For Mixed-Marriage Couples in Indonesia

Pre-word

Foreigners are not allowed to own property in Indonesia.  However, although foreigners will not be able to own freehold (Hak Milik) property, several Government Regulations issued in 1996 allow foreigners to hold  a Right of Use (Hak Pakai) which valid for 25 years with the possibility of another 25 years extension.

However, as the validity of a Right of Use title is limited to a certain period and it is not possible to a mortgage a Right of Use, this is not comparable to freehold or ownership in perpetuity. Holding a Right of Use offers the foreign investor protection for a certain period, but this title seems not well suited for long-term investment purposes.

2 (Two) Possible Solutions

In order to own the property in Indonesia, there are 2 (two) possible solutions for foreigners i.e.:

Using the Nominee

The nominee sign several documents with the foreigner i.e.: a) A Loan Agreement that acknowledges the foreigner has lent to the nominee the purchase price of the property; b) A Right of Use Agreement that allows the foreigner to use the property; c) A Statement Letter stating that the nominee acknowledges the loan from foreigner and intention to own the land; d) Power of Attorney. This is an irrevocable power of attorney giving the foreigner complete authority to sell, mortgage, lease or otherwise deal in the property.

Using the Foreign Company (so called PMA)

Under the new investment law number 25 of 2007, simplified services and/or permission of land titles may be granted and extended all at once in advance, and is renewable at the investor's request for the following:

1. Right to Cultivate (Hak Guna Usaha) may be granted for a period of 95 (ninety-five) years by being granted and extended all at once in advance for a period of 60 (sixty) years, and renewable for a period of 35 (thirty-five) years;
2. Right to Buld (Hak Guna Bangunan) may be granted for a period of 80 (eighty) years by being granted and extended all at once in advance for a period of 50 (fifty) years, and renewable for a period of 30 (thirty) years;
3. Right to Use (Hak Pakai) may be granted for a period of 70 (seventy) years by being granted and extended all at once in advance for a period of 45 (forty-five) years, and renewable for a period of 25 (twenty-five) years;

Land titles as intended above may be granted and extended all at one in advance for the following investment activities, inter alia:

1. an investment that is made for a long term and linked to structured changes in the Indonesian economy aimed at improving competitiveness;
2. an investment with an investment risk level that requires a long-term return on capital based on the types activities carried out;
3. investments that need no large areas;
4. investments with the state land titles; and
5. investment that do not undermine a sense of public justice and does not harm the public interest.

A land title is renewable upon evaluation that the land remains in good use and cultivation conforming to the conditions, nature, and purpose the title is granted.

Foreword

Postnuptial agreements, also known as post-marital agreements, are agreements entered into after a marriage has taken place. There are many reasons why a mixed-marriage couple might wish to draw-up a postnuptial agreement. Among others, a couple that did not sign a prenuptial agreement before marriage may later determine that they want to have some sort of financial plan in place in the event of death or divorce. Additionally, a major change in the financial circumstances of the couple, such as a major career change or inheritance, may alter the financial landscape, requiring a change to the terms of the couple's existing prenuptial agreement to reflect their current wishes, like simple thing as the intention of owning property in Indonesia.

Indonesia’s 1974 Marriage Law only recognises prenuptial agreements, ("prenup" for short), a written contract created by two people before they are married. The 1974 enacted law only discussing the matrimonial agreement that must be drawn-up prior to marriage. Indeed, the law regarding the validity and enforcement of post-marital agreements is not well developed in Indonesia. But if we dig a little bit deeper, Indonesian Civil Code provides special provision concerning property division in the course of marriage. The postnup is a product of our ancient Civil Code. It’s been there for many decades. So, some couples have been using it all along. It just the postnup is not as popular as his other sibling, the prenup. As to my personal opinion, the postnup is like a wine. It’s being kept in the dark, until they mature enough into something you would like to have dinner with. 

What’s Postnup?

First of all, postnup is not a back-dated prenup. It is signed and dated after your marriage. When you’re married, you’re married. There’s no way you can turn the clock around and get a prenup, or even back-date a prenup. That’s awful, and illegal of course! The harsh reality is that the courts tend to assume that a prenup is always valid, but they have the opposite reaction to the back-dated prenup. The assumption is, in the majority of cases, that this type of agreement is not valid.

