Agnes Winarti , The Jakarta Post , Jakarta | Mon, 06/02/2008 10:20 AM | City
Buying a high-rise unit is apparently not as simple as a common house, where land is automatically included in the transaction.
But becoming a property-savvy customer means one must take care to spend extra time and energy, for example, understanding all the necessary legal papers, the planned facilities and unit specifications.
"Customers need to know the ownership status of land on which a high-rise building stands," Association of Apartment Occupants in Indonesia (APERSSI) secretary-general Aguswandi Tanjung told The Jakarta Post recently.
"Some tenants are unaware of their property's land status for years, because they think buying a high-rise unit is just the same as buying a house on land."
"A strata title certificate only refers to the apartment units and does not automatically include entitlement to part of the land (on which they are built)," he said.
"Unfortunately, many customers are uninformed and many developers are not transparent," Aguswandi said.
According to the 1985 law on high rise buildings, an apartment may be constructed on land under various titles, including Hak Milik (Freehold), Hak Guna Bangunan -- HGB (Lease Hold or the Right to Build), Hak Pakai (Right to Use) or Hak Pengelolaan -- HPL (Right to Manage).
"There is no regulation obliging developers to voluntarily reveal the land status of their high-rise property," PT Property Advisory Indonesia (PROVIS) consultant Nonny Subeno told the Post.
"However, developers must be honest whenever there is a query because customers have the right to know," she said.
If customers purchase high-rise units built on land under a Right to Build (HGB) certificate or a Right to Manage (HPL) certificate, they risk losing their units if the original land owners (usually the administration) decide to reclaim it.
Currently around 8.7 percent of existing apartments in Jakarta (or 5,170 units) are built under such arrangements, Nonny said.
Another 3,900 units were proposed or under-construction with a similar land status, she added.
State-owned land is usually utilized by developers using HGB or HPL titles, under which both parties sign a Build-Operate-Transfer (BOT) contract.
Nonny cited several areas where developers built apartments under Build-Operate-Transfer (BOT) contracts with the government or other land owners, like Gelora Bung Karno, Landas Pacu Kemayoran, Ancol and the ex-Hotel Indonesia.
Some land owners, she said, are unaware of the consequences of that specific land ownership status.
"They own the unit, but they do not own the land underneath it," she said.
Nonny said the safest option for customers was to buy an apartment unit built on land with a full Lease Hold status, which accounts for the majority of apartments in Jakarta.
Nevertheless, Lease Hold property owners must extend their right status every 20 to 30 years, she said.
"Lease Hold property, as well as property with the status of Right to Build On / Right to Manage under BOT contracts, will never be eligible for strata-title certificates and can only hold a Lease Agreement -- so they cannot be offered as collateral for bank loans," Nonny said.
Property built on land claimed by several owners is not recommended for purchase, Jones Lang Lasalle Indonesia research head Anton Sitorus said.
"Besides the land status, customers must also check whether developers have complete permits."
Legal aspects could include building permits (IMB) and building-use permit (IPB), he said.
"Ideally an IMB has already been obtained before the construction begins, but in reality many projects start while still in the process of applying for a permit," Anton said.
Nonny also warned customers to be careful of what she called 'heavenly promises' of marketing officers, usually concerning unit specifications.
"Everything in the display units is always far better than the real ones. Customers must make sure all the specifications -- like the types of tiles, wood, paint and even the toilet -- are in a booking form attached in the sales and purchase agreement," she said.
"Do not just count on their spoken promises," Nonny added.
"Without written agreements, customers will not get any compensation ... after construction is complete."
She also warned customers to look out for architectural concepts offered in developer brochures, because most "contain disclaimers that state everything is 'subject to change'."
Most new high rise buildings in Jakarta are sold before they are constructed, Nonny said.
"There has not been any clarity in terms of consumer protection. Regulations are still in favor of developers, not customers," she said.
University of Indonesia professor of architecture Gunawan Tjahjono told the Post recently that customers must also check facilities in high-rise structures, like children's play areas, community halls, and particularly fire safety features like smoke detectors and fire stairs.
"These seem to be regarded as 'trivial' matters which are often forgotten by developers and architects," said Gunawan, who is also a member of the City Architecture Advisory Team.
"Developers and architects must realize they are designing the life of a community, not just building structures," he said.
With developers prioritizing high and quick returns, he said, many ignored the environment and life-cycle of their buildings.
According to World Health Organization, Gunawan cited, the standard green space requirement for each individual is 25 square meters, which is impossible in Jakarta.
"Well designed apartments are hard to find here," he said.
"Most of them are still high-cost and use large amounts of energy instead of applying green architecture concepts, so they are not healthy places to live in."
Apartment buying check list
The property's legal status including its land title certificate, building and other permits
Developer identity and track record
Property location and access
Facilities provided in the compound and other supporting social and commercial facilities
Floor plan and quality of unit
Dimensions and area of the unit and any service charges (which usually depends on the unit size)
Construction time line, i.e. when will the unit be transferred to the buyer and what are the penalties if the developer exceeds the deadline
Property maintenance management
Inspection of the actual site at various times of day (morning, noon and night) -- It is important to check the area around the apartment.
Examination of the display unit to check the quality of a planned unit. Usually, developers aim to make a display unit that will impress customers. For this reason, it is recommended to ask for details from marketing agents; Which parts of the display unit will be realized? If the developer does not provide a display unit, but has good track record, customers should ask for written specification of their unit to be attached to the booking form.
Apartments with clear ownership rights, like a full Lease Hold land title, usually have higher prices than apartments on a land with Rights to Build On (HGB) Rights to Manage (HPL) or BOT certificates. Customers must ask for clear answers on these issues: price and land status.
After customers agree on the apartment type and price, they would be asked to sign a booking form (Surat Pesanan or SP), and to pay a booking fee. It is recommended to ask for the list of specifications of the unit, including walls, tiles, electricity, water heater, kitchen -- basically everything that will be provided in the unit.
After signing the SP, customers will be asked for a down payment or other payment terms in accordance with the mutual agreement.
After they have paid between 10 and 20 percent of the sale price, customers will have to sign a sales and purchase agreement or PPJB (Perjanjian Pengikatan Jual Beli).