Due diligence is a thorough assessment of an asset before purchase. It’s essential for high-value investments such as land, buildings, companies, or even ships. This assessment is typically presented in a detailed report and varies based on the buyer's interests and the scope of the investment.
In this article, we’ll focus on land due diligence—a critical process that also applies to buildings on the land.
Purchasing land without proper due diligence can lead to unexpected costs, legal disputes, and restrictions on what you can do with the property. Many buyers rush into a purchase, only to face hidden issues later. Surprises such as unpaid taxes, zoning limitations, or third-party claims can greatly affect the cost and viability of your investment.
Imagine you acquire a piece of land and then discover it's burdened with liens or encumbrances, or that zoning laws prevent you from using it as planned. These issues can be costly and stressful, impacting both the value of your investment and your ability to move forward with your project.
Land due diligence prevents these risks by ensuring you fully understand the land’s legal status, taxes, and zoning regulations before making a purchase. This process protects your investment, so you can proceed with confidence and avoid unpleasant surprises.
Zoning determines how land can be used and what types of buildings or activities are permitted in a specific area. Each kabupaten (county or regency) in Indonesia has its own zoning regulations, called RDTR, that define land use for set periods. For example, Kabupaten Badung’s zoning plan for 2013-2033 outlines permissible buildings and businesses in key areas like Seminyak and Uluwatu.
The RDTR classifies zones like green (agriculture) zones, where farming is allowed, but industrial developments are prohibited. These classifications ensure that land is used appropriately for its designated purpose. Zoning can significantly impact the potential of your investment. Purchasing land without understanding zoning restrictions could mean you can’t build what you want or conduct your planned business activities.
Standard due diligence services include checking land clearance with the Indonesian Land Agency (BPN), verifying zoning with the Ministry of Public Works and Housing (PUPR), and confirming tax obligations with the Regional Revenue Agency (Bapenda).
While these checks are necessary, they often overlook key factors such as the land’s historical claims or potential disputes with business competitors. At SAS, we go beyond the basics by investigating these critical details.
Our comprehensive land due diligence report provides a complete picture of the property, protecting you from future risks and giving you peace of mind. With our detailed assessment, you’ll know exactly what you’re buying—allowing you to make confident investment decisions.
Step 1: The land due diligence process commences when the prospective buyer requests essential information, and the seller agrees to provide the required details regarding the property. In most cases, both parties will sign a Preliminary Leasehold or Purchase Agreement, accompanied by a deposit to secure the land.
Step 2: SAS is granted power of attorney to perform a comprehensive investigation, typically taking 3 to 4 weeks. This investigation includes a review of all legal documentation, a site inspection, and a detailed examination of zoning regulations and tax obligations. Our legal experts personally visit the regional land office to verify that all documents comply with local regulations and that no unexpected issues arise.
Step 3: Upon completion, SAS provides a thorough due diligence report, which includes a detailed assessment of the legal, tax, and zoning status of the property, along with our expert recommendations.
Safeguard your investment by entrusting SAS's legal team with your land due diligence. Our team’s expertise ensures that you can avoid costly errors and secure a sound property investment. Contact us today for a comprehensive, risk-free assessment before making your purchase.
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