Real Estate in Indonesia – Legal Liability

The owner or tenant of real estate in Indonesia may face environmental liability arising from, for instance, pollution, contamination or failure to manage hazardous and toxic materials or waste. Indonesian environmental law recognizes strict liability in the event of damages resulting from a person's actions, business or activity that uses hazardous and toxic materials (B3), produces or manages B3 waste or causes serious threats to the environment. However, such liability usually does not extend to a lender who does not engage directly in the business activity causing the environmental liability.

Upon the transfer of title, the buyer assumes the rights and liability of the land, including any environmental liability.

A tort claim may be submitted if the landowner breaches a statutory obligation and causes loss or damage to a third party. For example, if there is an accident on the landowner's property, the landowner is not liable unless it can be proven that such accident was due to the landowner's negligence in implementing safety measures applicable to them under the prevailing laws and regulations.

Protection Against Liability

Insurance that covers environmental liability is available, although it is more common for owners who are also businesses whose activities may adversely impact the environment.

To protect the buyer from potential third-party claims it is important to include in the relevant sale and purchase agreement representations and warranties on environmental compliance and indemnity for third-party claims for breach of environmental compliance by the seller.

This first appeared in Lexology GTDT Real Estate 2021. 

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