Indonesia Update: New Strata Title Regulation Diminishes Influence of Developers and Major Owners of Strata Title Units on Owner/Occupier Associations

On 14 September 2018, Indonesia’s Minister of Public Works and Public Housing issued Regulation No. 23/PRT/M/2018 on Associations of Owners and Occupiers of Strata Title Units (“Regulation 23/2018”). Regulation 23/2018 came into effect on 18 October 2018 and replaces the previous regulations on owner/occupier associations.

An Association of Owners and Occupiers of Strata Title Units (Perhimpunan Pemilik dan Penghuni Satuan Rumah Susun or “PPPSRS”) is a legal entity established by its members, being owners or occupants of a particular strata title property, which is mandated under the law to manage common rights in relation the strata title property. Investors who are looking to invest in any strata title property development in Indonesia need to consider the provisions of Regulation 23/2018 in order to understand the role of PPPSRS and the rights and obligations of its members which may affect the investor’s ability to manage and control the property.

One notable amendment introduced by Regulation 23/2018 is the application of the one owner, one vote concept in respect of (i) matters to be decided at the Establishment Meeting (as defined in section 1 below) and (ii) the appointment of members of executive committee (pengurus) and the supervisory committee (pengawas). This new application of “one owner one vote” limits the ability of a developer of or investor in a strata title property to exert management control over the PPPSRS, and key matters such as the naming rights over the property, even if they retain ownership of the majority of the strata title units.

Key Provisions

The key provisions of Regulation 23/2018 are summarised below.

1.   Establishment of PPPSRS

Owners of strata title units are obliged to establish a PPPSRS and the developer must facilitate its establishment within a year after the first handover of strata title units to the owners.

PPPSRS will be established by a meeting of the owners of strata title units (“Establishment Meeting”). At the Establishment Meeting, the following matters will also be decided: (i) organisational structure of PPPSRS, (ii) establishment of articles of association and by-laws and (iii) appointment of members of executive committee (pengurus) and supervisory committee (pengawas).

The quorum for the Establishment Meeting is met if more than half of all owners attend. The Establishment Meeting may make decisions based on a majority of the votes of owners attending the meeting, with each owner (or representative) having one vote, no matter how many strata title units they own.

The deed of establishment, articles of association and by-laws of the PPPSRS must follow the forms prescribed in the attachments to Regulation 23/2018, and must be registered with the competent local government office.

2.   PPPSRS Membership and Meetings

Members of PPPSRS may vote on matters relating to (i) occupancy interests, (ii) ownership and (iii) management.

The PPPSRS membership includes (i) owners or (ii) occupiers with a power of attorney from the owners to vote on any of these three matters above. The accompanying table summarises the quorum and voting requirements for the matters to be decided by the PPPSRS meeting.

3.   PPPSRS Organisational Structure

The PPPSRS has an executive committee (pengurus) and a supervisory committee (pengawas). Members of the executive committee and supervisory committee must be appointed from owners who (i) are present at the Establishment Meeting or the PPPSRS meeting (as the case may be) and (ii) reside in the strata title property.

The executive committee must have at least a chairperson, secretary, treasurer and management and occupancy division. The supervisory committee must have at least five members (or a higher odd number), including a chairperson, secretary and at least three other members.

Members of executive committee and supervisory committee are appointed for a term of office of three (3) years.

4.   Management by PPPSRS

Developer must hand over management of the Common Parts, Common Objects and Common Land to the PPPSRS within three months after the PPPSRS is established. The handover must be performed before a public notary. A financial audit must be conducted by a public accountant agreed by the PPPSRS executive committee before the handover from the developer.

In managing the strata title property, the PPPSRS should establish or appoint a property manager within three months after its own establishment. The property manager must be a legal entity and have an appropriate business licence from the relevant local government office.

5.   Cooperation in Multi-stage Development

Strata title properties integrated upon one parcel of land can be developed in stages. In these circumstances, each development stage (i) must be completed within three years (from planning to completion), (ii) will have its own Common Parts, Common Objects and Common Land which are separate from other development stages, and (iii) will have its own PPPSRS.

If there are Common Parts to be jointly used by all owners and occupiers of all strata title properties, they will be jointly managed by all of the PPPSRS based on a cooperation agreement among all of the PPPSRS that is signed before a notary.