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Due Diligence
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Due Diligence - Who is it for and Benefits
The process of buying and leasing property in Indonesia could be easy if you have a comprehensive understanding of your rights as a buyer/lessee/lessor. There are, however, a range of issues that may affect your future investment.
For decades, property registration was carried out through handwritten records. It was not uncommon to find two official land certificates for the same plot of land. The Indonesian government recently launched a digital land certificate system. Due diligence serves as investigative documentation and property inspection before a real estate transaction takes place.
This is essential to ensure the property is free of legal issues, free of encumbrances, and meets the buyer’s expectations. The goal is to identify potential risks and liabilities associated with the property and make a decision based on those findings.
Engaging a reputable and experienced legal consultant can significantly contribute to a successful due diligence process in Indonesia, as it ensures that potential legal risks are identified and addressed, providing clients with valuable information for making informed business decisions.
What are the Types of Due Diligence?
There are various types of due diligence conducted in business transactions, each focused on a specific aspect of the company’s financial position. The most common is financial due diligence, which analyses financial statements, cash flow, and projections to assess the company’s financial health.
Legal due diligence examines contracts, litigation, regulatory compliance, and asset ownership to identify potential legal risks. Commercial due diligence evaluates a company’s market position, customers, competitors, and growth potential.
In addition, there is operational due diligence that assesses the efficiency of various types of operational costs and internal systems, environmental due diligence to identify environmental risks and liabilities, tax due diligence to check tax compliance and potential company tax liabilities, and HR due diligence that analyses organisational structure, employees, and human resource-related issues.
Steps to Conduct Due Diligence in Indonesia
- Consult the assets you would like to include on the Deed.
- Our notary team will assist with drafting the Deed.
- Once finished, we will contact you to schedule to seal the Deed.
Frequently Asked Questions
During due diligence for property in Indonesia, legal aspects to consider include:
- Ensure the seller has legitimate ownership of the property and verify the land title to avoid potential disputes.
- Check if the property has all the necessary permits and licenses from relevant authorities for its intended use.
- Understand the zoning regulations to ensure the property is suitable for the intended investment purpose.
- Identify any mortgages, liens, or legal claims on the property that might impact the transaction.
Generally, due diligence for a property in Indonesia can take anywhere from a few weeks to a few months. Connecting with a reliable legal consulting agency like LMI Consultancy will be able to provide more tailored information based on the specific circumstances of the property transaction.
The essential documents for property due diligence in Indonesia typically include all types of land documents according to the applied regulations. The documents can be in the form of: – A land certificate (Hak Milik), location permit (Izin Lokasi) – Building permit (Izin Mendirikan Bangunan) – Land use permit (Izin Penggunaan Tanah); – and any relevant licenses or approvals from local authorities.
- Land certificate (Hak Milik), location permit (Izin Lokasi), building permit (Izin Mendirikan Bangunan)
- Land use permit (Izin Penggunaan Tanah)
- Any relevant licenses or approvals from local authorities
Need more information about Home Ownership Credit? Check out some of our guides!
- Can expatriates get a mortgage in Indonesia
- Steps to get a mortgage in Indonesia
- Understanding KPR products in Indonesia
- Why It's Important to Use a Mortgage Consultant
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