INDONESIA Law and Practice Contributed by: Yogi Sudrajat Marsono, Heru Pamungkas, Agnes Maria Wardhana and Andin Aditya Rahman, Assegaf Hamzah & Partners
estate properties, including commercial leases for spaces, buildings, land and/or structures. Other lease mechanisms recognised in Indo - nesia include utilisation of HPL land by a third party. In this case, the lessee enters into a uti - lisation agreement with the HPL holder, which allows the lessee to develop the land, to utilise the land, and to apply for land title over the HPL. Build-Operate-Transfer (BOT) Schemes BOT schemes entail the utilisation of state- owned assets such as land by another party to construct buildings and/or facilities, which are then operated by that other party for an agreed- upon period before being returned to the state along with the buildings and/or facilities. They are regulated by Government Regulation No 27 of 2014 on Management of State/Regional Assets, as most recently amended by Govern - ment Regulation No 28 of 2020 (“Asset Manage - ment Regulation”). Leases of State/Local Government Assets Such leases involve the utilisation of state/local government assets by another party for a certain period in exchange for a cash consideration. The lease term is five years and can be extended, pursuant to the Asset Management Regulation. These mechanisms are not only for commercial purposes but are also for industrial, residential and other uses. 6.2 Types of Commercial Leases Besides the traditional lease, Indonesia also rec - ognises lease-purchase, which is a mixed agree - ment that includes elements of both a sale and a lease. In a lease-purchase agreement, as long as the price has not been fully paid, ownership of the goods remains with the seller-lessor, even though the goods are in the possession of the
buyer-lessee. Ownership only transfers after the buyer-lessee pays the final instalment to settle the price of the goods. 6.3 Regulation of Rents or Lease Terms In Indonesia, regulations regarding leases are generally regulated under the Indonesian Civil Code. However, there is no limitation on the formulation of lease terms in agreements; lease terms are generally freely negotiable. However, certain leases, such as those for state- owned goods or residential purposes, may be subject to more specific regulations. For exam - ple, Ministry of Finance Regulation No 115/ PMK.06/2020 on the Utilisation of State-Owned Assets applies to leases of state-owned goods, imposing restrictions on lease term, price deter - mination and payment methods. House leases for residential purposes must comply with Gov - ernment Regulation No 14 of 2016 on Hous - ing and Residential Area Management as most recently amended by Government Regulation No 12 of 2021 on Amendments to the Hous - ing Management Regulation, which specifies the minimum requirements for a written lease agreement, including the rights and obliga - tions of the parties, lease term, price and force majeure clauses. Leases of central government or regional gov - ernment assets must adhere to the Asset Man - agement Regulation, its amendments and imple - menting regulations. This regulation stipulates various requirements, including the permissible duration of lease terms, essential provisions to be incorporated into lease agreements – such as the rights and responsibilities of each party – and the intended purpose of the lease.
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