When you buy a property in Bali or other parts of Indonesia, due diligence is an important step to do. In property purchasing, due diligence is referring to reasonable measures to which all individuals must adapt before entering into real estate and real estate contracts.
Due diligence helps you to evaluate the risk when you are about to buy or even plan to buy a property in Bali. Due diligence in Bali is typically executed by a lawyer or a notary, but it is important for you to read and understand the document too. This process might take a lot of time and energy, but by doing this you’ll avoid potential legal difficulties in the future.
But what is due diligence?
According to Wikipedia (n.d), “Due diligence is the investigation or exercise of care that a reasonable business or person is normally expected to take before entering into any agreement or contract with another party or an act with a certain standard of care.”
In this article, we will discuss further the process of due diligence in buying property in Bali.
Making sure that you are actually dealing with the owner of the property or someone that is duly representing the owner is the first step you need to undertake. Depending on the type of acquisition or contract you aim to sign, you should enlist the assistance of a lawyer in Bali or a property notary. The property notary will also check whether the title is clean and ready to be transacted or whether there are any liens on it that need to be removed prior to you being able to acquire the property. This part of due diligence can take some time in Bali depending on the regency in which you are buying property.
Secondly, you need to verify that the property is under the correct zoning. If you want to buy a piece of land to build a hotel, it should be zoned for tourism. If you plan to build a residence for yourself, make sure you are actually allowed to build on the land. Check if there are other restrictions that apply to the property, like distance from important temples or other places of worship. If you are building close to the ocean, a river or on a cliff, investigate what setback applies. You don’t want to end up with a beautiful Bali beachfront property where you can only build on the last two meters of the land. This part of due diligence can take up to 2 weeks and is best done by a property notary or lawyer. Fees for that service vary greatly. So make sure you get some estimates to compare.
Whether you’re familiar with Bali or a complete outsider, you’re likely to have zero information on the neighborhood you’re planning to purchase the property in. Invest time in looking into the specifics by enquiring with the local village organizations and leaders. Talk to other people that live in the neighborhood. Find out whether there are specific local laws (“adat”) that apply and about which you should be aware.
If you have no experience in building, it is best to get an expert to have a look at the property you intend to buy and ensure that you won’t have any nasty surprises in the future. Are there termites in the building? Is the roof solid and waterproof? Is the structure of the building strong and solid? What is the quality of the electrical wiring? What about the water supply? What is the quality of the water in the house? How much power is connected to the house? Are the swimming pools leaking or not? How old are the various pumps, air conditioning units, and other appliances? The more you know the better.
Check whether the price of the property you are about to buy is within the range of the asking price of other similar properties in the neighbourhood? If you can’t find any data, try to assess the land value separately from the building value. The building value is fairly easy to assess by using a square meter price depending on the quality of the building and the age. You can consult with one of our experts here at Bali Property Direct to assist you with this.
With this article, we hope you have an in-depth understanding of due diligence with regard to buying property in Bali. If you are looking for a property to rent or to buy, take a look at our current Bali property listings.