Pre-Due Diligence Checklist

Pre-Due Diligence Checklist

The sales agent, at most times is representing the vendor and generally doing everything in the most professional manner to market the vendor’s property, communicating with the vendor and giving their advice and service to the vendor.  Of course, they will also have buyers who are interested in investing in property, so it is very important that every property listing presented for sale has correct, complete and valid property documentation, agreements, paid taxes, vendors I.D and a signed listing agreement from the agency representing that property.

However, this does not always ensure that a Due Diligence will pass smoothly through the notary.  To make each transaction as easy and as smooth as possible, it is important to have a Pre Due Diligence check carried out before any deal progresses further to signing, so that there are no repercussions due to legal or land aspect complications which may hold up or lead to an ineffective sale.

A Pre Due Diligence should be carried out to check:

  • Who really owns the land, is it shared ownership.
  • Does the vendor have the right to lease the land.
  • Are there any debts over the land.
  • Define the piece of land exactly.
  • Is there legal access to the land from a public road.
  • What the land is zoned to be used for, can it be used for the purpose the buyer wants to use it.

In preparing the documentation you need to:

  • Agree the price.
  • Check taxes that have to be paid, how much and who will pay.
  • Make sure the lease agreement is secure if the landowner dies or sells the land and that any new owner must honour the lease agreement.
  • Make sure that the vendor has the right to sell or pass on the land to a third party and that this will not require the signature of the landowner.
  • Define the period of time and extensions available plus renewal options and further extensions on that.
  • How much will extensions and renewals cost – usually at market price, but can also be at fixed price, negotiated price or the price of gold.

A Pre Due Diligence will ensure that everything is clearly defined and transparent to the buyer, so there are no ‘hidden’ costs or any problems with the ‘status’ of the property.

On our next article we will create a pre-due diligence checklist for buyers, which lists the standard Due Diligence requirements in Indonesia. In the meantime, please subscribe to our newsletter here.

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