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Acquiring a home on Bali.

Here's the scenario.
At sometime in the future (maybe next year) I send money to my Balinese
friends account with which she will buy a piece of land freehold.
She will then lease the land to me (99 years would be good) allowing me
to build on it. and to live there.
I have considered, before I read Ubudians post mentioning the subject, that
she might die. (What the heck, she rides a motorbike and was involved in an
accident only a couple of weeks ago.) I don't have a solution to that. Ideas ?
I realise that I am paying full price for lease held land and I am questioning
the pro's and con's of the idea.
I think the length of the lease will be an important factor.

Personally I think the cons far outweigh the pros. Everything is a risk for you unless of course you plan to marry the lady in question and plan a long future together.

Also, if you are retiring this year, a 99 year lease won't do you much good. Twenty years is probably going to be long enough.

Why don't you just apply for a retirement visa and rent a place to live together?

Hansson :

Personally I think the cons far outweigh the pros. Everything is a risk for you unless of course you plan to marry the lady in question and plan a long future together.

Also, if you are retiring this year, a 99 year lease won't do you much good. Twenty years is probably going to be long enough.

Why don't you just apply for a retirement visa and rent a place to live together?

excellent advice I agree

Just want to add that in such a situation, I would want to see exactly where the land is located, look at the access, safety aspects, does it have great views, friendly neighbours, is it infested with mosquitoes etc. It is worth getting involved in all this if you plan to live there for retirement.

By the way, can you let us know which area you are considering?

Well gentlemen, I would be very, very silly if I hadn't  considered the risk to some degree.
And, having done so I may well consider it a risk worth taking.

The 99 year lease. Well if I decide to sell some time (20 years you think) then 79 years
left on the lease may help.

I will apply for a retirement visa, but renting a place to live together ? Where's the fun in that ?

Of course she and I will look together when we're shopping for land, and we won't be in a hurry,
and we will take into consideration all that you have mentioned Hannson.

I've looked at a few areas online but won't really consider any until I've visited and had a proper look.

What about if she dies and the Hak Milik goes to someone in her family who is not sympathetic to me ?
How to resolve that ? I don't want to seem cold but these things have to be thought about if not
seriously considered.
The same would be true for her, if I sent 50% of the building cost and at 50% complete I died
she'd be left with a house she couldn't afford to finish.

Billy, you might want to have a look at this recent discussion linked below, as it is very applicable to the questions you raise:

http://www.expat.com/forum/viewtopic.php?id=533420

As for a “99 year lease” that is unlikely, even under a Hak Pakai lease.  Most every attorney and notaris will agree that the typical maximum length of a Hak Pakai lease is 50 years…the initial 25 year lease, but with an automatic and pre-paid 25 year extension.  Some will say that a Hak Pakai can be done for up to 100 years, but the truth is, no such lease of that duration has yet to be court tested, as this instrument hasn’t been around that long.

Please also note in that discussion that you would also be facing a double tax situation if your Balinese friend first purchased the land you like, and then engaged in a Hak Pakai lease with you.  You would be far, far better off simply taking out a Hak Pakai lease (in your own name) with whomever currently owns the land you eventually find.  Simply put, there is absolutely no advantage to you by using your Indonesian friend aside from possibly helping you to locate some land you might like.

Loads of places available to lease without sending anyone any money (save the rent) and much less risk as it's legal.
Why do something illegal/dodgy when it's safer and easier to do it legally?

Hi Roy,
Thanks for the link.
Regarding the 99 yr lease. Yes I thought that might be a bit ambitious,
but a 25 +  25 prepaid sounds good enough.
As you say there would be little advantage to involving my Balinese friend.
Mostly it would be to do with enjoying a shared project but I hadn't considered
the double tax situation.
In case of my demise she would deal fairly with my next of kin.
I would expect her to sell the property with Hak Milik and dispose of the assets
in a way we would have discussed previously, including, of course, a percentage
for herself.
Either way I was thinking of building 2 houses on the land, living in one, and letting
the other as holiday accommodation at outlandish rates to foreigners in order to
support my lavish and extravagant lifestyle on Bali.

Fred :

Loads of places available to lease without sending anyone any money (save the rent) and much less risk as it's legal.
Why do something illegal/dodgy when it's safer and easier to do it legally?

Hi Fred, Why do you think there's something illegal in my proposal ?

Wish to live in Bali and want to own a house?
Better way for you is lease a plot for long term and build your house.
OR Rent a villa or house for long terms.
More safe for you.

