Key Changes and Additions on the Association of the Owner and Tenant of Condominium Unit

The Regulation of the Minister of General Works and Public Housing Number 14 of 2021 on the Association of Owner and Tenant of Condominium Unit has been revoked by the recently issued Regulation of the Minister of Housing and Settlement Number 4 of 2025 on the Management of Owned Condominium and Association of Owner and Tenant of Condominium Unit. The new regulation is significantly more advanced than the previous one accommodating the modern form of the association of owner and tenant of condominium unit (PPPSRS) despite being late for so many years, especially if compared to the neighboring countries such as Singapore and Malaysia.

Some key changes are removal of the one man one vote provision in electing the manager and supervisor of the PPPSRS, alteration of ‘member general meeting’ to ‘member deliberation’, removal on the voting mechanism at the initial setup of PPPSRS, noncompulsory nature on the guidelines for articles of association and by-laws, noncompulsory nature that the handover of condominium from the developer to PPPSRS is made before the Notary, and condition on the election of manager and supervisor of PPPSRS. In addition, this new regulation is much more comprehensive than the previous one regulating some items that have not been regulated before e.g., comprehensive management aspect of the condominium, calculation of the service charges and sinking fund, forms to set up the PPPSRS and handover, subdivision of PPPSRS manager for residence and non-residence, subdivision of the common property, financial statement, bank account and bookkeeping, deficit of service charges, management and tenancy agreement, limit of NPP voting right, joint PPPSRS, due diligence on the condominium on handover of condominium to PPPSRS, action to the unit late in paying the service charges, estate management forum, registration of PPPSRS, administrative sanction, and dispute settlement on the setup of PPPSRS. This article will discuss the key changes and new additions of the new regulation of 2025 that is applicable since 17 April 2025 from the previous regulation that was applicable since 31 March 2021.

General

The new regulation has more than double the new provisions from the previous one. The previous regulation has 43 clauses, but this new regulation has 101 clauses. The previous regulation only attached form of deed of establishment, articles of association and by-laws of PPPSRS. This new regulation has 5 (five) attachments, namely (i) calculation of service charges and sinking fund, (ii) guidelines on the drafting of articles of association and by0laws, (iii) forms of document and procedures to prepare the setting up of PPPSRS, (iv) forms of document and procedures to implement the deliberation setting up the PPPSRS, and (v) form of minutes of agreement on the delivery of management from the developer to PPPSRS. In addition, this new regulation is titled differently from the previous one due to its more expansive provisions on the management of PPPSRS. The new title is “Management of Owned Condominium and Association of Owner and Tenant of Condominium Unit” while the old one does not have the “Management of Owned Condominium” in its title.

Key Changes – Voting right

In the previous regulation, voting right to elect the manager and supervisor was based on one vote per owner even though the owner has more than 1 (one) condominium unit. In the new regulation, for normal fully owned condominium unit which has certificate of right of ownership over condominium unit (SHM Sarusun) as its title, the voting right would be based on comparative proportional value (NPP) with a limit of 20% per owner. While for the building-only owned condominium which has building ownership certificate (SKBG), the voting right is one vote per owner even though the owner has more than 1 (one) unit. This provision follows the previous regulation. This change is significant to the developer especially to the developer developing mixed use project. But this amendment alone may not be suitable when not combined with the two-tier concept of PPPSRS subdividing the residence and nonresidence function, which has been accommodated under the new regulation.

What is lacking, the new regulation does not specifically provide that each subdivision may conduct each own member deliberation (meeting) to decide the service charges, sinking fund, and other matters for that subdivision based on valid voting rights. Despite being subdivided, the question is, whether all matters must be submitted to the ‘parent’ PPPSRS and decided by all members (residence and nonresidence), or will it be decided on the subdivision level? This is unclear.

Furthermore, the general voting right provision that was regulated under the previous regulation i.e., ownership, management, and tenancy are removed in the new regulation. This would mean that the types of voting right will refer to the Government Regulation No. 13 of 2021 on the Implementation of Condominium (“GR on Condominium”).

Key Changes – Member general meeting
The defined term “member general meeting” is altered to “member deliberation”. It is not clear why this amendment is made. The amended term, according to the author, does not change its meaning. The different defined term should have not been made since the term of “member general meeting” is still used under the GR on Condominium.

Key Changes – Removal on the voting at the initial setup of PPPSRS

At the initial setup of PPPSRS, there are some documents and amount that must be approved, e.g., organization structure, draft of articles of association and by-laws, and rules of meeting. The previous regulation only stipulates that it is based on voting. But the GR on Condominium provides that the voting is based on the number of units owned by the owner. Hence, it is not ‘one owner one vote’ voting right. But this provision is removed in the new regulation. In addition, the new regulation also provides another additional item to be approved in the initial setup of PPPSRS i.e., amount of service charges and sinking fund, penalty on the nonpayment, plan for sinking fund use, financial statement for transitional period, and management plan and its budget.

