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 associations1.
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 rights2 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.
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 interests3, (ii) ownership4 and (iii) management5.
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 meeting6.
||Attendance by more than 50% of the PPPSRS members, who are defined as (i) owners or (ii) occupiers with a power of attorney from the owners to decide on occupancy matters.*
||Majority affirmative vote by members attending the meeting, where each member is entitled to cast one vote.
| Ownership and management (kepemilikan dan pengelolaan)
|| Attendance by more than 50% of the PPPSRS members, where “members” shall in this context refer to (i) owners or (ii) occupiers with a power of attorney from the owners to decide on ownership and management matters.*
|| Majority affirmative vote by members attending the meeting, where each member will be entitled to vote based on its NPP7.
| Appointment of members of executive committee (pengurus) and supervisory committee (pengawas)
|| Attendance by more than 50% of the owners or their representatives.*
|| Majority affirmative vote by owners (or their representatives) attending the meeting, where each owner will be entitled to cast one vote.
|Articles of association and by-laws (including to change the name of the PPPSRS or the building)
||Physical attendance by at least 2/3 of the owners with valid voting rights.**
||Affirmative vote by at least 2/3 of total valid voting rights of owners.
* If the first meeting is not quorate, a second meeting may be convened at the earliest 7 calendar days and at the latest 30 calendar days after the date of the first meeting. There is no quorum requirement for the second meeting.
** No mechanism for a second 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.
1. Regulation of the Minister of Public Housing No. 15 of 2007 and Decree of the Minister of Public Housing No. 06/KPTS/BKP4N/1995
2. “Common Parts” – parts of strata tile property which are not separately/individually owned, and which are for common use in an integrated function with strata title units; “Common Objects” – objects which are not parts of strata title property, but are owned together (not separately/individually owned) for common use; and “Common Land” – a piece of titled land or leased land for buildings which is used based on common right (not separately/individually) whereby a strata title property is built on top of it and the borders are determined in the building construction licensing requirements.
3. Matters relating to community relations among occupants, namely determination of residential rules, implementation of other community activities, and determination of amount of contributions for security, sanitation and social community.
4. Determination on utilisation of Common Parts, Common Objects and Common Land, and charges on strata titles units.
5. Matters relating to operational activity, maintenance and care of Common Parts, Common Objects and Common Land, payment and determination of contribution for management and sinking fund.
6. Based on a strict interpretation of the provisions of Regulation 28/2013. We are currently closely monitoring how these provisions are being implemented in practice, as in our experience implementation may be influenced by developments in practice.
7. “NPP” is the ratio of the value of units owned to the value of the Common Parts, Common Objects and Common Land. This value is calculated by comparing the value of the unit to the value of the entire building at the time the developer first calculates the overall cost of the development to determine the