Why Nominee Ownership in Bali Is Illegal — and What Foreign Buyers Should Do Instead

Last updated: February 2026 · By Bali Property Rules Research Desk

Table of Contents

1. What Is a Nominee Agreement in Bali Property?
2. Why Are Nominee Agreements Illegal Under Indonesian Law?
3. What Happens If Your Nominee Dies or Disappears?
4. Can a Nominee Legally Sell “Your” Property Without Consent?
5. Are There Any Court Protections for Foreign Buyers Using Nominees?
6. What Are the Legal Alternatives to Nominee Ownership?
7. How Does Hak Pakai Compare to Nominee Freehold?
8. What About Using a PT PMA to Hold Property?
9. How to Transition Away From an Existing Nominee Arrangement
10. Frequently Asked Questions
11. Sources

What Is a Nominee Agreement in Bali Property?

A nominee agreement is an arrangement where an Indonesian citizen purchases land under their own name — typically Hak Milik (freehold) — on behalf of a foreigner who provides all the funds. The foreigner and the nominee sign a series of side agreements intended to give the foreigner control over the property despite not being the legal owner.

A typical nominee package — often sold by property agents as a “safe” or “standard” structure — includes several documents:

• Loan agreement (perjanjian hutang piutang): States the nominee “borrowed” money from the foreigner to buy the land, creating a theoretical debt obligation
• Power of attorney (surat kuasa): Grants the foreigner authority to manage, lease, or sell the property on the nominee’s behalf
• Statement letter: The nominee acknowledges they have no beneficial interest in the property
• Option to purchase: Gives the foreigner the right to “buy” the property back at a nominal price

On paper, this looks comprehensive. In practice, every one of these documents is legally unenforceable because they all serve the same purpose: circumventing Indonesian land ownership restrictions. And that purpose is explicitly prohibited by law.

Why Are Nominee Agreements Illegal Under Indonesian Law?

Article 26(2) of the Basic Agrarian Law (UUPA No. 5/1960) states that any transfer of land that directly or indirectly circumvents foreign ownership restrictions is “null and void by law” (batal demi hukum). This is not a grey area — it is an explicit statutory prohibition.

The phrase “batal demi hukum” is significant. Under Indonesian civil law, this means the agreement is void from the beginning — it never had legal force. This is stronger than “voidable” (dapat dibatalkan), which would require a court to cancel it. A nominee agreement does not need to be challenged in court to be invalid. It was never valid in the first place.

The illegality extends to all supporting documents in the nominee package:

• The loan agreement is a sham — no genuine loan was made, and both parties know it. Indonesian courts can look past the form of a document to its true substance (the principle of materiality).
• The power of attorney is revocable at any time by the nominee, regardless of what the document says. Under KUHPerdata Article 1813, a power of attorney terminates when either party revokes it.
• The option to purchase cannot compel a transfer of Hak Milik to a foreigner — that would itself violate Article 26(2) of the BAL.

What Happens If Your Nominee Dies or Disappears?

If your nominee dies, the property passes to their legal heirs under Indonesian inheritance law — not to you. The nominee’s spouse, children, or extended family become the new legal owners. Your side agreements die with the nominee, and you have no enforceable claim against the heirs.

This is not hypothetical. The practical risks of nominee death or disappearance include:

• Heirs refuse to cooperate: The nominee’s family may have no knowledge of the arrangement — or may simply refuse to honor it. They have no legal obligation to do so.
• Multiple heirs claim the land: Under Indonesian inheritance law, property may be divided among several heirs. You could face negotiations with five or six family members, each with a legal stake.
• Nominee disappears: If the nominee leaves Indonesia or becomes unreachable, you cannot sell, lease, or transfer the property. Only the title holder can authorize these actions.
• Nominee goes bankrupt: If the nominee has personal debts, creditors can seize the property — because legally, it belongs to the nominee. Your claim as the “real” buyer holds no weight against secured creditors.
• Nominee’s divorce: In a divorce, the nominee’s spouse can claim half the property as marital assets. Under Law No. 1/1974 on Marriage (Article 35), property acquired during marriage is joint marital property.

For a detailed analysis of how inheritance law affects foreign-owned property, see our guide: Inheritance and Bali Property: What Happens When a Foreign Owner Dies?

Can a Nominee Legally Sell “Your” Property Without Consent?

Yes. Because the nominee is the legal owner, they can sell the property at any time to any buyer without your knowledge or consent. The land certificate bears their name. The Land Office (BPN) will process the transfer based on the certificate holder’s instructions — not yours.

The power of attorney you signed does not prevent this. Under KUHPerdata Article 1813, a principal (the nominee) can revoke any power of attorney at will. Even an “irrevocable” power of attorney in a nominee context is unenforceable, because it serves an illegal purpose — circumventing the BAL.

Practitioners report cases where nominees demand additional payments to “cooperate” — effectively extorting the foreigner who funded the purchase. The foreigner has limited recourse: pursuing a civil claim would require admitting to an illegal arrangement, and Indonesian courts have not recognized the foreigner’s beneficial interest in such cases.

Are There Any Court Protections for Foreign Buyers Using Nominees?

No Indonesian court has upheld a foreigner’s claim to beneficial ownership of land held under a nominee agreement. The legal position is consistent: agreements that violate the BAL are void from inception, and courts will not enforce them.