Since the new regulation is silent on these items, what is clear is only on the legalization of organization structure and draft of articles of association and by-laws because both these items are governed under the GR on Condominium. For other matters, what basis would be used? Would it be based on NPP or based on number of units owned. This is unclear and may create confusion in the initial setup.

Key Changes – Noncompulsory nature on the guidelines for articles of association and by-laws

There are two aspects in this regard. First, the guidelines seem noncompulsory in nature. The previous regulation stipulates that the articles of association and by-laws are drafted in accordance with the attached document. This new regulation only says that the attached document is a guideline to draft articles of association and by-laws which serves as integral part of the regulation. Second, the guideline in the new regulation excludes the form of deed of establishment of PPPSRS.

Key Changes – Noncompulsory nature that the handover of condominium from the developer to PPPSRS is made before the Notary
The previous regulation stipulates that the delivery of management of common property from the developer to the PPPSRS is made before the Notary. In this new regulation, it may be done before the Notary, hence, it is not compulsory to do it before the Notary.

Key Changes – Condition on the election of manager and supervisor of PPPSRS
The new regulation provides that the election of manager and supervisor of PPPSRS is to be conducted if, based on NPP, at least 25% of deed of sale and purchase from the developer to the owner has been made. When the deed of sale and purchase of unit has not yet reached 25%, what will be formed is the joint management of PPPSRS in contrast to the definitive management of PPPSRS. This joint management is temporary in nature and the joints management of PPPSRS must conduct the election of manager and supervisor of PPPSRS once the 25% threshold is reached.

New Addition – Expansive management aspect of condominium

The management aspect of condominium under the previous regulation was very short and did not really implement the provisions under GR on Condominium that covers operational, maintenance, and care of the building. In contrast, the new regulation specifically regulates each sub aspect of the management. It regulates the scope of each sub aspect. For example, operational covers operation of road, employment and financial administration, safety and cleanliness management. Management covers cleaning, tidying, inspection, testing, repair and replacement. Care covers rehabilitation, renovation, and restoration. The new regulation also stipulates that a record should be made, before and after the implemented work, that will be legalized and approved by the building operator. The new regulation also provides that PPPSRS may do the management by its own (which was not regulated previously and only applicable for low level and low intensity building), form a building operator or engage a building operator.

New Addition – Calculation of the service charges and sinking fund
The new regulation provides the complete guide and formula to calculate the service charges and sinking fund of a condominium with a basic formula, namely that the annual service charges equal to income minus expenses.

New Addition – Forms to set up the PPPSRS and handover
The new regulation provides for the standard forms to set up the PPPSRS, its implementation, and handover from the developer to PPPSRS. The forms are quite detail and can be easily used as reference by the deliberation committee.

New Addition – Subdivision of PPPSRS management for residence and nonresidence

The organization of PPPSRS is not only ‘one tier’ organization as it used to be. Now, it can consist of PPPSRS, subdivision of residence, and subdivision of nonresidence. The subdivision of nonresidence may consist of office, commercial, hotel, tourism, and recreation. The formation of subdivision of nonresidence is possible when it consists of not less than 10% of the total floor area of constructed condominium. This subdivision must be made during the initial setting up of PPPSRS, in the draft of articles of association and by-laws. The allowance of subdivision causes the ‘two tier’ PPPSRS where the PPPSRS will act more as coordinator of the other subdivisions of residence and nonresidence in the condominium. This subdivision of PPPSRS management is significant for modern form of PPPSRS and fortunately, the new regulation also provides for the subdivision of the common property.

New Addition – Subdivision of the common property

It is normal that the common property of residence and nonresidence is separately used. The new regulation confirms this possible separation in a condominium. Difference common property may refer to different quality of facility, different number of facilities, and different type of facility. For example, the common property of a hotel which may cover swimming pool and fitness center may be different with the common property of an office which may not have both facilities. The new regulation stipulates that the subdivision PPPSRS management of residence and nonresidence will be responsible for the management of each common property under their responsibility. This is another crucial modern form of PPPSRS that we have previously been lacking.

New Addition – Financial statement, bank account and bookkeeping
The question on which bank account the service charges and sinking fund are paid to have now become clear. When the PPPSRS is not yet formed, all payment is made to the developer’s bank account after the first delivery. This first delivery is not further regulated in the new regulation. But reading the GR on Condominium, it covers the transfer of title and handover of the condominium unit. When the PPPSRS is formed, the payments will be made to the PPPSRS’ bank account.

