Property lease extension process to be simplified

spicyayam

Report from the Jakarta Globe: The government has backpedaled on a proposal to allow foreigners to own property in Indonesia for 90 years and will now only simplify the extension process and not change the maximum length of title from the current 70-year tenure. The changes are contained in a new regulation which will be presented to President Susilo Bambang Yudhoyono for approval before the end of May, the Ministry of Public Housing’s Jamil Ansari said on Wednesday. The regulation is expected to take effect within two months of the president approving it, he said. “The draft review of the regulation is almost finished and we expect it will be ready by the end of May,” Jamil said. Currently, foreigners can hold property for 25 years. After the term expires, they may renew their property rights with the National Land Agency (BPN) for an additional 25 years and then extend it once more for 20 years, making for a total of 70 years. Under the new regulation, foreigners will be able to renew for the additional 25- and 20-year terms at the same time, effectively meaning they will be able to renew for 45 years. “Many foreigners find that the extension process for their property is really unpractical. Therefore, we decided to simplify it,” Jamil said. Teguh Satria, chairman of the Indonesian Real Estate Developers Association (REI), said it would make more sense for foreigners to be able to own property outright so they did not have to go through time-consuming extensions. Not allowing foreigners to own property meant Indonesia’s property sector was less competitive compared to Singapore and Malaysia, Teguh said. He said there were around 83,000 foreigners living in Indonesia. If 10,000 of those foreigners bought a $250,000 apartment it would translate into $2.5 billion of foreign investment, Teguh said.

leeloo

Lease extension

Report from the Jakarta Globe: “Currently, foreigners can hold property for 25 years. After the term expires, they may renew their property rights with the National Land Agency (BPN) for an additional 25 years and then extend it once more for 20 years, making for a total of 70 years.

They say you can renew your lease AFTER THE TERM EXPIRES. Really??? Is that right? Because my lawyer wants me to sign a lease agreement of 25 years and a lease extension agreement of 25 years at once but with a different dates (distanced by 15 days on the paper). So my question is : Is mylease extension agreement legal? I'm wondering because 1) according to the text above, you can renew only once the term expires (but maybe you can extend?), and 2) because they say extension should be 20 years max, not 25.... I must admit it's a bit confusing for me. What's the difference between renewing and extending? I was also wondering if you could have just one lease agreement in which you put a clause saying the lease is automatically extended (or renewed I don't know :-) at a pre-definite rate. Would that be legal? Thanks for your help. Leeloo

spicyayam

Are you using a lawyer or notary for this? If you want to be sure about this, it might be an idea to get another notary to look over the contracts.

ANZAC

[QUOTE=;][/QUOTE] Hi all, I have just moved to Bali a few weeks ago and I am looking at some land to build on. The problem I have is that when I ask how the lease of land/property operates I did speak to a developer but he did not know - I smelt a rat! Is there any expats who lives in the Padma region who could perhaps sit down and explain me the process in good english! I'll buy the lunch LOL. Thanks, Anzac :icon_biggrin:

MATT_BALI

[b]Buying /Leasing in Bali[/b] I to find it hard to get a straight answer i want to buy a property but because I am Australian I am not legally allowed to own property only if local is on title then they can sell at any time. So I look at lease for 25 years most of the time its the same price as if I had purchased the property but after 25yrs i have to give it back. ??? Unless i renew the lease and then that costs me the same again in value ????????? is this correct.

hermit

Leasehold construction

The problem I have is that when I ask how the lease of land/property operates I did speak to a developer but he did not know - I smelt a rat! Is there any expats who lives in the Padma region who could perhaps sit down and explain me the process in good english

Check the site of this notary in Sanur,Perfect english.: .:: Rainy Hendriany - Bali property investment legal specialist. Foreign investment specialist ::.

ronb

......... So I look at lease for 25 years most of the time its the same price as if I had purchased the property but after 25yrs i have to give it back. ??? Unless i renew the lease and then that costs me the same again in value ????????? is this correct.

You make it sound like you have to re-buy it at 25 years. That's not what happens. At the beginning you pay a purchase price so that the land can then be owned by your nominee. You also sign some contracts for the 25 year lease arrangement with your nominee. It includes a provision for you to pay a rent - usually a small "peppercorn" rent. After 25 years you, or whoever you have sold it to, has the option to re-new the lease. In a past thread Gilbert translated the set of lease agreements he was using have a look: https://balipod.com/forum/threads/namegiver-need-to-be-onsite.3912/

hermit

[QUOTE]You make it sound like you have to re-buy it at 25 years. That's not what happens. At the beginning you pay a purchase price so that the land can then be owned by your nominee. You also sign some contracts for the 25 year lease arrangement with your nominee. It includes a provision for you to pay a rent - usually a small "peppercorn" rent. After 25 years you, or whoever you have sold it to, has the option to re-new the lease.[/QUOTE] Sorry Ron,i think you are mixing up two things,buying and leasing.Leasing is legal for foreiners,so you do not need a nominee.Only if you buy-no extension needed- you need a nominee.Indeed you have to pay again as the lease expires.The price of lease land should be considerably lower than for buy-land anyhow.Good leasecontracts state the reference to be used to establish the price of the extension,such as the price of rice or gold.

