Welcome to your second home in Bali, which you can not own or rent.

Welcome to your second home in Bali, which you can not own or rent.
By Charles Darrow
Oct 11, 2007, 08:33

When I leave the TNI I will sell unreal estate

Read on poor foreign villa “owners” of Bali; we tell you the truth, which will go down like a shot of fermented Thai chili sauce, and then we offer you hope and a legal alternative the frauds of Indonesia do not.

East Javanese born President Susilo Bambang Yudhoyono AKA mini-Suharto, AKA SBY, one time student of the US Command and General Staff College, has opened his ever-empty wallet arms to Australians, telling them that a bond exists between their country and his and that Australians should treat Indonesia as their second home. But the term “home” is a conditional one, as it is not legally possible for a foreigner to have a home, let alone their second home in Bali, unless they pay taxes on their worldwide income to the Indonesian tax authority, which is not a very good idea!

We know, plenty of deluded Australians, Brits, Americans, Dutch, French and others all claim to own villas in Bali, no doubt such false assumption based on smiling faces, nodding heads, being called “Mr.” for the first time that year, what the real estate crooks told them, a little cheap plonk, the sound of gamelan and maybe even the odd puff of a highly enlightening cheroot. But the fact is, they own diddly squat except the piece of paper which convinces them otherwise. Oh course, the plethora of bent, mostly foreign-criminal-on-the-run owned real estate agents, claiming to offer freeholds to suckers with more bucks then brain cells, also helps to convince these kings for the day that they really haven’t sold the shirts off their backs and are now walking around butt naked. Like the millions of losers who have succumbed to the various Nigerian pyramid fraud emails, they live in hope and firm expectation of the “cheque (check) not bouncing”.

It is a fact foreigners can not own land or properties in Indonesia, period. So the scum that floats on the top of the sesspit offering freeholds to foreigners should be in jail, but they are not, why? Is it incompetent law enforcement or hand rubbing corrupt law enforcement or both? You see, if you own something you legally can not, you are the perfect target for extortion from Bali’s bent police; one of if not the most corrupt in the world. For the same reason they allow pushers and pimps to ply their sordid wares openly on the streets of most tourist areas in Bali, the police grin like the theiving monkeys they are about the foreign fools investing thousands and sometimes millions into worthless pieces of paper.

So now the publicity about the freehold bait and switch con, where some “generous Indonesian name-giver" is appointed to actually own the land and villa for the foreigner and contract all rights thereof in perpetuity, which agreement holds as much legality as a sieve, is becoming well known; so it’s “All change for the New 2004 foreign property law”. This change in sales tactics by the foreign real estate mutts of Bali shows you just how unknowledgeable these barrow boys really are, as the law they refer to was introduced in 1996; Agraria RMA 7/96. Basically the law concerns the right for certain foreigners to lease a property. However, what these property sales frauds do not know or tell you is;

a) Most of the “law” that is cited is not law, but an extract from a letter written by the then minister of Agraria (property and land) which is not law, just his opinion.
b) The Bali la-la’s interpretation of RMA 7/96 that any foreigner can benefit under the regulation ignores other laws and legal definitions such as the highly connected KITAS regulations which clearly govern what certain terms within RMA 7/96 mean.

If you want to read a well written article on the subject that quotes the various sources for the true legal definitions of RMA 7/96, see: Bali Real Estate Fraud Blogspot. Bottom line, unless a foreigner first, stress first obtains a KITAS visa (work permit) and registers for tax in Indonesia, they can not lease a house under RMA 7/96. And guess what? Running a villa is not on the list of occupations available to foreigners that qualify them for a KITAS! Be clear, RMA 7/96 is a law that allows foreigners deemed to be providing clearly defined benefit to and living in the state of Indonesia to rent a house, period.

Oh sure, the extent to which this ignorance and fraud has spread is incredible, with even an Indonesian consular site in Australia reporting how this new 2004 law allows foreigners to "own" properties, somehow without being specific enough to be held legally accountable. But the fact that most “we need your money” pundits get it wrong and show their total lack of knowledge of the law by getting the date wrong by 8 years says it all, if you have a brain that is.

It is not just the owning or leasing of a property that lies outside the grasp of the everyday foreigner to Bali, it is the fact that even if they manage to somehow control a property for the time being, they can not legally rent it out to other people (tourists). This is because rental villas need to have an operational license and only Indonesian citizens, partnerships between Indonesian citizens and private companies whose directors are all Indonesian citizens can get one! Publicly traded Indonesian companies which foreigners can presently control a majority of the voting shares of are hardly suitable for running a 4 bedroom bed and breakfast!

Of course, some developers and sales agents have gone up-market and the PMA (private foreign investment company) route; problem is, using a PMA to “own” a villa in Bali is a circumvention of the law that has dried up it seems recently as well (See: Hanno Soth / PT Hanno Bali / C151 villas article).

But now comes an even more dangerous period with the Balinese authorities mouthing off that they need to crack down on illegal villa rental operations; properties "owned" by foreigners which are unlawfully being rented out to tourists. The amnesty deadline for illegal villas in the la-la preferred Seminyak / Canggu area to report themselves and start down a road to legitimacy they can never take, has come and gone with only a handful of villa owners taking up that generous offer. So it is backs to the wall, “What on Earth do we do now?” time for thousands of foreigners owning bits of Balinese paper.

Pretty in pink? Jack Daniels advertises for and personally deals with gay inquiries.

