The Legal Risks of Taking Over a Home Loan (KPR) Without the Bank’s Knowledge

Taking over someone else’s home loan (take over KPR) remains attractive to many people because it is generally seen as cheaper and more convenient than applying for and arranging a new home loan (KPR) from scratch. The usual arrangement looks like this:

• The home loan has been running for several years;

• The original buyer (the transferor) offers another person (the transferee) the chance to continue the instalments;

• The transferee simply reimburses the instalments already paid, or just the down payment; and then

• Once the loan is repaid, the house belongs to the transferee.

At first glance, this looks simple. Both parties agree, draw up a receipt or agreement, the money is handed over, the keys change hands and the transferee carries on with the instalments. The big problem arises, however, when the transaction is made privately, that is, without the knowledge and consent of the Bank that provided the home loan. This raises two fundamental questions:

1. What does a legally valid takeover look like?

2. How great are the legal risks for the transferee in a transaction made without the Bank’s knowledge?

A Legally Valid Takeover Mechanism

To untangle the issue of takeovers, we cannot look at the sale alone. A home loan transaction involves several interlinked legal relationships, so we need to examine it from each of the legal perspectives that bind it.

1. From the Perspective of the Law of Obligations and the Credit Agreement

   A home loan starts with a Credit Agreement between the Bank (the creditor) and the transferor. This is the principal agreement. In practice, Credit Agreements usually contain restrictive covenants, one of which prohibits the debtor from transferring the debt or re-pledging the mortgaged property without the Bank’s written consent. Article 1413(2) of the Civil Code recognises passive subjective novation, i.e. the renewal of a debt by replacing the old debtor with a new one. However, the requirements for novation are very strict under Article 1415 of the Civil Code, which provides that the intention to novate cannot be presumed; it must be clearly evident from the deed. In other words, it “must be clear and stated in an authentic deed”. No one can quietly transfer their obligations to someone else. If the debtor is to change from the transferor to the transferee, the Bank must be formally involved in a new agreement. A loan transfer agreement made only between the transferor and the transferee will never override the Credit Agreement concluded with the Bank.

2. From the Perspective of Security Law (Mortgage Rights)

   A mortgaged house is encumbered with a Mortgage Right (Hak Tanggungan) under Law Number 4 of 1996 on Mortgage Rights over Land (UU HT). A Mortgage Right is accessory in nature, i.e. ancillary to the principal agreement (the Credit Agreement). The right to the security follows the person named in the principal agreement. Put simply, the house has been charged to the Bank in the transferor’s name. Until the transferor’s payment obligations have been discharged, as far as the Bank is concerned, the house remains security in that person’s name. Even if the transferee is the one transferring the instalments every month, under the UU HT the house remains attached to the transferor.

3. From the Perspective of Banking Law

   A Bank cannot simply accept someone as a new debtor. Under Articles 2 and 8 of Law Number 10 of 1998 on Banking, Banks must apply the prudential principle. A Bank must be satisfied of the debtor’s ability and willingness to repay the debt. It must therefore vet who is entitled to use the facilities it provides. It needs to check the borrower’s credit history, such as their OJK SLIK record, review their income and analyse the transferee’s ability to pay. For the Bank, a transferee whose financial profile does not pass this vetting is a risk that could lead to a bad loan.

Legal Risks for the Transferee in a Takeover Made Without the Bank’s Knowledge

Given that ownership of the house and the loan obligations legally remain with the transferor, a takeover without the Bank’s knowledge leaves the transferee in a very vulnerable position. Since the receipt or agreement binds only the transferor and the transferee, and not the Bank, the transferee may face the following risks:

1. Collecting the Certificate and the Mortgage Discharge (Roya)

   When all home loan instalments have been paid, the Bank will only hand over the original certificate and the mortgage discharge (roya) cover letter to the person named in the Credit Agreement. This means the transferee has no right or legal basis to demand the certificate directly from the Bank. If, at the time of repayment, the transferor is hard to reach, has moved or is unwilling to cooperate, the transferee will struggle to obtain proof of ownership of the house they have been paying for.

2. Risk of Disputes with Heirs

   Under the law of succession, Article 830 of the Civil Code provides that when a person dies, all their assets and obligations pass to their heirs. A mortgaged house still legally in the transferor’s name will be treated as part of their estate. Heirs are often unaware of, or even refuse to acknowledge, a private takeover made in the past. As a result, they may claim the house, and the transferee could lose a home whose instalments they have been paying all along.

3. Risk of Seizure Arising from Third-Party Claims

   Under Article 1131 of the Civil Code, all of a person’s property serves as security for all their obligations. Because the house is still legally recorded as the transferor’s asset, it is highly exposed to any legal problems the transferor may face. If the transferor later falls into debt with someone else, is sued in a civil case or is declared bankrupt by a court, the house may well be included in the list of assets to be seized, even though the transferee has been paying the instalments regularly.

4. Weak Evidential Position on Ownership

   Even if the transferee holds receipts, a stamped agreement and proof of every monthly instalment transfer, these documents essentially only prove a debt relationship or an agreement between the transferor and the transferee. They are not strong enough to be recognised as evidence of a valid transfer of rights to land and buildings under Indonesian agrarian law.

In conclusion, a legally valid home loan takeover requires the formal involvement and consent of the Bank as creditor. The transfer of obligations cannot rest solely on an agreement between the transferor and the transferee; it must go through a process of debt renewal (novation). That novation must be clearly set out in an authentic deed, followed by the administrative transfer of land rights and adjustment of the Mortgage Right security, so that the transferee’s legal position becomes valid and protected.

By contrast, a takeover made without the Bank’s knowledge leaves the transferee in a very weak and unfavourable legal position. Despite paying the instalments regularly, the lack of legal standing means the transferee bears legal risks down the line, from losing the right to collect the certificate and the roya, to potential disputes with the transferor’s heirs and the threat of asset seizure arising from third-party claims. Ultimately, legal certainty can only be achieved if the takeover follows the proper legal procedure.

Illustration: Gemini AI