Strategies for Preventing Property Disputes for Investors and Developers

Examination of Land and/or Building Ownership Documents

Investors and developers must ensure the ownership status of the land or building to be acquired.

This verification should be conducted at the Land Office (BPN) to confirm:

• The type of land title (Freehold, Right to Build, Right to Cultivate, or Right of Use);
• The name of the titleholder matches the sale and purchase documents;
• No overlapping ownership or ownership disputes exist;
• The land is free from encumbrances such as liens, seizures, or registered mortgages.

This step is crucial to prevent developers from entering problematic land transactions or building projects on land with unclear legal status.

Verification of Permits and Spatial Planning Compliance
Every property project must comply with the Regional Spatial Plan (RTRW) and Detailed Spatial Plan (RDTR) of the respective area. Investors must ensure the completeness and validity of documents such as:

- Building Approval (PBG) or former Building Permit (IMB);
- Location permit, environmental permits (AMDAL/UKL-UPL), and business licenses;
- Spatial suitability statements from the relevant authorities.

Such verification helps prevent disputes with local governments or communities arising from zoning or construction permit violations.

Review of Agreements and Cooperation Documents
Investors and developers should review all cooperation agreements, sale and purchase contracts, lease agreements, or joint venture agreements related to the project. The review should focus on:

- Validity of the parties signatures;
- Signing authority (whether in accordance with the companys articles of association and regulations);
- Rights and obligations of each party;
- Dispute resolution and termination clauses.

Comprehensive document review minimizes potential conflicts arising from misinterpretation or breach of contract.

Verification of Tax Records and Administrative Obligations
Unresolved tax liabilities often become a source of property disputes. Therefore, investors should check:

- Proof of Land and Building Tax (PBB) payments;
- Status of Land and Building Acquisition Duty (BPHTB);
- Income tax and value-added tax obligations for property transactions;
- Unpaid regional administrative fees or levies.

This helps avoid legal claims or delays in the title transfer process due to tax issues.

On-Site Verification and Supporting Documents
Beyond legal documents, investors must ensure that administrative data align with actual site conditions, such as land boundaries, current land use, and building conditions. This inspection should ideally involve a notary, Land Deed Official (PPAT), or experienced legal consultant.

Legal and administrative due diligence serves as a primary safeguard to detect potential legal risks before investment. By carrying out these steps comprehensively and professionally, investors and developers can minimize potential disputes, strengthen legal standing, and ensure smooth project execution.


Secure Sale and Purchase Binding Agreement (PPJB)
A Sale and Purchase Binding Agreement (PPJB) is a preliminary agreement between a property seller and buyer before executing the Sale and Purchase Deed (AJB) before a Land Deed Official (PPAT). The PPJB is typically made when the property has not yet met all legal or administrative requirements, such as pending land subdivision certificates, unfinished construction, or incomplete payments.

The main function of a PPJB is to legally bind both parties to complete the sale and purchase once all requirements are fulfilled, providing legal certainty for both investors and developers during the preparation phase.

Essential Elements and Clauses of a Secure PPJB
To ensure legal validity and prevent disputes, the PPJB must clearly include:

- Valid and Authorized Parties The seller must be the rightful owner or an authorized representative, and the buyer must have the legal capacity to transact.
- Comprehensive Property Details Include certificate data, land size, boundaries, building permits, and a site plan.
- Price, Payment Terms, and Schedule Specify transaction value, payment mechanism, and consequences of late payments.
- Timeline and Conditions for Executing AJB Define the time frame for AJB signing once conditions (e.g., certificate issuance or construction completion) are met.
- Possession and Handover Provisions Clarify that physical or legal possession transfers only after AJB execution and full payment.
- Default and Sanctions Clauses Outline remedies such as cancellation, refund, or penalties in case of breach.
- Dispute Resolution Include agreed mechanisms, such as negotiation, mediation, arbitration, or specific court jurisdiction.
- Form and Legality of PPJB
- A PPJB may be executed privately or in a notarial/PPAT deed form.