A foreigner who brings a claim faces a fundamental problem: to assert their interest, they must demonstrate that the nominee arrangement exists — which means presenting evidence of an illegal agreement. Indonesian courts apply the “unclean hands” doctrine: parties who come to court seeking enforcement of an illegal arrangement are denied relief.

The best outcome a foreigner might hope for is a civil claim for unjust enrichment (perbuatan melawan hukum) — essentially suing the nominee for the money paid. But even this is uncertain, difficult to prove, and subject to lengthy court proceedings. The land itself will not be returned.

What Are the Legal Alternatives to Nominee Ownership?

Three legal structures allow foreigners to control property in Bali: Hak Pakai (Right to Use), Hak Sewa (Leasehold), and PT PMA (foreign-owned company holding HGB title). Each has trade-offs, but all provide something a nominee arrangement never can — enforceable legal protection. See our full comparison of all three structures.

Recent regulatory changes have made these alternatives more accessible than ever. PP 103/2015 formalized Hak Pakai for foreign residential ownership. PP 18/2021 expanded foreign property rights under the Omnibus Law framework. And PP 28/2025 (our full guide) further streamlined the process through risk-based licensing.

Overview of Legal Structures

How Does Hak Pakai Compare to Nominee Freehold?

Hak Pakai gives you a registered land title in your own name, enforceable in Indonesian courts, for up to 80 years — while a nominee arrangement gives you nothing enforceable at all. The comparison is not close.

The most common objection to Hak Pakai is that it is “not freehold.” This is true — Hak Pakai is a right to use, not outright ownership. But this framing misses the point. Under PP 103/2015, Hak Pakai for residential property can be granted for an initial period of 30 years, extended for 20, and renewed for another 30 — totalling 80 years of legally protected use.

Key advantages of Hak Pakai over a nominee arrangement:

• Your name on the certificate: The Hak Pakai title is registered at BPN in your name. No intermediary, no dependency on another person’s goodwill.
• Legally enforceable: You can sell, lease, mortgage, or bequeath the property through legal channels.
• Court protection: If someone disputes your title, you can defend it in court with the full weight of Indonesian property law behind you.
• Bankable: Some Indonesian banks accept Hak Pakai as collateral for loans — impossible with a nominee arrangement.
• Inheritable: Heirs with valid KITAS/KITAP can inherit your Hak Pakai directly. See our inheritance guide for details.

The main requirements for Hak Pakai: you must hold a valid KITAS or KITAP (Indonesian residence permit), and the property must meet minimum value thresholds set by PP 28/2025, which vary by region. For more on visa requirements, see: What Happens to Your Bali Property If Your Visa Expires?

What About Using a PT PMA to Hold Property?

A PT PMA (foreign-owned Indonesian limited liability company) can hold land under HGB (Hak Guna Bangunan — Right to Build) for up to 80 years, providing a fully legal route for foreigners to control property used for commercial or investment purposes.

Under Law No. 40/2007 on Limited Liability Companies, a PT PMA is a separate legal entity that can own assets, enter contracts, and hold land titles independently of its shareholders. The property belongs to the company, and the foreigner controls the company through share ownership.

Key Advantages

• Commercial use permitted: Unlike Hak Pakai (residential only), HGB through a PT PMA allows commercial activities — villas for rent, hotels, restaurants, co-working spaces
• No personal visa requirement: The company holds the land, so the foreigner’s visa status does not affect the title
• Simplified inheritance: Heirs inherit company shares, not land titles — avoiding the 1-year forced divestment rule entirely
• Multiple properties: A single PT PMA can hold multiple properties across Indonesia

Key Considerations

• Minimum paid-up capital: Following October 2025 reforms, the minimum paid-up capital for a PT PMA is IDR 2.5 billion (approximately USD 150,000). This makes it viable primarily for higher-value investments.
• Ongoing compliance: PT PMAs require annual tax filings, financial reports, and corporate licensing renewals. Budget IDR 30-60 million per year for accounting and compliance costs.
• Business activity requirement: The PT PMA must have a genuine business purpose aligned with its investment license (OSS/BKPM). Simply holding a single residential property may not qualify.

How to Transition Away From an Existing Nominee Arrangement

If you already have a nominee arrangement, the safest path forward is to convert the property into a legal structure — but this requires your nominee’s active cooperation, which is not guaranteed. The process varies depending on your target structure.

Option 1: Convert to Hak Pakai

If you hold a valid KITAS or KITAP, the nominee can sell the property to you directly. The Hak Milik title is downgraded to Hak Pakai upon transfer to a foreigner. This requires:

1. A sale and purchase deed (AJB) executed before a PPAT (land deed official)
2. Payment of all transfer taxes (PPh by seller at 2.5%, BPHTB by buyer at up to 5%)
3. Registration of the new Hak Pakai title at BPN in your name
4. Proof of KITAS/KITAP eligibility

Option 2: Transfer to a PT PMA

The nominee sells the property to your PT PMA. The title converts from Hak Milik to HGB upon transfer to a company entity. This works well for commercial properties but requires an established PT PMA with the appropriate business license.

Option 3: Negotiate a Lease (Hak Sewa)

If you cannot obtain a KITAS/KITAP or afford a PT PMA, you can negotiate a long-term lease agreement with the nominee as landowner. This does not transfer the title, but it gives you a legally enforceable right to use the property for the lease term. Make sure the lease is notarized and includes explicit renewal and heir-transfer clauses.

Frequently Asked Questions

Related Guides