Lease Land and Property in Indonesia
Foreigners who interest in Indonesian exoticism and natural beauty, can start to lease land or property
for living or doing business in Indonesia. You can be the Leaseholder or Lessor of land and property in Indonesia. The Leasehold, it is actually regulated in the Act Number 5 Year 1960 About Basic Regulation of Agrarian Principles (hereinafter called UUPA).
LEASEHOLD
On article 44 UUPA stated, “A person or a corporation has the right to lease land, if he is entitled to utilize land owned by another for the purpose of building, by paying to its owner an amount of money as rent”. Besides, in UUPA regulate about Leasehold for the agricultural purpose which is state in Article 16 paragraph (1) h jo Article 53 UUPA.
Therefore, UUPA distinguishes Leasehold into 2 types, namely:
1. Hak Sewa Untuk Bangunan or Leasehold for Building
The land with Freehold title that does not have a building yet, it can be leased for a certain period to construct a building. A Leasehold for building occurs due to the lease of land with the status of Freehold. Leasehold of Buildings is an implementation of the principle of horizontal separation, there is a separation between ownership of land and buildings on it. If a foreigner or foreign investment company stays temporarily in Indonesia, he or she or it cannot be granted to be a Leasehold. In this case, it will be just a building Lease Agreement. What is leased is not the land, but the building.
2. Hak Sewa Untuk Tanah Pertanian or Leasehold for Agricultural Land
The characteristic Leasehold of Agricultural Land is only temporary. Thus there is no exploitation element when the land does not show a profit.
Lease periods are not always the same but it referring to the time of Hak Guna Bangunan or The Right of Building which is 30 years. Indoned Consultancy provides more information about Land Right in Indonesia.
The Process to Lease a Land in Indonesia:
| 1. | In order to lease land, the first thing that you should do is deciding the purpose of Leasehold, whether for building or agriculture lands. |
| 2. | The land title before Leasehold is Freehold. You can find it on one of the important components before making a lease agreement, which is a land certificate. The state cannot lease the land, because the state is not the landlord. |
| 3. | Make the Lease Agreement with regard to the period of Leasehold, price, taxes that have to be paid, how to do the payment, rights and obligation of each party and other necessary clauses. In addition, a foreigner must stay in Indonesia for quite a long time, thus the rights of foreigners will be Leasehold of land for building or agriculture purposes, not only in the form of building or land Lease Agreement as mention above. |
| 4. | After the Lease Agreement is done, the next step is the registration of Leasehold for buildings or agriculture on Freehold land to the Office of the Land National Agency (BPN). Thus there is Legal Certainty, Legal Protection and orderly administration of land. |
Indoned Consultancy always gives the best advice and solution regard to your plan to lease a land in Indonesia. Indoned Consultancy is one of business consultant in Indonesia which provide various services as well. Our team will always able to help each of your business processes and providing the latest regulation that must be applied in Indonesia so that you will feel comfortable when doing business in Indonesia.
LEASE AGREEMENT
Lease is a consent, where the other party is bound to provide the enjoyment of an item to another party during a certain time, with the payment of a price which is afforded from the last party mentioned.
This definition is stated in the Indonesian Civil Code (Kitab Undang-Undang Hukum Perdata or hereinafter called KUHPer) Article 1548.
The differences between Leasehold and Lease Agreement is Leasehold is one of the rights of the land, where a person or legal entities will have the right for lease the land, whether for building or agriculture, while the Lease Agreement is a process that is done between the lessee and the lessor to make the Leasehold. Thus the Lease Agreement is part of the Leasehold of buildings or agricultural land.
The understanding of Lease Agreements will be different if the lease object is a building that has been built on land, whether it is a house, office or factory. This Lease Agreement does not make the Leasehold birth, it will be only ordinary Lease Agreements. A Lease Agreement must be documented at a Notary Public (PPAT), which means the owner’s title of Hak Milik (Freehold) will be legally transferred to the foreigner under the Hak Sewa (Leasehold). Although, the land title is not under the foreigner’s name and remains under the ownership of the original owner. If the Leasehold is not renewed once it expires, all rights go back to the original owner and it becomes a Freehold Hak Milik property again.
In addition, the Lease Agreement Letter is the most important part of the lease process. As we mentioned above, the Lease Agreement must clearly specify the rights and obligations of each Party, both the lessor and the lessee. In this way, there are obvious boundaries, thus conflicts that may occur in the future are avoided. Regard the terms and conditions of any extension to a lease, are usually built into the original agreement. Most Lease Agreements have some sort of extension option, although you should be careful to fully understand the means by which the extension may be activated. Indoned Consultancy is able to help you with regard to Lease Agreement and Leasehold as well. For further information please contact us.
Disclaimer:
The information provided here is based on our long experience. In addition, the process or requirement may vary depending on the specific facts and conditions. Besides, the law and regulations in Indonesia subject to frequent changes. In either case please contact us as your consultant to get an up to date information and accurate advice. More Information click here and You can also follow our social media accounts to see the latest information posts. please click on the following links: Facebook, Instagram, Linkedin, and Twitter.