Down-Value lease contract

TheTurtle

New Member
Apr 5, 2017
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Hello,

I am about to invest in Bali and I saw a lot of warning not to down-value the lease contract although it is common practice. I did some research but I not exactly understanding the legal disadvantages, especially in case there might be a conflict with the landowner afterward. My understanding is that his can be used as leverage after all.

Also, what taxes a due when I lease land? On the lessors and lessees side.


Kind Regards
 

spicyayam

Well-Known Member
Jan 12, 2009
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I guess it is some kind of tax-dodge by the land owner to "down value" the lease of the contract. I know if happens with free hold property sales to reduce sales tax, but not all notaries do this.

It is hard to say if you will have problems later on, who knows really. I don't believe there are any property taxes for the lessor.

I hope you are using a notary for the transaction and it is a good idea to get a lawyer to check all the contracts before you sign everything. Especially with regards to inheritance (for you and the land owner), sub-leasing, who will own any improvements to the property, business licences, lease extensions etc etc.
 

Markit

Well-Known Member
Sep 3, 2007
9,317
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Karangasem, Bali
I don't share all this legal-beagle stuff to be honest. It seems to loan a false sense of security to us westerners that in a pinch doesn't back up what it promises and just costs more money. I'm wondering if the complexity in the case has been caused by that desire?! because I've never heard of half the stuff you are asking about (in this and your other post) in any property transaction here on Bali. I would suggest going to an independent estate agent that has been here a while and ask what he thinks - might cost you dinner and a beer but might be money well saved on an unneeded lawyer.
 

spicyayam

Well-Known Member
Jan 12, 2009
3,592
342
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I guess the notary was chosen by the land owner and the notary has prepared the agreement for the OP. The land owner can put any clauses into the agreement they want. It also sounds as though they are not fluent in Indonesian and have to rely on translations.

I am sorry, but if you don't get everything checked out by a lawyer, you will have bigger problems later on. The small cost of getting a lawyer to read over the agreement and suggest amendments to put yourself in a strong position is a fraction of what you will have to pay should you have to go to court over any dispute.

You probably think I am biased because my wife is a lawyer, but I have seen first hand the problems people get into without fully understanding the contracts and agreements they sign. One thing that comes to mind in one long term land agreement, the owner could sell the property at anytime and any improvements to the land belonged to the owner. Imagine that happening after you build a villa!

Another problem with relying on translations is that things can conveniently be left out of the translation. The original can also be changed at anytime without the foreigner knowing it has been amended. So you really need a lawyer to go over it again before you sign it.