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Barely Legal

Bali Legal Expert Warns that Foreign Villa Owners in Bali Face a Rough Road Ahead

(6/29/2012) Bali's real estate boom, fueled by villas purchased by foreign investors, appear to be ultimately headed for a bust.

As reported by Bisnis Bali, one-by-one legal cases involving villa ownership by foreigners are being lodged with the civil courts or the police in Bali.

Ketut Suwiga Arya Dauh, a leading local lawyer, predicts “I think in the coming ten years there will be many property case disputes in Bali.” He explained that a failure to understand Indonesian law and the mistaken belief that “everything can be sorted out” has lured many foreigners into a false sense of security, unaware of the many problems they may face in the future.

He cited as contributing to the problems confronting foreign investors in Bali are efforts by many to avoid taxation and use of illegal and unconstitutional means used to secure control of a property, such as registering the ownership of a property in a local nominee’s name.

Suwiga predicts the myriad problems ahead for foreign investors are beginning to accumulate. He warned that the growing litany of problems for foreigners investing it property would only begin to emerge after ten years. He bemoaned that the large number of cooperative agreements built on poor legal foundations and the bad faith of many foreign investors serve as preludes to the coming maelstrom of litigation.

To underline the murky and legally complicated situation in which foreign investors in Bali may soon confront, Suwiga alluded to a recent decision in the Denpasar District Court refusing to hear a suit files by villa owners in Kuta against PT Maximus Bali, its President Director Hanno Soth, Russell C. Blagg and PT Hanno Bali. In that case, the presiding judge ruled the Denpasar District Court did not have the jurisdiction to rule in the case due a to clause in the original agreement mandating that disputes be settled by arbitration in Hong Kong.

The plaintiffs in the case were Francisco Noriega Malave, Anthony Desmond Hatton and Profit Power Management. The plaintiffs own three villas in a development managed by PT Maximum Bali.

The suit filed before the Denpasar court claimed mishandling of income tax payments dating from 2006 and income distribution from the three villas.

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