For anyone considering starting and running a Bali villas business whereby you rent their use of the villa to tourists, there is a huge fly in the ointment which you may not yet be aware of. We say fly, but in truth, it is more like a giant eagle in the ointment such as is the problems it creates. We are talking about Indonesian law, which states that no foreigner can own property in Bali.
When entrepreneurs hoping to start a Bali villas business discover this huge legal roadblock, it is often enough for them to ditch their plans and seek another business model. However, as with any law, there are ways, not to break it, but to swerve it. In the case of owning property in Bali, some entrepreneurs use a nominee to purchase a villa for their business.
A nominee is an Indonesian citizen who agrees to have the property ownership registered in their name, however, it is you that finances the purchase, and then has use of the villa for your holiday rental business. We should point out using a nominee carries huge risks, and so we thought it best to point out some of the pros and cons of buying property in Bali with the help of a nominee.
Pros
Greater Choice Of Villas To Choose From
With a nominee being able to legally own the property there should be no limitations on the location, the size, or the permitted use of the villa you are purchasing, provided you carry out full due diligence on factors such as land registry and access rights. Your nominee may also be able to visit villas on your behalf and report on their condition and suitability.
Your Business Gets Started Quicker
Without having to jump over all the legal hurdles that Indonesian property laws have in place, using a nominee can speed up the entire process of purchasing a villa and thus get your rental business underway faster.
Your Nominee’s Local Knowledge
In addition to them being able to visit potential villas, your nominee’s local knowledge could be useful. This could include advising locations are most suitable, where property prices are most favourable, and dealing with local red tape relating to purchasing property and starting a business in Bali.
CONS
YOU ARE TAKING MASSIVE RISKS
It might seem that by only having one con versus three pros that we are advising you to use a nominee, but believe us when we say we are not. Unless you can be 100% certain that any nominee you are using is legitimate, honest, and will only ever act in your best interests, the financial and legal risks you are taking in using them to purchase a property are massive.
Bear in mind, as far as any Indonesian law is concerned, and that includes courts should you ever have to resort to one, the nominee is the sole and legal owner of any property that you have the arrangement to purchase. This leaves you wide open to any of the following:
- They can claim the property as theirs and refuse you access, financial returns and so on.
- They can demand ongoing payments from you for them to continue the arrangement.
- You could face threats of legal action relating to the purchase.
- They could sell the property without your knowledge, permission, or any returns on your investment.
These huge risks undoubtedly outweigh the pros.
