Do Foreigners Need a Local Nominee to Own Land or Property in Bali? – Legal Guide by The Bali Lawyer

Bali has become one of the most sought-after destinations for property investment in Southeast Asia. From luxurious beachfront villas to serene hillside retreats, foreigners are increasingly drawn to the island for both personal and investment purposes. However, navigating property ownership laws in Bali can be complex, especially regarding the use of local nominees.

At The Bali Lawyer, a trusted law service based in Bali, we provide comprehensive legal guidance for foreigners seeking to acquire property legally. This article explains whether foreigners need a local nominee, the risks involved, and the legal alternatives available for owning property in Bali.

Understanding Property Ownership Laws in Bali

Indonesia’s property laws are governed by the Basic Agrarian Law (UUPA) of 1960, which regulates land rights and ownership. According to this law:

  • Freehold ownership (Hak Milik) is exclusively available to Indonesian citizens.

  • Foreigners are prohibited from directly owning land in their name.

This restriction has led to misconceptions and common practices such as using local nominees—Indonesian citizens who hold property on behalf of a foreigner.

What is a Local Nominee in Bali Property Ownership?

A local nominee is an Indonesian citizen who legally holds the property title on behalf of a foreigner. The foreigner may provide funds to purchase the property, while the nominee’s name appears on the land certificate.

While this may seem like a simple solution, using a nominee carries significant legal risks, as the property is legally owned by the nominee. Indonesian law does not recognize informal arrangements that transfer ownership rights to the foreign investor without proper legal documentation.

Risks of Using a Local Nominee

Foreigners who rely on local nominees to hold property face several potential risks:

  1. Loss of Ownership

    • Since the nominee is the legal owner, the foreigner has no direct legal claim over the property.

    • In the event of disputes, the nominee could legally refuse to transfer the property back.

  2. Fraud and Mismanagement

    • Without proper legal safeguards, nominees could sell or mortgage the property without the foreigner’s consent.

  3. Legal Invalidity

    • Indonesian authorities do not recognize nominee arrangements as legal ownership for foreigners.

    • This can create challenges in property registration, banking, or obtaining building permits.

  4. Difficulty in Selling or Transferring Property

    • Selling property held under a nominee can be complicated, as it requires cooperation from the nominee and compliance with legal procedures.

Due to these risks, relying on a nominee is considered unsafe and strongly discouraged by legal experts.

Legal Alternatives for Foreigners to Own Property in Bali

Fortunately, there are legal and secure ways for foreigners to acquire property in Bali without resorting to a local nominee. These methods are recognized under Indonesian law and provide full protection for the investor.

1. Hak Pakai (Right to Use)

  • The Hak Pakai title allows foreigners to legally use and occupy land in Indonesia.

  • Foreign individuals or foreign-owned companies (PT PMA) can hold this title.

  • Initial rights are granted for 30 years, with possible extensions up to 80 years in total.

Benefits of Hak Pakai:

  • Legal registration in the foreigner’s name or their company’s name.

  • Full rights to build and use the property.

  • Option to sell or transfer the rights legally.

2. Hak Guna Bangunan (Right to Build)

  • The Hak Guna Bangunan (HGB) title allows the holder to build and operate on land owned by another party or the state.

  • Commonly used by foreign-owned companies (PT PMA) for commercial projects like hotels, resorts, and rental villas.

  • Valid for 30 years, with renewals available.

Benefits of HGB:

  • Secure legal ownership for commercial use.

  • Ability to operate and manage business activities on the property.

  • Recognized under Indonesian law for foreign investors.

3. Leasehold Agreements (Hak Sewa)

  • Foreigners can lease land or property for a fixed period, typically 25–30 years, with renewal options.

  • Lease agreements are legally binding and registered with a Notary (Notaris/PPAT).

Benefits of Leasehold:

  • Full legal use of property during the lease period.

  • Can include clauses for subleasing, renovation, and resale rights.

  • Safe alternative without legal complications associated with nominee arrangements.

Steps to Legally Acquire Property in Bali as a Foreigner

To ensure legal compliance and secure ownership, foreigners should follow these steps:

Step 1: Identify the Right Ownership Structure

  • Consult with a legal expert to choose between Hak Pakai, HGB, or leasehold depending on your purpose (residential or commercial).

Step 2: Conduct Legal Due Diligence

  • Verify the property’s legal status, title, zoning, and absence of disputes.

  • Check that the property has all necessary building permits (IMB/PBG).

Step 3: Draft a Legal Agreement

  • Engage a Notary (Notaris/PPAT) to draft a formal agreement for purchase or lease.

  • Ensure the contract includes all terms of use, rights, and obligations.

Step 4: Register the Property

  • Submit the documents to the National Land Agency (BPN) for official registration.

  • The property is now legally recognized under the foreigner’s name or their PT PMA.

Step 5: Complete Handover and Documentation

  • Obtain copies of the land certificate, building permits, and tax registration.

  • Ensure all documents are safely stored for legal protection and future transactions.

Why Nominee Structures Are Discouraged

While some sellers in Bali may suggest using a nominee to facilitate foreign ownership, this practice is illegal and risky. Legal alternatives such as Hak Pakai, HGB, or leasehold are fully recognized by the Indonesian government and offer long-term security.

Foreigners are advised to:

  • Avoid informal agreements with local nominees.

  • Consult a licensed legal service before making any property purchase.

  • Use Indonesian notaries and register property properly with the BPN.

Advantages of Using Legal Ownership Methods

  1. Security and Legal Recognition

    • Your property rights are protected under Indonesian law.

  2. Resale and Transferability

    • Legal structures allow smooth resale or transfer to other eligible parties.

  3. Banking and Financing

    • Properties under legal ownership can be used for bank financing or investment purposes.

  4. Peace of Mind

    • Avoid disputes, fraud, and legal complications associated with nominee arrangements.

The Role of The Bali Lawyer

At The Bali Lawyer, we specialize in assisting foreigners with:

  • Legal property acquisition in Bali

  • Drafting and notarizing purchase or lease agreements

  • Ensuring compliance with land title and zoning regulations

  • Advising on suitable ownership structures (Hak Pakai, HGB, or leasehold)

  • Coordinating with the National Land Agency and other authorities

Our team ensures that your property investment in Bali is secure, legal, and fully protected under Indonesian law.

Tips for Foreigners Buying Property in Bali

  1. Work with a Licensed Legal Expert

    • Avoid relying on advice from informal sources or property agents alone.

  2. Verify Land and Title Documents

    • Confirm that the property is free from disputes, encumbrances, or illegal claims.

  3. Choose the Right Ownership Structure

    • Determine whether Hak Pakai, HGB, or leasehold best suits your needs.

  4. Ensure Proper Notarization and Registration

    • All transactions should go through a registered notary and be officially registered with BPN.

  5. Avoid Nominee Arrangements

    • Nominee structures are illegal and carry significant risks; always use legal ownership methods.

 

Foreigners do not need a local nominee to own property in Bali if they follow the legal alternatives provided under Indonesian law. Methods such as Hak Pakai, Hak Guna Bangunan, and leasehold agreements allow foreigners to acquire, use, and manage property safely and legally.

Relying on a local nominee carries significant risks, including loss of ownership, legal disputes, and lack of recognition by authorities. By working with a professional legal service like The Bali Lawyer, foreigners can ensure a secure and compliant property investment in Bali.

Our expertise covers every aspect of property acquisition, from legal due diligence and drafting agreements to registering with the National Land Agency and obtaining necessary permits.

Contact The Bali Lawyer today to secure your property investment in Bali legally and enjoy peace of mind with a fully compliant and safe ownership structure.