The Ministry of Public Works and Housing has enacted Regulation No.11/PRT/M/2019 (the “Regulation”) regarding PPJB on 18 July 2019. The Regulation is applicable to sale and purchase transactions of residential real estate and properties, including private houses, private commercial houses, cluster houses, and apartment units. In the PPJB context, the term “Developer” refers to both an individual and legal entity.
The Regulation regulates PPJB transactions, which are usually entered by a developer and buyer prior to entering the Deed of Sale and Purchase Agreement (“AJB”), because the construction of the property is still underway. It contains provisions on the marketing activities and the signing of PPJB.
Marketing Activities (Before PPJB)
Single House and Cluster House:
Developer is allowed to conduct marketing activities during with the construction period.
Apartment Unit :
Developer is allowed to conduct marketing prior to the construction period.
To conduct marketing activities, the Developer needs to obtain:
- Letter of Regency/City Site Plan (“KRK”) approved by the Local Government
- Land Certificate
- Land Authorization Warrant (if the land owner is not the Developer itself)
- Building Construction Permit (“IMB”)
- Building Construction Guarantee Letter issued by Bank or Non-Bank Guarantor
Marketing Information shall contain:
- KRK reference number;
- Land Certificate registration number;
- Supporting Letter issued by Bank / Non Bank Guarantor;
- Developer and/or landowner identification (i.e company registration number for legal entity and identity card for individual);
- IMB reference number;
- Building / Unit Specification;
- Unit Price;
- Clear information on facilities and public facilities provided by the Developer;
- Clear information on shared utilities, shared properties, and shared land for apartment construction.
- Payment made by the Buyers during the Marketing Period shall be considered as part of payment of the Unit Price;
- Developer receiving payment from the Buyer shall deliver information on building construction schedule, PPJB and AJB signing schedule, and handover schedule.
- If the Developer is unable to meet the schedule as informed in the marketing activities, the Buyer may terminate the transaction and will be entitled to be a refund for all payments made to the Developer. Furthermore, the Developer can be imposed with delay penalty in the amount of 1/1000 of the outstanding refund amount per calendar days.
- If the Buyer requests to cancel the transaction, the Developer shall return the payment with a deduction of 10% from all payments made, including tax.
Time for Signing :
PPJB is allowed to be executed after the Developer has met the following requirements:
- The Developer has presented the land certificate to the Buyer at the time of signing the PPJB;
- The Developer has explained the clauses in the PPJB (e.g: unit condition, public utilities, land status, terms agreed in the PPJB)
- The Developer has furnished the copy of IMB Building Permit to the Buyer at the time of signing the PPJB;
- The Developer has completed the construction of the road, drainage, public utilities, such as power and water source.
- The Developer has completed at least 20% of total unit for single houses or clusters, along with facilities and public utilities, and 20% of construction volume for the marketed apartment.
PPJB Clauses :
PPJB shall consist, at least, the following clauses:
- Identity of the parties;
- Details of the object of PPJB;
- Unit Price and Terms of Payment;
- Developer’s Guarantee;
- Rights and Obligations of the Parties;
- Handover Schedule;
- Maintenance Period;
- Utilization of the Building;
- Transfer of Rights;
- Dispute Settlement.
Condition for Signing :
- Buyer is entitled to review the PPJB for at least 7 business days prior signing;
- PPJB shall be executed by the Developer and the Buyer before a notary.
Conditions for Termination :
- In the event of termination due to default by the Developer, the Buyer shall be refunded of all the payments made to the Developer;
- In the event of termination due to default by the Buyer, then :
- If the Buyer has paid 10% or less of the Unit Price, the Developer is entitled to keep all payments;
- If the Buyer has paid more than 10% from Unit Price, the Developer is entitled to deduct 10% from the Unit Price
The Regulation is designed to balance business needs and consumer protection in the real estate and property industry. The Developer must be able to market and sell their residential project before completion to acquire funding for construction. However, the Buyer should seek legal protection in the event the Developer has failed to complete the residential project in which they are investing.
Whether you are a Developer or a Buyer it is important to understand your legal rights and obligations bourne from statutes or contracts. Schinder Law Firm can advise and represent you on any legal issue related to real estate and property, either during the transaction or dispute.
About the author:
Budhi Satya Makmur
A qualified Indonesian advocate. Budhi specialises in litigation, arbitration and other contentious matters. Budhi has extensive experience in representing numerous domestic and multi-national companies before the Indonesian National Board of Arbitration (BANI) and the Indonesian courts.