Background Minister of Agrarian and Spatial Planning/Head of National Land Agency enacted the Minister Regulation No. 14 of 2017 regarding Procedures on Extinguishment of Mortgage Rights over the Land and Objects related to the Land Documents (“Minister Regulation No. 14/2017”), which came into force since 15 August 2017. Extinguishment of Mortgage Right Documents Document of…
Background Regulation published by the Minister of Public Works or also renowned as Permen PU No. 11/2014 happens to be the regulation which controls the management of rainwater on buildings and its land. This regulation is the application of the previous laws which are issued in 2002 and about the building. It states that every…
Background A Circular Letter Number 11/SE/VIII/2015 (Circular Letter No. 11/2015) associated with the acceleration of process to grant or extend the land rights are promulgated by the Minister of Agraria Affairs and Spatial Layout/Head of the National Land on August 3rd, 2015. This Circular Letter has intention and objectives which are to improve the land…
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.
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
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.
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.
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.