You can’t find a postnup in the 1974 Marriage Law. It’s not there. Nevertheless, just because the Marriage Law didn’t say anything about the postnup, it doesn’t mean it’s not legal. It’s in the Civil Code. This is can be the ultimate solution for mixed-couples in Indonesia who did not sign a prenuptial agreement before their marriage. This also may preserve the rights of the Indonesian to own property in Indonesia even though they are married to a foreigner. 

The postnuptial agreement, may be useful to couples seeking to enter into a postmarital agreement after a significant financial change or a period of marital conflict. It is signed and entered into in contemplation of an existing, ongoing, and viable marriage. This agreement allows married couples to legally pre-determine how property will be divided if the couple divorces.

The postnup creates property separation in your marriage since the signing date, and therefore the community property regime shall not exist any further. As for the property exist prior to the postnup, you need to determine them. It means that it has to be separated as well. You need to appoint one spouse as the property holder. 

Nevertheless, please take a note that signing a postnup is not the only phase required to create separation of property during the course of your marriage. Your Indonesian lawyer needs to work on other legal issues such as taking prior-legal-measures to make sure the legality of the postnup before signed by husband and wife.

Legal Implications of the Postnup

Legal implications will occur due to property division in the course of marriage to the parties in the postnup (i.e. husband and wife), to the property in the marriage, and other related third party. Both husband and wife shall be bound by the legal binding force as affected by the Postnup. As it is a legally binding contract, therefore it shall serve as the law between both contracting parties; husband and wife. This is in line with Article 1338 of Civil Code stipulating that: “All the contracts legally drafted shall serves as the law to the parties involved.” 

The postnup also take effect to the third party. The further implementation in regards to creditors, it must be specified according to the time frame. The community property shall be liable as collateral in the event the mortgage exist prior to the postnup date. On the other hand, if one spouse getting a loan from a bank after the postnup date, his/her separate assets shall be in liability to any debts he/she might have created. 

Postnup for Mixed-Marriage Couples

In accordance with Article 186 (1) of Indonesian Civil Code, the wife may, in the course of marriage, request a division of assets, in the following circumstances: "...wife is in imminent danger of losing the security of her dowry and her entitlements pursuant to the law.., and also if ... in the management of the community property, such property might be endangered." This is totally applicable to the circumstances in every no-prenup mixed-marriage household in Indonesia. By marrying a foreigner, the Indonesian spouse will be precluded to own a property, which is her/his right as an Indonesian citizen. Her/his entitlements in owning a property in Indonesia may be endangered. 

There are many mixed-marriage couples in Indonesia that did not incorporate a prenuptial agreement prior to their marriage. In the absence of a prenuptial agreement, by law, their marriage has joint property regime because the Marriage Law automatically assuming joint property regime within their marriage. This means either of you would require consent from the other for every transaction involving the immovable property in Indonesia. The implementation of consent if to co-sign of every transaction documents. In terms of mixed-marriage, such consent cannot be retrieved from the foreign spouse because a foreigner is now allowed to own property in Indonesia. An Indonesian will not be able to retrieve such consent from her spouse because he is not in the legal position to own the property in the first place. So, the Indonesian position is stuck. This is where a prenup is essentials. 

Since there are too many mixed-couples out there without a prenup, then a postnup may be used as one of the options. Writing a postnup, just because you didn’t have a prenup, is not some business they see every day. Instead of getting a silly back-dated prenup, I certainly think the postnup is legally worth a shot. They can get a postnup. 

The postnuptial agreements most often used to settle financial matters, including property ownership in mixed-marriage. The postnup is very useful when spouses failed to create a prenuptial but want to protect their assets. It is not something usual in Indonesia because the law thinks that you should’ve get the prenup in the first place. Therefore, requirements to get a postnup are stricter than getting a prenup. The contract must be created with full disclosure of assets, be entered voluntarily by both parties, and have terms that are fair and equitable.

Why Should You get the Postnup?

Because it is dated after your marriage, and because it is legal. The postnup is about admitting that you did not realize that you need a prenup in order to own property in Indonesia right before you got marry to a foreigner. It’s about being honest to yourself, and to the public institution where the postnup will be registered. Back-dated prenup is about manipulating facts of your marriage date, and the date when you sign the prenup.

Postnup is the most favorable choice for the limbo situation of having no prenup in the first place. Some mixed-marriage couples have resorted to questionable measures, such as making purchases using fake ID cards, or risky purchases, such as buying real property using their relatives’name. You may be trust them, but trust is not the only issue here.

