Bali Bans Nominee Land Agreements Under Perda No. 4 of 2026

For decades, the nominee agreement (a borrowed-name arrangement) in Bali was treated as a "grey zone" left largely unaddressed. That changed with Bali Regional Regulation No. 4 of 2026 on the Control of Productive Land Conversion and the Prohibition of Nominee Land Ownership Transfer — a legal breakthrough that no longer treats the nominee issue as a purely private civil dispute, but as a systemic threat to Bali's agrarian sovereignty and the Subak irrigation ecosystem.

1. Why the regulation exists, and its legal basis

Fundamentally, a nominee arrangement is a form of legal circumvention that breaches the nationality principle under Law No. 5 of 1960 on Basic Agrarian Principles (UUPA).

Under Article 9(1) and Article 21(1) of the UUPA, land ownership rights are granted only to Indonesian citizens (WNI). Article 26(2) of the UUPA expressly states that any legal act intended to transfer ownership rights to a foreign national (WNA), whether directly or indirectly, is void by operation of law.

From a civil-law perspective, a nominee agreement is void by operation of law (nietig van rechtswege), because it breaches the objective requirement of a lawful cause under Article 1320 in conjunction with Article 1337 of the Civil Code. Because it is intended to circumvent the law, such a contract is considered never to have existed, and provides no legal protection for the foreign investor involved.

Perda No. 4 of 2026 fills a procedural gap through:

Norm specialisation: turning an abstract statutory prohibition into a concrete step suited to Bali's sociological character.

Attribution of oversight authority: giving the region operational supervisory authority, so that Satpol PP and related agencies can take direct administrative action on the ground.

2. Prohibition, definition, and sanctions

A nominee arrangement is defined under Article 1(11) as a transfer of land rights based on an agreement appointing someone to hold or manage rights on behalf of a foreign national as the beneficial owner. Article 14 expressly prohibits anyone from acting as an intermediary or facilitator that enables a foreign national to control land through a nominee arrangement.

Sanctions under Article 20 are strict and layered:

Administrative sanctions: a written warning, temporary suspension of activity, closure of the location, revocation or cancellation of a permit, demolition of a building, restoration of land function, and administrative fines.

Sanctions for civil servants: a facilitator who is a civil servant (ASN) faces disciplinary sanction in the form of career guidance under applicable civil-service regulation.

Criminal sanctions: beyond administrative sanctions, a violator remains subject to criminal sanctions under higher-level legislation.

3. Integration: a gateway for enforcement

The regulation's key strength is integrating the nominee prohibition with spatial-planning protection — a "two-layer" protection:

Ownership gateway: invalidating the legality of land control where a nominee arrangement is indicated.

Land-use gateway: acting against unlawful conversion of productive rice fields even where a building permit has been manipulated.

This integration is intended to prevent negative economic, social (the potential displacement of local communities), and environmental impact (ecosystem degradation that can trigger natural disaster), as mandated in the regulation's Recital (b) and Article 3(2)(i).

4. Oversight grounded in local wisdom

As an oversight mechanism, Article 19 mandates the Governor to form an official supervisory team. The regulation's central strength lies in involving elements of local wisdom: Article 24(1) and (2) require Subak and Desa Adat (customary villages) to take part directly in the supervisory team to detect illegal practices within their respective customary jurisdictions.

What it means for business and Bali's investment climate

For the investment world, this policy amounts to a large-scale "clean-up" that will separate healthy, sustainable investment from speculative, high-risk investment. For business operators and Bali's investment climate more broadly, the regulation carries both upside and downside, as set out below.

Benefits for business and investment

Absolute legal certainty: the nominee scheme has long been a "time bomb" for investors. By firmly prohibiting it, investors are pushed into a legitimate scheme through a Right to Build (Hak Guna Bangunan). Although the process is longer, investors gain full legal protection from the state, an asset that can be pledged to a bank, and ownership rights recognised internationally.

A cleaner property market: the policy will filter out investors. Bali will no longer be a place for "rogue investors" seeking to control land cheaply by breaking the rules, creating a fairer playing field for professional investors who comply with regulation.

Preserving Bali's "market value" (sustainability): investment in Bali depends heavily on its natural beauty and culture, embodied in Subak. If rice-field conversion is left unchecked due to nominee practices, Bali will lose its appeal. By protecting its green corridors, the government is effectively safeguarding the long-term investment of tourism operators, keeping Bali a premium destination.

Greater confidence from institutional investors: large investors and international companies typically avoid grey-area schemes. A firm, transparent regulation will attract higher-quality investors who place real weight on ESG (Environmental, Social, and Governance) standards.

Risks and challenges for investment

Property price correction: in the short term, fluctuation in property prices is possible. Assets held under a nominee scheme will lose market value due to the difficulty of the legalisation process and the risk of seizure.

Higher compliance costs: foreign investors can no longer simply "borrow a name" cheaply. They must establish a proper legal entity, pay the minimum paid-up capital required by BKPM, and meet transparent tax obligations.

Potential for large-scale legal disputes: a wave of lawsuits may arise between the foreign national (as the source of funds) and the Indonesian citizen (as the nominal owner). Since the regulation affirms that such agreements are void by operation of law, many foreign nationals risk losing their assets without compensation should the nominee (the Indonesian citizen) unilaterally decide to take over the asset.

Operational risk for existing businesses: a villa or hotel already operating but found to be using a nominee scheme, or standing on productive land, faces the threat of sudden closure or revocation of its operating permit through an administrative audit.

Bali's regional regulation on the prohibition of nominee agreements and land conversion, passed in December 2025, is not simply a redundant restatement of national law — it is a smart enforcement instrument. By linking the nominee issue with land-use conversion, Bali is protecting itself from environmental damage while cleaning up its investment climate. For legal practitioners and investors, compliance with spatial planning and rights status is now an absolute prerequisite that can no longer be negotiated away through an "under-the-table agreement."