“Are you running a property marketing or consultation business? Did you know that in order for you to run your business, an agreement is needed? Especially when you are a property broker.”

Before jumping in to the agreement explanation, we are going to give you some information related to the Property Trading Broker Company first. In Indonesia, every company that engaged in the services of property brokerage and other services related to property marketing activities and consulting, should have a license to run their businesses. This license named as Business License of Property Trading Broker Company, or SIU-P4, as stipulated in Regulation of the Ministry of Trade No. 33 of 2008.

According to the mentioned regulation, these are business activities that Property Trading Broker Company does:

  1. Intermediary of selling and renting property;
  2. Doing research and/or assessment in the property field;
  3. Conducting a promotion and marketing of property; and
  4. Providing consultation and spreading the information in related of property.

As we mentioned before, in order for the company to do all the activities above, a cooperation between the company and the assignor shall be based on an order and on a written agreement. Who is the assignor? For your information, the assignor, or commonly known as the client, is parties requiring the services of a Property Trading Broker Company in the form of purchasing, leasing, research and assessment, marketing, as well as consultation and dissemination of property-related information.  This definition was already stated on the Ministry Regulation as well.

The written agreement at least contains these six main things:

  1. The scope of works;
  2. Object property;
  3. Rights and obligations of the parties;
  4. Value or percentage and procedure of payment of commission;
  5. The term of the agreement includes the active period and the passive period; and
  6. Dispute resolution.

Regarding the scope of works, as already mentioned on the regulation, it could be intermediary of selling and renting property, researching, marketing or providing consultation in regard of property matters. As for the object matters, there must be in the form of land and / or buildings and other facilities and infrastructures that are an inseparable part of the land and / or building.

Do not forget to state the rights and obligations of the parties. There must be consent between parties regarding this specific matter. However, the general obligations for the Company are it has to report its activities once in a year, reporting all the amendment in company such as, the amendment of company’s name and its address, the composition of company executives, and/or experts. If the company is about to be ended, it has to be reported in written statement by returning the original SIU-P4.
Another important point is the arrangement of fees or commissions provided by the client, it has been regulated that the commission has to be at least 2% of any transaction value incurred on the related services.

Lastly, as for the dispute resolution, property disputes are mostly referred to and resolved by a general court. This type of court generally resolves cases on breach of contract, unlawful act, nullification of agreement, breach of certain legal provisions (for example, limited liability company law), and many others. Each parties may also settle the dispute through the arbitration procedure which is one of the best known mechanisms to resolve disputes out of court.

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Author: Windi Saptarani