Foreign nationals cannot hold freehold title in Indonesia, however, a long‑term land lease (hak sewa) can still provide ownership‑like control, legal security, and a clear path to build or operate a business on the Island of the Gods. This guide explains the key clauses every foreign lessee should include, presented in clear, neutral language so investors, entrepreneurs, and prospective homeowners can avoid costly surprises.
1. Identify the Parties
A strong lease begins by naming exactly who is contracting.
- Lessor (Owner): An Indonesian citizen or locally incorporated company with a clean land certificate, free of liens or disputes.
- Lessee (You): Include full passport information, or company deeds for a PT PMA, as well as an Indonesian tax ID. Clear identification protects your legal standing.
Tip: Attach colour scans of both parties’ identification documents to keep the lease self contained.
2. Describe the Property
List the certificate number, a scaled site map with GPS coordinates, the exact area in square metres, and the zoning classification, for example residential, commercial, or green. If the land is split into several plots, list each plot number to avoid boundary disputes.
- Utilities: State current connection points for electricity, water, and internet.
- Access: Describe public or private road access, the width of any right of way, and easements that could limit use.
3. Lease Term and Right of First Refusal
Typical Bali leases run for twenty‑five years and can include one automatic twenty‑five year extension, exercisable by the lessee.
- Start and End Dates: Use calendar dates rather than “upon signature.”
- Extension Notice: For example, “The lessee may extend the lease by giving written notice twelve months before expiry.”
- Right of First Refusal (ROFR): If the owner receives a genuine offer, you have thirty days to match it. Any new buyer must honour the lease exactly as written.
4. Permitted Use and Licensing
Define the intended activity, for example private villa, boutique hotel, surf camp, or wellness centre, and assign permit duties.
- Building Licence, PBG: Usually arranged by the lessee, with the owner providing supporting signatures.
- Environmental Approvals, AMDAL or UKL UPL: Required for larger projects.
- Village Approval: Certain desa adat demand a no objection letter before construction begins.
Reminder: Since 2023, zoning enforcement in Bali has tightened. Building outside your zone can bring work to a halt.
5. Financial Terms and Taxes
Clarity here prevents later disputes.
- Escrow Deposit: Paid to a neutral notary and released only after due diligence is complete.
- Payment Schedule: Split payments into milestones, for example fifty percent on signing, thirty percent after PBG issuance, twenty percent on handover.
- Statutory Costs: Allocate ten percent PPh Final, five percent BPHTB when applicable, notary and registration fees, and any transfer duty.
Late payment interest can be added, for example zero point one percent per day after a short grace period.
6. Collateralisation Restriction
The owner may not pledge or mortgage the land without your written consent. If a lien is recorded without approval, the lease should state that it is invalid against the lessee, and the owner must remove it within thirty days or refund all sums paid plus interest.
7. Sub Lease and Assignment
- Sub Lease: Allows you to rent units or rooms while you remain liable under the main lease.
- Assignment: Transfers all rights and obligations to a new lessee. The owner’s approval may not be unreasonably withheld.
- Transfer Fee: If a fee is due to the owner, cap it, for example one percent of the sale price, to prevent surprises.
8. Maintenance, Infrastructure, and Construction
Specify responsibility for boundary walls, drainage, utility connections, and road access. Agree on a construction schedule with milestones such as groundbreaking, roofing, and completion, and link each milestone to liquidated damages if deadlines are missed. State ongoing duties such as landscaping and waste management after operations begin.
9. Insurance Requirements
Indicative minimum limits per event.
| Coverage | Purpose |
|---|---|
| Property and Fire | Buildings, contents, and fit out |
| Third Party Liability | Injury or property damage to others |
| Earthquake and Volcanic Eruption | Important for areas such as Uluwatu and Kintamani |
| Flood and Water Damage | Protection during the monsoon season |
State who pays premiums, supplies proof of cover, and renews policies.
10. Force Majeure
Cover natural disasters, war, pandemics, and government shutdowns.
- The affected party must give written notice within seven days.
- Rent and the lease term are paused for up to three months.
- If disruption lasts longer than three months, either party may renegotiate or terminate without penalty.
11. Tiered Dispute Resolution
- Amicable negotiation within fourteen days.
- Independent mediation within thirty days if necessary.
- District Court of Denpasar if mediation fails. Indonesian law governs, and Bahasa Indonesia prevails if the texts differ.
The parties may choose BANI arbitration instead of court for faster, confidential decisions.
12. Due Diligence and Escrow Refund
Provide at least thirty days to confirm the following.
- Authenticity of the land certificate through the BPN online portal.
- Zoning compliance from the local planning office, Dinas PUTR.
- Tax clearance and confirmation that land tax, PBB, is paid.
If any problem appears, the escrow agent must refund the deposit within five banking days.
13. Village, Desa Adat, Obligations
Address community requirements such as regular banjar contributions, waste management duties, noise control, and respect for ceremony days that can restrict construction.
14. Succession and Early Termination
Allow the lease to pass to heirs or a related company. If the lease ends early, for example because of government acquisition, agree on a valuation method, actual cost or market value, whichever is lower, to calculate compensation for improvements.
15. Registration at the Land Office
The notary must register the lease deed with the National Land Agency, BPN, within seven days. Until registration is complete, the lease binds only the parties and not third parties.
Common Pitfalls and Solutions
| Issue | Recommended Fix |
| Unclear extension wording | Use fixed calendar dates, for example 1 January 2050 |
| Lease not registered | Add a contractual penalty if the notary is late |
| Undefined tax obligations | Include a clear tax allocation table |
| Hidden encumbrances | Make closing conditional on a clean land status check |
| Village levies overlooked | Confirm banjar dues before signing |
Pre-Signing Checklist
- Order a current land certificate and encumbrance search from BPN.
- Confirm zoning matches intended use and allowed floor area ratio.
- Calculate all taxes, notary fees, permit costs, and insurance premiums.
- Obtain written spousal consent if the land title is jointly owned.
- Attach bilingual texts, noting that Indonesian takes precedence over English.
- Confirm escrow instructions, account details, and release conditions.
Professional Support
A well structured lease protects capital, timelines, and peace of mind. For personalised advice, thorough due diligence, and professional document drafting, contact our team. We transform complex regulations into clear action steps so your Bali project starts smoothly and stays compliant.