MATT_BALI

hermit wroteSorry Ron,i think you are mixing up two things,buying and leasing.Leasing is legal for foreiners,so you do not need a nominee.Only if you buy-no extension needed- you need a nominee.Indeed you have to pay again as the lease expires.The price of lease land should be considerably lower than for buy-land anyhow.Good leasecontracts state the reference to be used to establish the price of the extension,such as the price of rice or gold.

Ok so looking at a lease as it seems the safest way to go. Most of them have been the same price to buy or lease. I understand this will be hard work till I find the right person to deal with, plus properties are hard to find at the moment. As I mentioned being the same price to buy or lease it pushes you into trying to buy as your not paying for a new lease at the end of the term. Example i pay $250,000 for a lease in 25 years i have to pay the same again or more to extend for the same period. Yet if I buy its mine forever till I sell or get ripped of by the nominee ????:icon_sad:

hermit

[QUOTE] As I mentioned being the same price to buy or lease it pushes you into trying to buy as your not paying for a new lease at the end of the term. Example i pay $250,000 for a lease in 25 years i have to pay the same again or more to extend for the same period. Yet if I buy its mine forever till I sell or get ripped of by the nominee ????:icon_sad: [/QUOTE] I am not sure where you have been looking,but generally speaking the leasehold prices are considerably lower than buyingprices,rightly so.In the present booming market real estate agents might tend to ask idiotic prices for leasehold while minimizing the information on the effects of leasehold.If the price of rice (example as one of the references you can put in your contract)goes up,so will the price for the renewal of your lease.I agree it is not really inviting to invest that way.In fact the value of your property goes down each year instead of up,wich is usual in real estate. yet the leasehold is the only construction that is really advised as safe by all kind of knowledgebale people.(i use a nominee myself,like living dangerously.)One advice to all who would like to invest in indonesia:do not invest more then you could afford to loose,for whatever reason.You will sleep bet.ter

hermit

ronb wroteNo I am not mixing up two things. I am talking about foreigners buying property in Indonesia - so the money involved is not an lease payment for a number of years - but is the purchase price. Perhaps I should not have referred to the contracts between the foreigner and the name-holder or nominee as lease contracts. Maybe I should just say contracts - but really they boil down to being special leases where the foreigner has all the rights and the land owner (name-holder) has very few rights.

I am sorry Ron,but Matt was talking about LEASING land for 25 years,To wich you replied.

ronb

hermit wroteSorry Ron,i think you are mixing up two things,buying and leasing.Leasing is legal for foreiners,so you do not need a nominee.Only if you buy-no extension needed- you need a nominee.Indeed you have to pay again as the lease expires.The price of lease land should be considerably lower than for buy-land anyhow.Good leasecontracts state the reference to be used to establish the price of the extension,such as the price of rice or gold.

No I am not mixing up two things. I am talking about foreigners buying property in Indonesia - so the money involved is not an lease payment for a number of years - but is the purchase price. Perhaps I should not have referred to the contracts between the foreigner and the name-holder or nominee as lease contracts. Maybe I should just say contracts - but really they boil down to being special leases where the foreigner has all the rights and the land owner (name-holder) has very few rights.

MATT_BALI

hermit wroteI am not sure where you have been looking,but generally speaking the leasehold prices are considerably lower than buyingprices,rightly so.In the present booming market real estate agents might tend to ask idiotic prices for leasehold while minimizing the information on the effects of leasehold.If the price of rice (example as one of the references you can put in your contract)goes up,so will the price for the renewal of your lease.I agree it is not really inviting to invest that way.In fact the value of your property goes down each year instead of up,wich is usual in real estate. yet the leasehold is the only construction that is really advised as safe by all kind of knowledgebale people.(i use a nominee myself,like living dangerously.)One advice to all who would like to invest in indonesia:do not invest more then you could afford to loose,for whatever reason.You will sleep bet.ter

I agree Hermit but around Legian Seminyak Jimbaran all seem to be the same price lease or buy, all I want is a good deal and get on with it. I am not being stinjee on price just want value for money not the same as buy to lease ????

kitpattrainor

We are looking to renew/extend our lease on our villa in Seminyak. We have 8 years remaining on what was a 25 year land lease. Can anyone advise what is the basis for which lease extensions are calculated? gold? rice? whatever the land owner feels like? I have also heard IDR 3,500,000 per "are" per year. any comments or advice greatly appreciated.

matsaleh

I don't know a lot about leasing prices, but I have heard recently that the going rate for leasing established villas in Seminyak this year is between IDR 20 million and 25 million per are / per year, depending on the proximity to the beach. IDR 3.5 million per are/per year in Seminyak is not even remotely possible. Haven't seen prices like that for more than 10 years.