 

However, to ensure legal security and evidentiary strength, it is strongly recommended that the PPJB be executed as an authentic deed before a notary or PPAT.

A notarized PPJB provides:
- Certainty of date and content;
- Strong legal evidentiary value;
- Legal protection for both parties in case of dispute.
- For off-plan property projects, the PPJB must comply with Minister of Public Works and Housing Regulation No. 11/PRT/M/2019 concerning Preliminary Sale and Purchase Agreement Systems, requiring developers to first obtain construction, business, and environmental permits before offering PPJBs to the public.

Dispute Prevention Through a Secure PPJB
To minimize dispute risks, investors and developers should:

- Conduct due diligence on land legality and project permits before signing;
- Use an independent notary;
- Channel payments through an escrow account until requirements are met;
- Keep all supporting documents (e.g., payment receipts, powers of attorney, and permits) properly archived.
- A secure PPJB must be transparent, legally valid, and carefully drafted.

 

By ensuring that all essential clauses are clearly stated and executed before competent authorities, both investors and developers can obtain maximum legal protection and avoid future disputes.


Risk Management and the Role of Property Legal Consultants in Dispute Prevention
The property business involves long-term investments, high asset values, and multiple stakeholdersfrom landowners and contractors to local governments and buyers. This complexity makes the sector highly prone to legal disputes, whether at the land acquisition, licensing, construction, or marketing stages.

Therefore, legal risk management is a vital component of investors and developers business strategiesnot only to resolve disputes but to identify, prevent, and minimize potential risks from the outset.

Key Stages of Legal Risk Management in Property Projects
Legal risk management typically involves four main stages:

- Risk Identification Detect potential legal issues, such as unclear land status, incomplete permits, or weak cooperation agreements.
- Risk Analysis and Evaluation Assess the potential impact and likelihood of each risk from legal, financial, and reputational perspectives.
- Risk Mitigation or Prevention Implement preventive measures, including legal due diligence, contract strengthening, legal guarantees, and regulatory compliance.
- Monitoring and Control Conduct regular monitoring of legal compliance, regulatory updates, and contract performance to prevent violations from escalating into disputes.

 

Property legal consultants act as strategic advisors and legal risk managers who help investors and developers execute projects with legal certainty. Their roles include:

- Legal Due Diligence and Verification Reviewing land validity, permits, and legal agreements to ensure there are no defects that could lead to disputes.
- Contract Drafting and Review Preparing or reviewing agreements (e.g., joint ventures, land acquisitions, construction contracts, PPJBs) with clear, balanced rights and obligations and strong dispute resolution mechanisms.
- Regulatory and Licensing Compliance Ensuring the project adheres to spatial planning, environmental, and construction regulations (PBG, location permits, AMDAL, etc.), minimizing government or community legal risks.
- Protection of Corporate Rights and Assets Managing security interests such as mortgages or fiduciary arrangements to protect investors financial interests.
- Negotiation and Dispute Resolution Assistance Acting as mediators or negotiators to settle potential conflicts amicably before they escalate into litigation.

 

Effective legal risk management requires close collaboration between investors, developers, and legal consultants. Legal consultants should not merely act reactively (as problem-solvers) but serve as strategic partners from the projects inceptioncovering planning, land acquisition, and property delivery stages.

Through this proactive approach, developers can:

- Reduce costs and time caused by disputes;
- Enhance credibility with investors and regulators;
- Ensure long-term project sustainability and legal certainty.
- Robust legal risk management, supported by proactive property legal counsel, forms the foundation for preventing disputes in the property business. Through early identification, legal verification, and continuous oversight, investors and developers can conduct projects safely, efficiently, and in full compliance with prevailing laws and regulations.

In practice, the success of legal risk management in property projects depends heavily on precise strategy and experienced legal assistance.

Our team has extensive experience in conducting legal due diligence, contract drafting, and resolving property disputes for various investors and developers across Indonesia.

For further consultation regarding property legal advisory and investment risk mitigation, please contact us through the available channels.