6 steps to leasing property in Bali correctly

Leasehold is one of the best ways foreigners acquire property in Bali. With restrictions against foreign ownership of lands, property leases are the safest and most efficient way for a foreigner to have a home in Bali. With over 10,000 holiday rental properties in Bali competing for tourist attractions, leasing land or property is a viable option for those looking to invest or live on the island. Find out how leasing property in Bali works.

Step-by-step guide on leasing property in Bali

1. Use a professional and reliable real estate agent
2. Find the right property
3. Check the property licenses
4. Conduct due diligence
5. Draft leasehold agreement and downpayment
6. Final payment and sign the lease agreement
7. Obtain the proper land certificate

Step 1: Use a professional and reliable real estate agent

Indonesian property ownership structures can be complicated. Working with amateurs or inexperienced parties may complicate the process. That’s why working with a professional and reputable real estate agent is recommended.

Step 2: Find the right property

Finding properties in Bali is the first step towards leasing land or property. One can explore real estate websites, consult with local agents, or search for advertisements in local newspapers. Ensuring that the properties meet your requirements before negotiating lease terms with the owner or agent is essential. It’s worth checking out the different real estate places in Bali to get an idea of where to find a property.

Step 3: Check the property licenses

Always ask to check the following property licenses:

• The Certificate of the Property
• The Building Approval (PBG)

If the owner cannot provide these licenses, don’t even consider moving forward with the transaction, as it means that something is probably not correct.

Step 4: Conduct due diligence

Conducting due diligence is a critical step in the leasing process, and the duration can vary depending on the property/land. It involves a thorough investigation by a notary or lawyer to ensure that the vendor has the legal right to lease the property, that all relevant paperwork is in order, and that there are no disputes over the property or land. This process can take one to three weeks, and it is necessary to ensure a smooth and legally compliant lease agreement.

Some questions you should ask when conducting due diligence:

• Who is the owner of the real estate object? Is it a private individual, or are other persons involved as well?
• Is the property inherited? If so, are all of the beneficiaries willing to lease? Have they declared their permission to lease?
• What type of certificate does the property have? Does it allow you to perform your planned activities?
• Are the documents with the owner or at a bank?
• What are the local zoning laws of the property?
• How much tax would you need to pay for leasing the property?

Getting answers to these questions helps you to understand the situation better.

Step 5: Draft leasehold agreement and downpayment

Drafting a leasehold agreement is a crucial step in leasing land in Bali. The lease agreement should clearly outline the terms and conditions agreed upon by both parties. It should include the duration of the lease and who is responsible for paying maintenance, utilities, and property taxes. It is best to consult a legal professional to ensure the lease agreement is legally binding and protects your interests.

Step 6: Final payment and sign the lease agreement

After finalizing the lease agreement and agreeing on its terms, signing the deal and keeping a copy of it for your records is crucial. To ensure the agreement is legally binding, a public notary (PPAT) should notarize it. This process involves verifying the signatures of both parties and registering the lease agreement with the land office. Therefore, notarizing the lease agreement is crucial in the leasing process.

Leasehold as an individual or through a PT PMA?

In particular, foreigners cannot own properties under a freehold title because these are only available to Indonesian nationals. Nonetheless, a leasehold is an alternative with the same rights as a freehold. Both foreign individuals (WNA) and foreign-owned companies (PT PMA) can acquire a leasehold title.

Are you planning to use the property for residence? Leasing in your personal name may be more suitable. Do you want to lease property and rent it out to generate income? Then, it might be better to lease through a PT PMA.

What you need to know about renting properties in Bali

1. Terms are negotiable 

One significant advantage of leasehold agreements is their flexibility, as the terms of the agreement are entirely negotiable. Parties are free to determine their words, and even after the contract has ended, they can still renegotiate the deal. However, the lease agreement must only be for a 25 to 35-year period but can be consecutively extended when the contract ends. It allows for a more personalized and adaptable understanding tailored to both parties’ needs.

2. Restricted ownership

Leasehold entails that you merely rent out the property for some time, and full ownership remains with the owner. This characteristic has both advantages and disadvantages. The downside is that you can only make significant changes to the property with the owner’s permission, limiting your freedom of use. On the positive side, you do not have to commit to the property long-term, and you are not responsible for taxes and other government regulations, which is a benefit that may suit some individuals.

3. Costs of leasing a villa in Bali

Villa leasing prices differ depending on the size, location, and amenities. It can go for as low as IDR 2.5 million ($158) or IDR 4 million ($252) per square meter.

Buy property in Bali with Own Property Abroad

Do you want to buy property in Bali? Own Property Abroad can assist you and ensure a seamless and hassle-free property journey. Thanks to our extensive knowledge and local experience, we can help with land titles in Bali, legal requirements, finding suitable properties, negotiating the best deals, and conducting due diligence.

With our expert team, you won’t have to navigate the complexities alone. For further information on how we can assist you, kindly drop your details below or email us at [email protected].

Conclusion

Leasing land or property in Bali requires careful consideration and a thorough legal process to protect both parties. Each step is crucial to ensure a legally compliant and mutually beneficial lease agreement, from finding a suitable property and negotiating the lease terms to conducting due diligence and notarizing the agreement. By following these steps, individuals looking to lease property in Bali can make informed decisions and protect their interests throughout the leasing process.

Frequently Asked Questions (FAQs)