Markit

3.5/year/are is the going price up here in Karangasem for new leaseholds but only for land. No buildings on it.

Mark

kitpattrainor wrote We are looking to renew/extend our lease on our villa in Seminyak. We have 8 years remaining on what was a 25 year land lease. Can anyone advise what is the basis for which lease extensions are calculated? gold? rice? whatever the land owner feels like? I have also heard IDR 3,500,000 per "are" per year. any comments or advice greatly appreciated.

I guess your lease does not have an extension clause? If not, and if the owner is amenable to extend/renew the lease, then you could assume it's at market rate. The challenge is to agree what will be the market price for a long term lease in your area in 8 years' time when your current lease expires, unless the owner is willing to sign off on a renewal that becomes effective in 8 years at today's prices. To me that seems unlikely. As an alternative, you could consider entering into a new long term lease starting from now, at today's price, which any decent property agent in your area should be able to advise. Then negotiate with the owner to apply 8 years worth of payment already made on the current lease towards the new one. Just a thought. In any case, I'd also consider talking to a notaris in your area to get their perspective and advice.

kitpattrainor

Thanks for your comments in 2019. I had put off negotiations for that year and I did not get involved with negotiations last year having been stuck in Hong Kong and the USA, and now am back again....I have 4.34 are in Seminyak about 5 minutes to the beach, and I have been told by our management company to start negotiations at IDR 12 million per are, for a 20 year lease. I think that in light of the covid epidemic, that this ID 12 million ( 12 juta) is not realistic. Any thoughts or comments? Thank you.

Mark

kitpattrainor wrote Thanks for your comments in 2019. I had put off negotiations for that year and I did not get involved with negotiations last year having been stuck in Hong Kong and the USA, and now am back again....I have 4.34 are in Seminyak about 5 minutes to the beach, and I have been told by our management company to start negotiations at IDR 12 million per are, for a 20 year lease. I think that in light of the covid epidemic, that this ID 12 million ( 12 juta) is not realistic. Any thoughts or comments? Thank you.

My thoughts are that Covid will not be a problem for the next 20 years extension of your lease, so don't expect a 20 year windfall because of the current situation. You may argue that at least the next 2-3 years should be discounted, since it may be difficult to rent the villa (if that's what you do), or even use it yourself given travel restrictions. On the other hand, based on your post number 14 above you still have a number of years left on your current lease. Assuming you are negotiating for an extension of this period, I wouldn't hold my breath for any Covid discount, since it is unlikely to have any effect on property prices beyond the next 2-3 years from now. Your management company should know what the going rates are in your area, so probably best to take their advice after you've asked around to confirm their info.

kitpattrainor

Mark wrote My thoughts are that Covid will not be a problem for the next 20 years extension of your lease, so don't expect a 20 year windfall because of the current situation. You may argue that at least the next 2-3 years should be discounted, since it may be difficult to rent the villa (if that's what you do), or even use it yourself given travel restrictions. On the other hand, based on your post number 14 above you still have a number of years left on your current lease. Assuming you are negotiating for an extension of this period, I wouldn't hold my breath for any Covid discount, since it is unlikely to have any effect on property prices beyond the next 2-3 years from now. Your management company should know what the going rates are in your area, so probably best to take their advice after you've asked around to confirm their info.

Hi Mark, Thank you for your reply. We do rent out the villa in addition to visiting about 3x per year from here in Hong Kong, and this past 2020 year has been quite difficult in having to let management company staff go and villa staff going on much reduced hours and salaries. (In HK, we currently have a 21 day quarantine period) Even if there are problems for 2 years, it is not easy to recoup last year plus 2 more, in a short period of time. I went back and found my my original lease agreement from 2006 which was at a rate of IDR 2,400,000 per "are". So I cannot even begin to think of starting a negotiation at my management company's suggestion of IDR 12,000,000 per "are" even thought it is now 14 years on from the start of our first lease. You did give me an idea to possibly review, which is the concept of a tiered lease agreement, given the covid situation, that a rate would be "x" for a number of years now and then "x+" for later years. Not sure how this will fly with the land owner but I am considering it. Thank you.