rules. Membership of tenant association is based on the reality of occupancy, means that the person who can be a member of the tenant association are those who actually inhabit or occupy the unit of the condominium either on the basis of ownership or other legal relation. If the owner has not yet occupied, use or utilize the unit of condominium, thus, the developer becomes a member of the tenant association. If the developer of condominium is has not yet sold the entire of the units of the condominium, the developer shall act as a member of the tenant association.

Isrilitha Pratami Puteri

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Revocation of Lands Rights

Revocation of Lands Rights

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Revocation of Lands Rights

Background

In order to implement the provision of the granting of rights of land in accordance with Law Number 5 of 1960 on Agrarian Principle Regulation (“Law No.5/1960”) and Government Regulation Number 40 of 1996 on Right to Cultivate, Right to Build and Right of Use of Land, the procedure of the revocation of such land rights must also be regulated, which is already set forth in Regulation of Agrarian State Minister/Head of National Land Agency Number 9 of 1999 on Procedure of Granting And Revocation of Rights of State Land and Right of Management (“Regulation”).

Revocation of Rights of Land

Point 1 letter 14 of Regulation states that revocation of land rights means the revocation of the decree of the granting of land rights or land rights certificate (“Granting Decree”) due to the administrative legal error in the issuance of such Granting Decree or in order to implement the court decision which has obtained the permanent legal power.

The revocation includes the revocation of: (a) decree of the granting of land rights; (b) certificate of land rights; and (c) decree of the granting of rights in order to regulate the land acquisition. The revocation of land rights is conducted through the decree of Minister who is responsible in agrarian/land field (“Minister”). Minister may delegate such revocation to the Head of Regional Office of National Land Agency, which is the National Land Agency Office for the provincial level (“Regional Office”) or to the appointed officer.

Revocation

1. Revocation of land rights due to administrative legal error

According to Article 107 of Regulation, the administrative legal error means (i) procedural errors, (ii) error implementation of laws and regulations, (iii) error of the subject of rights, (iv) error of the object of rights, (v) error of the type of rights, (vi) error of area calculation, (vii) there is overlap of land rights, (viii) juridical or physical data is incorrect, or (ix) other administrative legal errors.

The decree of revocation of land rights due to administrative legal error in its issuance may be conducted due to (i) the application from the party in interest or (ii) the authorized officer without application. The revocation of land rights due to administrative legal error through the application from the party in interest is submitted directly to the Minister or the appointed officer through the Head or Land Office, which is the National Land Agency for the district/city level (“Land Office”). Meanwhile, the revocation of land rights without application by the authorized officer is conducted if it is found that there is legal error in the issuance process of the Granting Decree without an application.

2. Revocation of land rights due to the court’s decision

The decree of the revocation of land rights due to the implementation of court’s decision which has obtained permanent legal power shall be issued through the application of the party in interest, provided that such application is submitted directly to the Minister or Head of Regional Office or through the Land Office.

Procedure of Revocation of Land Rights

There are some processes in the procedure of revocation of land rights, as follows:

1. Land Office

The revocation application is submitted in writing to the Minister through the Head of Land Office having the work area within the location of the land concerned, and enclosed with documents, such as: (i) copy of identity card and nationality (if the applicant is individual) or copy of deed of establishment (if the applicant is a legal entity); (ii) copy of the Granting Decree and/or certificate of land concerned; (iii) other documents related to the revocation application.
After the application is received, the Head of Land Office shall: (i) inspect and examine the completeness of the juridical and physical data; (ii) record in a form; (iii) provide a receipt of the application; (iv) notify the applicant to complete the juridical and physical data if necessary.
2. Regional Office

In the event that the revocation application is delegated to the Head of Regional Office, the Head of Regional Office shall record it in a certain form and inspect and examine the completeness of the juridical and physical data, and if it is not completed yet, shall request the Head of Land Office concerned to complete the documents.
In the event that the revocation application is delegated to the Head of Regional Office, the Head of Regional Office issue the decree of revocation of land rights or decree of rejection along with the reason.
3. Minister

After receiving the revocation application, the Minister orders the competent officer to inspect and examine the completeness of the juridical and physical data, and if it is not completed yet, shall request the applicant to complete the documents and record it in a certain form.
Minister will decide such application by issuing the decree of revocation of land rights or decree of rejection along with the reason.

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Inheritance of the Right of Use

Inheritance of the Right of Use

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According to Article 41 of Law Number 5 of 1960 on the Principles Provisions of Agrarian (“Agrarian Law”) [Note: sy sudah ingatkan berkali2 untuk gunakan terms yang sama dengan yang sudah kita buat dan ada di web kita[, Right of Use means right to use and collect the production over State Land or land which is owned by private parties. As stipulated in Article 42 of Agrarian Law, Right of Use can be granted to:

Indonesian citizens;
foreigners domiciled in Indonesia;
Indonesian companies established based on Indonesian law and domiciled in Indonesia; and
foreign companies having its representative office in Indonesia.

Assignment of Right of Use

According to Article 54 paragraph (3) of Government Regulation Number 40 of 1996 on Right to Cultivate, Right to Build, and Right of Use Over Land (“Government Regulation 40”), it is stated that the Right of Use can be assigned by the following reasons:

sale and purchase;
exchange;
capital participation;
grant;
inheritance.
Further, the assignment shall be registered to the Land Office (kantor pertanahan). For the assignment of Right of Use as a result of inheritance, Article 54 paragraph (7) stipulates that the assignment shall be evidenced with the testament or heir information document (surat keterangan waris) which is issued by the competent authority.

The Article 42 of Government Regulation Number 24 of 1997 on Land Registration (“Government Regulation 24”) has set out the required documents that must be provided by the heirs for land registration:

land certificate;
death information document (surat keterangan kematian) of the holder of Right of Use;
heir information document (surat keterangan waris).
Moreover, the elucidation of Article 42 of Government Regulation 24 stated that the transfer of right is occurred when the holder of Right of Use dies, which means the heir will become the new right holder. With regards to the party who has the right to become the heir, it will depend on the civil law that applies to the existing right holder.

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