30 Aug 2019
Ministry of Agrarian Affairs Introduces Online System for Administration of Charges over Land

A. Overview

The Minister of Agrarian Affairs and Spatial Planning has issued a new regulation (“Reg. 9/2019,”[1] effective 21 June 2019) to provide for the establishment of an online system for the administration of charges over land.

The term “charge” in this legal update refers to the Indonesian legal concept of “Hak Tanggungan,” that is, a security interest over land that is granted by the holder of a land title to a creditor.

The system, which will be rolled out gradually, is intended to be used by both creditors (individuals and legal entities) and officials of the Ministry of Agrarian Affair and Spatial Planning.

Reg. 9/2019 envisages that the following services will be provided online by the system:

• Registration of charges
• Transfer of charges
• Changes in creditor name
• Deletion of registered charges from the system upon release.

As regards the role of notaries/authorized land title conveyancers (“PPAT”)[2] in the process of fixing charges over land and their registration with the National Land Office (Badan Pertanahan Nasional), Article 10(2) of the Encumbrances Law (Law No. 4 of 1996)[3] provides that a charge must be recorded in a deed drawn by a PPAT, and that this deed (and other required supporting documents) should be submitted by the PPAT to the National Land Office for registration within seven business days of its signing (Article 13(2)). This situation is maintained by Reg. 9/2019. However, deeds may now be submitted by PPAT in electronic document format, whereas previously the originals had to be submitted.

According to the letter of Reg. 9/2019, it would appear that there are no plans to make the system’s use mandatory (at least not yet). Rather, it seems that the system is intended to operate on a complementary basis to the existing manual system.

B. Issues

As is often the case with regulations that establish new ways of doing things, a number of the provisions of Reg. 9/2019 give rise to questions. These include the following:

• To use the system, an entity must be registered with the Financial Services Authority (Otoritas Jasa Keuangan / “OJK”). This requirement implies that the system may only be used by banks and financial-services institutions. It may also limit the ability of an offshore creditor to use the system, such as in circumstances where a foreign bank that does not have a branch office in Indonesia extends a loan to a multinational company, where the loan is to be partly secured by land assets of the borrower’s Indonesian subsidiary.

• For a charge to be registered, the title certificate for the encumbered land must be in the name of the borrower. Thus, the system would appear not to accommodate the needs of a third-party security grantor (i.e., a party that grants a security interest over its land to secure a loan to another party);

• 9/2019 only acknowledges full repayment of a loan as the basis for the deletion of a registered charge from the system. However, the Encumbrances Law provides other grounds for the deletion of a charge, such as its early release by the creditor.

• It is not clear from Reg. 9/2019 as to what will happen when there is a syndication of creditors: can all of the creditors be registered on the system or only one creditor (the security agent, for example)?

It is to be hoped that these issues will be ironed out as soon as possible going ahead for the sake of both legal clarity and the effective operation of the system.

By Herry Kurniawan (hkurniawan@abnrlaw.com) and Danny Tanuwijaya (dtanuwijaya@abnrlaw.com)

[1] Minister of Agrarian Affairs and Spatial Planning / Head of the National Land Agency Regulation No. 9 of 2019 on Integrated Electronic Hak Tanggungan Services (Peraturan Menteri Agraria dan Tata Ruang / Kepala Badan Pertanahan Nasional Nomor 9 Tahun 2019 Tentang Pelayanan Hak Tanggungan Terintegrasi Secara Electronik)

[2] Under the Encumbrances Law (see footnote 3 below) and Reg. 9/2019, an “Authorized Land Title Conveyancer” (pejabat pembuat akta tanah) is a person who is authorized by the state to make deeds for the transfer of land, deeds related to the fixing of charges over land, and deeds incorporating powers of attorney for the fixing of charges over land. In practice, a PPAT is normally a notary.

[3] Law No. 4 of 1996 on Charges over Land and Appurtenances to Land (Undang-undang No. 4 Tahun 1996 Tentang Hak Tanggungan atas Tanah Beserta Benda-benda yang Berkaitan Dengan Tanah)

This ABNR Legal Update and its contents are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained in this Legal Update. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.