When Is Due Diligence Money Due in Property Transactions & What Are the Provisions? – Warm greetings to all readers across Indonesia! If you’re planning or involved in a property transaction, surely you want the process to run smoothly, securely, and in accordance with applicable regulations. One critical aspect often discussed is the payment of due diligence money. In this article, we from SIEMA KONSULTAN will comprehensively explain when this money should be paid and the related regulations to ensure you don’t make any mistakes.

We invite you, prospective buyers, investors, and property professionals throughout Indonesia, to continue reading and understanding this information. Knowledge about the due diligence process can help you avoid legal risks and financial losses in the future. SIEMA KONSULTAN is here as a trusted partner providing professional and experienced due diligence services.

What Is Due Diligence in Property Transactions?

Before discussing the timing and regulations regarding due diligence money, it’s important to understand what due diligence entails. Generally, due diligence is a thorough examination and verification process of the property intended for purchase or sale. Its purpose is to give the buyer a complete picture of the legal, physical, and administrative conditions of the property.

This process includes checking certificates, land status, building permits, tax status, and potential disputes. By conducting due diligence, the risks of loss due to document discrepancies or legal issues can be minimized.

When Should Due Diligence Money Be Paid?

A common question among prospective buyers is: “When should I pay the due diligence money?” The answer varies depending on the agreement between the seller and buyer, as well as local practices in Indonesia.

Generally, here are key points regarding the timing of due diligence payment:

1. At the Initial Offer and Negotiation Stage
   Many property transactions start with offers and negotiations. At this stage, there is usually no obligation to pay due diligence money. However, some sellers may request this as a commitment fee, especially if the transaction is serious and requires detailed verification.
2. After an Initial Agreement and Before the Deed of Sale
   Typically, due diligence money must be paid after an initial agreement (such as a Memorandum of Understanding / MoU) and before the notarization process of the Sale and Purchase Deed. At this point, the buyer often conducts intensive legal and administrative inspections.
3. Within the Sale and Purchase Agreement (SPP) or Binding Agreement
   In some cases, the payment of due diligence money is arranged through a written agreement, such as the Sale and Purchase Agreement (SPA). The payment is made as part of this agreement, and the amount is mutually agreed upon.
4. Specific Terms in the Contract
   If the contract explicitly states that the due diligence fee is payable at a certain time, then those terms must be followed. It’s important to understand that this money typically serves as a fee for verification and is not a down payment or earnest money.

How Much Is the Due Diligence Fee?

The amount of due diligence money varies depending on the property value and the complexity of the inspection. Generally, it ranges from 1% to 3% of the property’s purchase price, or based on mutual agreement.

However, it’s essential to remember that this fee is usually a cost for the verification process and is non-refundable if the transaction does not proceed, unless otherwise stipulated in the contract.

Legal and Common Practice Regulations on Due Diligence Money

In practice, there is no specific regulation governing the payment of due diligence money. Nonetheless, the general principle is that both parties agree on the terms, which are documented in a written contract.

Key points related to these regulations include:

• When must it be paid: After initial agreement and before official legal procedures.
• Amount payable: Based on mutual agreement, usually as a verification fee.
• Refundability: Generally non-refundable unless specified otherwise.
• Impact on the transaction: Paying due diligence money does not legally obligate the buyer to proceed, but it is part of the verification process.

Why Is Due Diligence Important?

Conducting due diligence is a crucial step to ensure your property transaction proceeds smoothly without legal obstacles later on. Some risks mitigated through this process include:

• Confirming the legal status of certificates and documents.
• Avoiding land or building disputes.
• Ensuring no encumbrances or liens attached to the property.
• Knowing the tax and administrative status comprehensively.
• Reducing financial losses caused by incomplete or illegal documents.

Why Choose a Professional Due Diligence Service?

Performing inspections independently is possible but risky, especially if you lack experience and knowledge. Therefore, it’s highly recommended to utilize professional services, such as SIEMA KONSULTAN, with extensive experience in property due diligence.

A professional service ensures thorough, accurate, and standard-compliant verification. The results will be a comprehensive and trustworthy report that serves as a solid foundation for your decision-making.

This comprehensive explanation aims to clarify when due diligence money should be paid and the regulations surrounding it in property transactions. We hope this information proves helpful and assists you in conducting safe, smooth, and compliant property deals across Indonesia.

If you need a trusted and professional due diligence service, SIEMA KONSULTAN is the right choice. Our office is located at Sampoerna Strategic Square South Tower Level 30, Jl. Jenderal Sudirman Kav. 45, Jakarta 12930, Indonesia.

For free consultation and more information, please contact us via phone/WhatsApp at 0813 1114 2228. With SIEMA KONSULTAN, your property transactions will be safer and more assured!

For more information

Please visit:

www.siemakonsultan.com

Jakarta Office:

Sampoerna Strategic Square

South Tower Level 30,

Jl.Jend.Sudirman Kav.45

Jakarta Selatan – DKI Jakarta

Bali Office: 

Jl. Cokroaminoto No.212,

Ubung, Denpasar Utara,

Bali – Indonesia

Contact Us:

Imam Budiharto
imam@siemakonsultan.com

Telpon: 021 2992 7844

Whatsapp: 0813 1114 2228