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Pitfalls of Renting Properties in Indonesia

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Indonesia is one of very few countries in Asia where landlords (mostly) require pre-payment of rent for the period of the lease – which is usually a minimum of two years. Korea and Taiwan are the only other countries that have similar practices. This practice goes way back to the 1970s when the country was booming and there was an enormous shortfall in expatriate accommodation. Unfortunately this leaves the tenant in a weak position with very little legal recourse when it comes to disputes with the landlord.

This means that the process of renting a property here is a very much a “buyer-beware” scenario. There is currently no strict building code that is enforced for residential properties in Indonesia. And landlords are notorious for cheap construction and ‘band-aid’ repair work. This means that tenants often walk into a newly leased property unaware of a myriad of problems that are likely to arise – and in some cases these problems can pose a serious risk to the tenant and their family.

It is therefore strongly advisable that a tenant organize an independent property audit prior to signing the lease and pre-paying the rent.

A complete property audit should consist of the following audits:

Electrical Audit – A comprehensive check on grounding, balance, installation, material, workmanship, safety (ELCB, RCD), power supply and lightening protection.

Plumbing Audit – Checking the condition of the water tanks, heaters, pumps, filters, faucets, drains, pipework installation, mixers and taps.

Air Conditioner Audit – Checking central, split, cassette, window and mobile units – operational condition, electrical, drainage, refrigerant, filters, blowers etc.

Structural & Water Proofing Audit – Checking roofing, walls flooring, ceilings, stairs, concrete roofing, pergolas, awning, carport, rising damp etc.

Other audits that are also available, if required, can include the following:

Pool Audit – Checking water quality, pump, filters, pump house, maintenance equipment, tiling, access and safety.
Pest Audit – An inspection and recommendations to reduce influx of pests (mosquitoes, rodents, fleas etc) into the home and/or property.
Post-Earthquake Audit – Assessing whether any structural damages have been caused and make recommendations
Electrical Consumption Audit – Complete registration of all electrical appliances and their usage. Prediction and review of monthly billing. Make recommendations on how to implement a reduction of electricity consumption and costs.

Ideally, audits should be based on industry standards; unfortunately Indonesia does not have such standards that are formally regulated. So when requesting an audit you should ask the audit company what standard will the inspection and report be based on. Ideally it should be based on an Australia, UK, or USA standards.

It is also important to find out whether the property has an ELCB. ELCB stands for Electrical Leakage Circuit Breaker and it will cut off all power supply to the property if it is tripped due to power shorting, grounding and accidental handling of live wire. This equipment in itself is fairly inexpensive, however due to its sensitivity (it will automatically trip if any of the electrical wiring is incorrectly installed) most landlords prefer not to install this, despite the fact that it has the potential to saves lives. It is highly recommended that you ensure that an ELCB is installed in your property.

By outlining the problems and shortfalls of the property about to be signed for a two or more year lease, the tenant (or employer) will then be in the position to bargain with the landlord. The tenant should request the landlord to rectify the defective items as set out in the Audit Report, especially those items relating to safety. The response of the landlord in agreeing to and then fixing the defective items will also give the prospective tenant a good indication of how responsive the landlord will be to other issues which may arise during the term of the lease. Ideally, the audit team should be recalled to the property to make sure that the defective items have been fixed correctly.

According to Teddy Ragg, Manager of Santa Fe’s Property Management Division, as the costs of electricity in Jakarta are very expensive and larger households are now paying an even higher premium, Energy Audits are becoming increasingly requested from his office. The audit essentially registers all of the electrical equipment that is in the premises from pool pumps to microwaves, from water heaters to hair dryers. The tenants then inform the auditors on the usage of each item. Once this is done the report will make recommendations as to where the tenant can definitely save on power consumption and money. “In most cases, just by reorganizing the electrical usage in their residence, they can manage to reduce their electrical consumption and therefore costs by as much as 40% to 60% per month” says Teddy.

Thanks to Teddy Ragg of Santa Fe Relocations for the generous contribution of this article!

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