“Hi Fred, Why do you think there's something illegal in my proposal ?”

Billy, Fred is specifically referring to your idea of using a friend, or “nominee” of Indonesian citizenship to buy land in their name which is specifically targeted for a foreigner.

This topic has also been written about rather extensively and recently on this forum, so have a look. 

That all aside, it seems to me that once you understood the double taxation of the approach you mention, you would see how illogical such an approach would be.  ;)

Billy, I just spotted this from your earlier post...

"In case of my demise she would deal fairly with my next of kin."

You should understand that your "kin" would have NO rights or privilege of use of any land you contract for here in Indonesia unless that “kin” happened to be your children born into a marriage to an Indonesian.

Ubudian :

“Hi Fred, Why do you think there's something illegal in my proposal ?”

Billy, Fred is specifically referring to your idea of using a friend, or “nominee” of Indonesian citizenship to buy land in their name which is specifically targeted for a foreigner.

This topic has also been written about rather extensively and recently on this forum, so have a look. 

That all aside, it seems to me that once you understood the double taxation of the approach you mention, you would see how illogical such an approach would be.  ;)

Yes the double taxation puts an end to the idea, but to continue to it's bitter end.

I have read that stuff Roy, and maybe I failed to put 2 and 2 together.
Surely if I enter into a lease agreement (Hak Pakai) with anyone at all, they become the nominee.
and therefore the agreement is at risk of investigation. Does that mean all foreigners holding Hak Pakai
leases with vendors they've never had dealings with before are at risk ? Should I not be looking
at land for lease ?
I understand that if she buys land one day and leases it to me the next it might look a little suspicious.
The fact that she probably couldn't afford to buy the sort of land I'm looking for might also not look good.

I do understand that my next of kin have absolutely no rights or privilege regarding anything I may
leave in Indonesia. Nevertheless I'm convinced of the honesty of my friend and that she will act
with fairness toward them.
All this is by the by if I'm not using her as nominee.

One thing is for sure. I would never attempt anything illegal either here in Australia or in Indonesia.

You can rent or lease all you like and, as long as you have a good lawyer on the job, you have few worries.

The moment you attempt to 'own' land, you give yourself a potentially serious headache.
Nominee ownerships are under the spotlight at the moment, so you risk losing the lot.

It goes like this.
An Indonesian buys the land for the foreigner.
The foreigner has a fake lease or just lives there as owner, but without his name on the deeds (In the book)

Now it splits into two.
1 - The 'on paper' owner sells the place out from under you, and they can with the book, regardless of what agreements you have. Then you have a court battle where you have to prove you illegally own a property.
2 - The government finds out, confiscates the land, and you get kicked off with not a penny back.

Of course, no one could find out and your friend might not run away with enough money to keep them for the rest of their life without ever working again.

Fred :

You can rent or lease all you like and, as long as you have a good lawyer on the job, you have few worries.

The moment you attempt to 'own' land, you give yourself a potentially serious headache.
Nominee ownerships are under the spotlight at the moment, so you risk losing the lot.

It goes like this.
An Indonesian buys the land for the foreigner.
The foreigner has a fake lease or just lives there as owner, but without his name on the deeds (In the book)

Now it splits into two.
1 - The 'on paper' owner sells the place out from under you, and they can with the book, regardless of what agreements you have. Then you have a court battle where you have to prove you illegally own a property.
2 - The government finds out, confiscates the land, and you get kicked off with not a penny back.

Of course, no one could find out and your friend might not run away with enough money to keep them for the rest of their life without ever working again.

I see a bit of a contradiction here Fred.
On the one hand you're telling me that I can lease all I like and if I have a good lawyer I will have
few worries.
On the other, the owner of the land can sell the place from under me and might run away with the money.

Perhaps you think that I would not require a proper Hak Pakai agreement with my friend as I would
with anyone else, and certified by a "good lawyer".

“Surely if I enter into a lease agreement (Hak Pakai) with anyone at all, they become the nominee.  and therefore the agreement is at risk of investigation. Does that mean all foreigners holding Hak Pakai leases with vendors they've never had dealings with before are at risk ? Should I not be looking at land for lease ?”

I think you are confused regarding a Hak Pakai lease.  Just Google, “Hak Pakai Lease Indonesia” as there are plenty of sites which do a good job describing it.

There is no “nominee” arrangement or feature between the parties to a Hak Pakai lease.  Moreover, and this is why a Hak Pakai is best for foreigners…the Hak Pakai takes precedent OVER the pre-existing Hak Milik land deed, thus there is no way the land can be sold out from under you, or put into jeopardy by an Indonesian relative.