The developer must prepare a half-annual and annual financial statement according to the accounting standard. This financial statement must be delivered regularly to the owners. The annual financial statement must be audited. The same applies to PPPSRS. PPPSRS must prepare a monthly, quarterly, and yearly financial statement according to the accounting standard. This quarterly financial statement must be delivered to the owners regularly, and the yearly financial statement must be audited.

New Addition – Deficit of service charges

The developer is to bear the deficit of service charges in the transitional period when the PPSRS is not yet formed. Despite this might have been applicable in practice, this is specifically regulated in the new regulation.

New Addition – Management and tenancy agreement
The new regulation provides that a tenancy and management agreement is to be signed between the developer and buyer. This agreement consists of commitment of the owner to adhere to tenancy regulations, paying the service charges and sinking fund, and paying the penalties of late payment. This management agreement has been existing for some time despite not being specifically regulated. What is confusing, the new regulation stipulates that this management agreement is to be re-signed between the owner and PPPSRS after the PPPSRS is formed. This is unnecessary since the owner will be bound to the articles of association and by-laws of the PPPSRS. That provision will essentially reduce the power and authority of PPPSRS. As a legal entity, and as an association having the authority over management of common property, without having any separate agreement, each owner is legally bound to adhere to the rules of PPPSRS.

New Addition – Due diligence on condominium handover
The handover of management of condominium is conducted through the report of management of condominium and due diligence. Due diligence includes the comprehensive inspection of the conformity of the building with its title of division and certificate of feasible function, license and other legal document, and record of management. PPPSRS may engage a professional to do the due diligence.

New Addition – Action to the late payment of service charges

When the owner has arrears due to late payment of service charges and sinking fund more than 30% of the purchase price, the developer or PPPSRS may proceed to a court to sell the condominium unit owned by that owner. It is not clear what legal mechanism should be followed by either the developer or PPPSRS to achieve this sale. The developer or PPPSRS may surely claim the owner having such arrear but the sale through an executionary procedure that may only be made after the claim is successful and having obtained the legally binding decision.

New Addition – Estate management forum
In a gradual development of condominium in one complex, each PPPSRS in each joint land must be set up prior to the end of transitional period. When all PPPSRS have been established, these PPPSRS must set up an estate management forum. This forum is established through a joint meeting among already-formed managements of PPPSRS within a complex. The new regulation does not clearly provide the intent of this forum other than the obligation to form a forum.

New Addition – Registration of PPPSRS
Registration of PPPSRS has not yet been regulated in the previous regulation. In the new regulation, the registration requirements consist of first-time registration and registration on the change of manager and supervisor of PPSRS.

New Addition – Administrative sanction
The new regulation stipulates various administrative sanction that can be determined by the regional government, from reprimand to the revocation of license. This sanction may be made gradually, freely, and cumulatively.

New Addition – Dispute settlement on the setup of PPPSRS
When there is a dispute in the setup of PPPSRS, the technical instance may facilitate the resolution of dispute for two times based on the report by the owner or developer. When the disputing parties do not accept such facilitation, the dispute will be resolved through court or out of court settlement procedure. Internal dispute after the PPPSRS is formed will be resolved through the mechanism under its articles of association and by-laws.

All the changes and additions under the new regulation are crucial to achieve the modern form of PPPSRS which Indonesia has been lacking all this time. But from all those changes and additions, from the perspective of mixed-use real estate developer and general developer, the change on voting rights on the election of manager and supervisor of PPPSRS from ‘one owner one vote’ to voting based on NPP, subdivision of PPPSRS management for residence and nonresidence, and subdivision of common property among different types of property within one complex are the most important. These new changes and additions may motivate and empower the disappointed and confused real estate developer to conclude the postponed formation of PPPSRS and to commence the postponed mixed use real estate project. Even though the new regulation is essentially positive and beneficial to all real estate developers, there are still non-clarity or lacking further provisions that the government should be more attentive in the future, especially when amending this new regulation of 2025. Apart from what has been described above, it is not clear whether the PPPSRS that has nonresidence function e.g., shopping center, office, and hotel may adjust its existing articles of association and by-laws based on this new regulation, which may be very beneficial to the owner and management of the complex. One may argue that the government cannot interfere the amendment provisions set out in the existing articles of association of that PPPSRS that has been approved by the members. But since most of the time it is very hard to amend such articles of association, the law should be able to be used as legal basis to do the adjustment. But for now, the real estate developer in Indonesia cannot be more than happier with this new regulation.

—oo00oo—

Dr. Eddy M. Leks

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