The postnup is about making sure that you control your own property without have to rely on someone else’s mood. You have the power and the authority in making the purchase without affected by the legal constraints anymore. Sounds good, huh? 

What’s Your Marriage Like after the Postnup?

The postnup serves as the law for both contracting parties; husband and wife. After both of you signed the postnup, the property shall be separated since the date of the postnup takes effect legally.

Each and every spouse in your matrimony shall be independent and will not require any consent from the other spouse, including to conduct property transactions. The best part is the Indonesian spouse will no longer affected by his/her foreign spouse. There you have it! The rights of an Indonesian in owning the property is preserved as if you had a prenup in the beginning of your marriage.

Reinstatement of the Community Property

This is the proceedings if you want to go back to the joint property regime, because may be, the laws have changed. For example, the Indonesian is no longer affected by getting married to a foreigner in owning any property in Indonesia. 

In the event where community property is reinstated, matters relating thereto shall be afforded the same status as that applicable prior to separation, without prejudice to the result of acts carried out by the wife which took place in the interim between separation and reinstatement. Agreement providing for reinstatement of community property by the spouses for any reasons other than those already specified shall be deemed void. 

The community property which is dissolved by separation of assets may be reinstated with the consent of the spouses. The reinstatement of community property must be made public by the spouses. Third parties shall not be affected by the reinstatement until the public announcement has been made. 

Preword

Will is the most common way for people to state their preferences about how their estates should be handled after their deaths. It is a legal document containing  a statement of an individual’s wishes and intents to take effect following his death, and which can be revoked. Many people use their wills to express their deepest sentiments toward their loved ones. You can protect the people you love most, choose guardians for minor children, and make gifts to family, friends and charities.

Making a valid Last Will and Testament is the only way to ensure that your property passes to people of your choosing rather than to people chosen by the Courts based on laws that are decades old. Without a will, the estate can be subject to many problems. Relatives may also dispute over property, leading to lengthy court proceedings, and a probate judge who does not know your personal wishes will dictate who gets your property and custody of your children after your death.

By having a valid Last Will and Testament, you will have full control over how your assets (i.e. your estate) are managed and distributed after your death and who will look after your children when you are no longer around to do so. The clear terms of last will require no clarification and in the event they can be interpreted in several ways, the intent of the testator must be determined rather than interpreting the text literally.

Legal Outlook

A last will cannot be made by two or more individuals in one legal document, whether it is in favor of a third party mutual or reciprocal arrangement. Everyone with property who have reached the full age of 18 years are allowed to make wills.  The competence of the testator shall be judged based on the condition that he was in at the time that the last will was made. In a last wills, conditions which are unintelligible or impossible, or which violates tha laws and good morals, shall be regarded as void.  Last wills which made as a result of duress, deceit or cunning shall be invalid.

The Legitimate Portion

The legitimate portion or the legal share of the inheritance is that portion of the estate which the lawful heirs in a direct line are entitled to and which the testator is not entitled to dispose of as a gift during his lifetime or by last will.

In relation to the descending line, if the testator leaves only one legal child, the legal share of the inheritance shall consist of half of the property which the child would be entitled to inherit upon death. In the event that there are two children, the legal share of the inheritance for each child shall be two thirds of whatever they would be entitled to inherit upon death. In the event that the deceased has left three or more children, then the legal share of the inheritence shall be three fourths of whatever each child should have inherited upon death. Children shall include the descendants, in any kind of degree; they shall, however only be regarded as substitutes for the child whom they represent in the inheritance of the testator. Meanwhile, in the ascending line, the legal share of inheritance shall always consist of one half of that which is by law due, upon death, to each blood relative in that line.

For the purpose of calculating the legal share, regard shall be had to those individuals who upon the death of an individual have become heirs to his estate but who have not been named as legatees under his will, and in the event that individuals other than the aforementioned heirs have been granted a share in excess of their legal share by deed during the lifetime of the deceased or by last will, provided that the aforementioned heirs were not present, the devises and gifts may be reduced upon a claim and in favor of the legatees and heirs or those entitled.

In the absence of blood relatives in the ascending and descending line, and of natural, legally acknowledged children, gifts by inter vivo deed or by last will, shall be deemed to be of the entire estate.