Ok Roy, so if we remove the word "nominee" from the equation, everything would
be good ?
So, she buys land (albeit with my money) and I enter into a Hak Pakai lease with
her properly and legally. A lease in my own name.
Is that ok ?

Good grief...what happened to what you wrote earlier..."yes the double taxation puts an end to the idea" (that idea being to use your friend)? 

But hey, if you think it's wise to pay real estate taxes twice on the same piece of land, who I am to discourage you from that?   :o

Sure it's OK, and what the heck, it's your money!

Ubudian :

Good grief...what happened to what you wrote earlier..."yes the double taxation puts an end to the idea" (that idea being to use your friend)? 

But hey, if you think it's wise to pay real estate taxes twice on the same piece of land, who I am to discourage you from that?   :o

Sure it's OK, and what the heck, it's your money!

Ok Roy. Don't get your knickers in a twist ...lol

Yes the double taxes puts paid to the idea, but I wanted to know if my opening
post, aside from the taxes, was a legitimate idea, and it seems, it was.

Too complex, and no advantage for the messing about.
Plenty of places for a simple lease without all the messing about trusting people with your cash.
Imagine sending the money, she doesn't buy the land but decides retiring to Lombok on your cash is a good move.
You have pretty much zero chance of getting a penny back.

Hi Billy, I would take extreme caution and seriously take Ubudians and Fred's advice and knowledge onboard . They both seem to know exactly what the risks are and are just steering you in the right direction. I'm assuming , like me , they have seen so many of us trusting ,good hearted folks who believe they are doing the right thing and trusting someone you hold dearly as a friend or lover or whatever the situation is for you only to be taken for everything! Now this is most probably not the case with you and your Balinese friend , but these guys are just giving you the correct information so that you come up with the ending you are looking for , without the worry , or in the worst case scenario , the disaster that could and does happen way to often to the unsuspecting and trusting. I personally have seen at least 3 of my friends lose thousands of their hard saved money over the last 8 years and  2 were actually married , not just good friends , so please be careful whatever you decide to do. 
I'm lucky , I had nothing to start with and still have a Balinese wife who helps us get what we now have together.
So I hope it all works out for you ,but please take their advice.  Steve

Well guys,
Because of the double taxation effect (as advised by Ubudian) the whole
scheme is shelved and therefore any discussion is moot.

I know you have my best interests at heart and I thank you for it.
The fact is though, that while some of the things I've written make me
appear naive and gullible, I'm the least trusting person I know.
Any person I might eventually trust (to some degree) has to tick
all the right boxes consistently over a period of time and over a variety
of subjects, and as I  always expect to be disappointed this is a slow
and lengthy process.
Robert Burton who coined the term "Penny wise and pound foolish" is also
credited with the adage "Building castles in the air". Not something I've
ever done.

That sounds like solid thinking to me Billy!   :top:

When it comes to old expressions as they pertain to Bali…these are my two favorites and which I have witnessed in action endlessly over the years:

“Many are called, few are chosen.”

“Expats, on Bali they ebb and flow like the tide.” 

Good luck!

Last time we went to Ubud it was just for a couple of hours and
we went in her brother's SUV. Next time we'll spend a couple of
days there and I want to ask her to let me follow her motorbike
on one I've rented for myself. (I have a little motorbike here)
If I see anyone wearing a startlingly white navel uniform, I'll
assume it's you Roy, and pull over to shake your hand, mate.

That’s an old friend from days gone by in the Lt. Commander’s uniform…but you might catch me in either a sparkly white kamben, saput, udeng or safari…but then again, you’ll catch a whole lot of others dressed the same way.   ;)

Next time in Ubud, try getting out of “downtown” and visit the many surrounding villages…especially those north and west of central Ubud.  You’ll see for yourself soon enough why the Ubud district is called the “cultural heart of Bali.”  And yes, riding a motorbike is the best way to explore these ancient villages. 

Looking forward to you shaking my hand…and buying me a beer!  :top:

My pleasure, Roy.

Cheers!   :top:

What ever you do, have a legally binding contract with your Balinese friend before you send any money......Maybe she is honest? Maybe not?  But is it worth the risk of a hell of a lot of money to find out.....

tanami :

What ever you do, have a legally binding contract with your Balinese friend before you send any money......Maybe she is honest? Maybe not?  But is it worth the risk of a hell of a lot of money to find out.....

Interesting. In what form do you suppose this "Legally binding contract" might take ?

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