Buying property is one of the biggest financial decisions in life. To ensure your investment is safe and free from fraud, it is very important to understand and check the completeness and validity of the property's legal documents.
Here are 5 Essential Property Documents You Must Know to ensure a smooth and legally secure purchasing process.
The SHM is the strongest type of property ownership certificate under the law. It grants full rights to the land and buildings on it, has no ownership time limit, and is considered the safest, easiest to use as collateral, and cannot be contested except through a very complex legal process. Always try to purchase property that already has SHM status.
SHGB is the right to construct and own a building on land that is not owned by the holder (generally owned by the state). SHGB grants the right to use the building for a specific period (usually 30 years and can be extended). If you purchase a property with SHGB status, ensure that the remaining validity period is still long and understand the procedures and costs involved in converting it to SHM (which can be done if the requirements are met).
IMB (now replaced by PBG based on the Job Creation Law) is a permit that must be obtained by building owners before or during the construction, alteration, expansion, reduction, or renovation of a building. Its purpose is to show that the building is constructed in accordance with the applicable spatial planning and technical regulations. Properties without an IMB/PBG are often considered illegal and may be subject to demolition or fines by local authorities. Ensure that the existing IMB/PBG matches the physical condition of the building you are purchasing (e.g., number of floors or building area).
AJB is an authentic document that serves as legal proof of the transfer of land and/or building rights from the seller to the buyer. AJB is not a substitute for a Certificate (SHM/SHGB), but rather proof that the property has changed hands. It can only be issued by an authorized Land Deed Official (PPAT). After the AJB is issued, the PPAT is required to register it with the National Land Agency (BPN) to process the transfer of the certificate to the buyer's name. The AJB must be drawn up in the presence of the PPAT. If the property is still under HGB/SHM status, make sure you obtain a copy of the AJB and immediately process the transfer of ownership.
Although not ownership documents, these tax documents are crucial in the property sale and purchase process. Land and Building Tax (PBB) is proof that annual obligations on the property (to date) have been fulfilled. The Tax on Acquisition of Land and Building Rights (BPHTB) is a tax that must be paid by the buyer upon acquisition of property rights. Payment of BPHTB is one of the mandatory requirements before the certificate can be transferred from the seller to the buyer. Make sure you understand the calculation and payment mechanism.
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