Although the crack down has clearly been pushed for by the Indonesian hoteliers, let us not forget where this crackdown almost certainly started from; corrupt police loving Jack Daniels of Bali Discovery Tours who in 2003 sent out a circular email asking people to report illegal villa operations to him, so he could in return report them to the police. Our pompous, clearly under the influence of his own adopted less than classy name, friend Jack Daniels, who after sending out the email and facing an almighty backfire claimed, wait for this, that his business competitor had sent out the email in his name! Trouble is, the electronic transaction information contained in the normally unseen header showed the email not just came from Jack’s mail server but also shows that the person who initiated it used Jack’s password protected Telkom account to connect to it. Bottom line is Daniels showed his intent in 2003 and we believe has been busily documenting unlicensed villas for the authorities ever since. It is a shame Jack Daniels does not love Bali's villa owners as much as he loves gay visitors to Bali; you see his company Bali Discovery Tours advertizes gay friendly services and Jack deals personally with them while leaving other (straight) inquiries to his staff; Are you free Jack!

Enter Jack Daniels of Bali's emails again, with his PATA newsletter ezine of the millennium award, offering advice about foreigners owning or leasing and operating villas in Bali; interviewing his friend Rainy Hendriany to add yet more false and very bad information into the pot. So here is a man, well, person with a well documented unlawful and very jealous past in Bali, interviewing a well respected property law expert, lawyer, perhaps law maker from Bali? Why no, Rainy Hendriany is a public notary! So she is not qualified to give legal advice, just put a stamp on bits of paper to say you have signed something and Jack Daniels is dishing what this legal hack says as fact! Wow, no wonder you are known to yourself as the (Indonesian) Ministry of Truth Jack! Ms. Hendriany goes on to say, no doubt with a little help from doting Daniels “there are already several banks which will now provide loans against such (Hak Pakai – right to lease) title.” We would like to ask Ms. Hendriany, who seems unavailable to comment with anyone else, which banks are these Rainy and how many foreigners have qualified?

Of course Jack and Rainy side step the all important question of how a foreigner can legally own or lease a property and then rent it out as a holiday rental using meaningless verbiage about “there not being one ideal solution” when in fact they could not name one, plus “balancing investments with understanding and sensitivity” plus “having Backup provisions” and performing “due diligence”. Yes, that’s right, utter tosh. Although the Bali mutt brigade are heralding Jack’s article as “great” on the Bali bog blog, the fact is Jack’s yarn will land anyone who follows his advice in yet more hot water. And with Mr. and Mrs. Joe Blow Foreigner’s life savings on the line, such poor, rambling and perhaps malicious advice is very dangerous indeed.

With foreigners finally waking up and smelling the Java, they realize it is likely only a matter of time before they are forced to give up their dream tropical home, or more likely bend over and open their wallets when the charming boys in brown come a knocking. Previously Bali’s police had to plant narcotics on foreign expatriates in Bali to be able to extort money from them, now their next unofficial bonus seems guaranteed and likely to be very generous! Though with the tourism business so bad in Bali right now as it is, the prospect of foreigner's having to pay unooficial police fines to keep their tropical 2nd homes is not so attractive.

OK, Bali villa owners, you are pretty much all stupid. If you have a “nominee” agreement, or a Hak Pakai agreement and are not paying tax / got your KITAS after you "bought" your villa, or have a villa courtesy of a PMA agreement, you have nothing but a piece of paper if the Indonesians decide to apply the law. So what do you do? We promised you a legal option to your problem and we will deliver. This is not because we want to support tourism presently to Bali or your own desires to make money, because we do not. The fact most foreign villa "owners" have avoided paying tax and other licensing charges for years while prattling on about how they are helping the Balinese, no doubt a reference to the breadcrumbs they throw their staff, makes us sick. We also get very nauseous at the prospect of the Bali Bill / Plod owning anything other than a 1986 Suzuki Jimmy as well. So understand we are only helping you, so you stop raping the Balinese and the police have less to rape you over.

The “secret” for a foreigner to control and rent out a villa in Bali is to take the matter out of the restrictive, corrupt and anti-foreign Indonesian jurisdiction. The method is called the “ABN” method and basically entails you setting up Indonesian friends to own the land and start a PT (private Indonesian company) to get the required operational permit. You and they then sign loan, marketing and reservation agreements outside Indonesia, probably in your home country, which then get duly notarized as a lien / right against the land title and PT company operation in Bali. By doing this you qualify for business visas which do not require you to pay tax in Indonesia yet allow you to conduct business relevant to your commercial interests there, as well as stay for extended periods. This method allows you legally to control the guests and money, and therefore the property / land. If you like it is a variation of the totally unlawful nominee / loan agreement where the all important aspects are put outside yet are still protected by Indonesian law. What is more it allows the foreign villa “owner” better control of the cash coming in by writing up deposits paid by guests as commission. The full details can be found on the official ABN Bali Villas Page; our thanks to the author and our recommendation to foreigners with bits of paper to get onto this ASAP.

Footnote: Hanno Soth (see our article: C151 PT Hanno Bali) told us on the 10th October 2007 “You might like to know that over the next week or so the government will be announcing a solution to the issue of illegal villas in Bali.” First, to be candid, we would not believe anything Hanno Soth said anyway. Secondly, we are not aware of any new such legislation being put before the state legislature in Jakarta, so we must presume this, if it is true, is a local Balinese or even national politician based initiative which carries about as much legal weight as one of yesterday’s free London underground newspapers carries value; given that Indonesian judges ignore even presidential decrees on the basis they are not the law.