Representations and Warranties in an Indonesian Real Estate Sale Transaction

Indonesian law is silent as to the warranties that should be given in a real estate sale transaction, by both the seller and the buyer. Representations and warranties, as well as the buyer's remedies for the seller's misrepresentation, in a real estate sale transaction shall be freely agreed between the seller and the buyer.

Please note that Indonesian law recognizes the principle of freedom of contract. This principle is codified in Article 1338 of the Indonesian Civil Code (ICC), which provides that par­ties to a contract are free to include any provisions they wish, subject only to mandatory provisions of Indonesian law.

The typical seller's representations and warranties would provide, among others:

• the legality of the seller's ownership of the land;
• if the seller is an entity, the legality of its establishment, the obtainment of the necessary corporate approval to sell the land and confirmation that the sale of the land does not violate the seller's articles of association or any contract to which the seller is a party;
• settlement of all taxes imposed on or in respect of the land prior to the sale;
• confirmation that the land is free and clear from any security rights, claims or liens; and
• confirmation that there is no legal action or proceed­ing that has been served on the seller that restrains or prohibits the sale.

The representations and warranties of a buyer would nor­mally be more lenient and typically provide, among others:

• if the buyer is an entity, the legality of its establishment, the obtainment of necessary corporate approval to pur­chase the land and confirmation that the sale of the land does not violate the buyer's articles of association or any contract to which the buyer is a party;
• confirmation that the buyer will provide the seller pay­ment of the purchase price pursuant to the agreed terms and conditions; and
• confirmation that there is no legal action or proceed­ing that has been served on the buyer that restrains or prohibits the purchase.

This first appeared in the Chambers Real Estate 2019 Guide, published by Chambers and Partners.You can find the full chapter here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.