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Important Changes of Condominium Law under Job Creation Law

By November 27, 2020 No Comments

The Law No. 1 of 2020 on Job Creation is enacted on 2 November 2020 and comes into effect from the enaction date. The Job Creation Law is a legal breakthrough that is expected to resolve various issues in several laws into one law.

In the real estate sector, the Job Creation Law amends several existing laws, among others Law No. 20 of 2011 on Condominium (“Condominium Law”). As below, are several important changes in the Condominium Law under the Job Creation Law.

Provision of Public Condominium by Commercial Condominium Developers

The obligation to provide public condominium at least 20% of the total floor area of commercial condominium that has been built still exists. However, the obligation can be converted in the form of funds for the construction of public condominium. The funds will be managed by the Accelerated Housing Management Agency.

For the record, the Condominium Law previously regulated the Implementing Body that has a task to realize the provision of proper and affordable condominium for low-income society. Under the Job Creation Law, the Implementing Body is changed to become the Accelerated Housing Management Agency.

Obligation to Legalize Title of Division

The Condominium Law previously regulated that developers were obliged to request legalization from the local government after obtaining a permit for the function and utilization plan. The Job Creation Law however deletes this provision. Therefore, it is not clear when the developer is obliged to apply the legalization of title of division.

However the Job Creation Law does not change the provisions under the Condominium Law which obliges the developers to obtain legalization of title of division from the local government if the developers want to market the condominium before the construction of condominium.

Building Approval and Condominium Construction Standards

The condominium construction standards are administrative, technical and ecological requirements. The condominium construction standards will be regulated further under the government regulation.

One of the administrative requirements in the form of Building Construction Permit is replaced by Building Approval. This refers to the change that has been made by Job Creation Law towards the Law No. 28 of 2002 on Building.

Drawing and Description of Condominium

The drawing and description of condominium still need to be made prior the construction of condominium. However, the Job Creation Law deletes the provision in the Condominium Law which stipulates that the drawing and description are the basis for determining the  proportional ratio values (NPP), certificates of  right of ownership over condominium unit (“Certificate of Condominium Unit”), certificates of ownership of building, and conditional sale and purchase agreement.

Issuance of Permits by Local Governments

In contrast to the previous provisions under the Condominium Law, the Job Creation Law stipulates that the issuance of permits related to condominium by the regional government, such as (i) approval of drawings and descriptions, (ii) certificates of feasible function, (iii) plans for functions and utilization of condominium as well as changes thereof, and (iv) the business license for the building management of condominium, must be carried out in accordance with the norms, standards, procedures and criteria set by the central government.

Condominium Unit for Foreigners

The Condominium Law stipulates that the condominium can be built on land with of (a) ownership rights, (b) right to build or right to use over state land, and (c) right to build or right to use over right of management. In addition, the Condominium Law also stipulates that the Certificate of Condominium Unit is issued to each person who meets with the requirements as the holder of land rights. Those provisions are not amended under the Job Creation Law.

However, apart from the amendments of Condominium Law under the Job Creation Law, the Job Creation Law regulates provisions regarding condominium units for foreigners, where the ownership rights of condominium units can be given to:

  1. Indonesian citizens;
  2. Indonesian legal entities;
  3. foreign citizens who have a license in accordance with the prevailing laws and regulations;
  4. foreign legal entities that have representatives in Indonesia; or
  5. representatives of foreign countries and international institutions that are located or have representatives in Indonesia.

In addition, the Job Creation Law also stipulates that the condominium can be built on land with (a) right to build or right to use over the state land; or (b) right to build or right to use rights over right of management.

Reading the provisions in the Condominium Law and Job Creation Law as described above, it can be understood that in principle, the regulation regarding ownership rights of condominium remain the same. It means that if a foreigner wants to have ownership rights over a condominium unit, then the condominium must be built over the land with right to use.

Sanctions

There is a change in criminal sanctions, where violations by (i) the developer in making a conditional sale and purchase agreement that is not in accordance with what is marketed or before fulfilling the certainty requirements in the Condominium Law, (ii) any person who builds the condominium outside the designated location , and (iii) any person who changes the designation of the location of the apartment which has been determined or changes the function and utilization of the apartment, are no longer subject to criminal sanctions, but only administrative sanctions.

However, if the violation in the point (iii) as mentioned above causes casualties, either human or damage to property, then the perpetrator can be punished with imprisonment of up to 1 year or a maximum fine of Rp250,000,000. Further, the Job Creation Law also deletes the provisions under the Condominium Law which was regulated that the imposition of administrative sanctions does not eliminate criminal responsibility.

Aditya Putera John Muchtar