Residential Leasing Guidelines
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Companies responsible for providing housing on behalf of their expatriate employees who are relocating to Indonesia, will likely encounter unusual leasing practices compared to what they would find in their country of origin. Below you will find the answers to questions we are most frequently asked in regard to the leasing a house or apartment.
How are rents quoted and paid?
Rents are typically quoted using a USD monthly rental rate and are fixed for the duration of the lease period. Indonesia is unique, in that, to rent a house or apartment, a lease agreement is signed and the rent is paid in its entirety, before you move in. A lease agreement is typically paid one to two years in advance and for properties located in desirable complexes and neighborhoods the lease may be paid for as much as three years in advance.
Is a security deposit required?
Upon the execution of a letter of intent, the tenant will typically be required to pay a booking fee equal to at least one (1) month of rent. This will either be credited to the advance rent payable by the tenant or will serve as a security deposit which is fully refundable upon the expiration of the lease provided compliance with all lease conditions. Additional deposits are required for telephone lines in amounts of from Rp. 2,500,000 for a non-IDD line to Rp. 5,000,000 for an IDD line. The exchange rate at the time of writing is approximately Rp. 9,000 per US$1 (December 2010).
What is typically not included in the rent?
There are operating costs that are not included in the rent that tenants should budget for, such as electricity (PLN), water (PAM) and telephone (Telkom).
Maintenance, such as servicing air conditioners, water pumps, etc., as well as minor repairs (typically under US$100) are usually incurred by the tenant. As a rule a standard lease agreement provides for all major repairs (over US$100) to be the responsibility of the landlord; however it is advisable for tenants to negotiate a withholding fee, usually equivalent to 1 month's rent or 10% of the total lease value, that can be utilized in the event that a major repair is not addressed to their satisfaction.
What is the typical lease term?
Lease terms typically vary from one (1) to three (3) years.
Do tenants have automatic renewal rights?
The tenant typically has an option to renew at market rental rate. Rental increases, which are typical after 3 years, are typically capped at a maximum of 20% of the rental from the previous year.
Do tenants have automatic sublet or assignment rights?
Tenants are typically allowed to sublease the premises during the lease term with the approval of the Landlord – in some extraordinary cases the tenant may be able to have a “diplomatic clause” inserted in their lease which will allow a company to terminate the lease if the expatriate is transferred outside of Indonesia.
Our thanks to Colliers International for their generous contribution of this article!
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