Rental Agreements in Indonesia
Understand the different elements of the tenancy agreement and what to expect when giving notice or renewing a contract...
When renting a house, contracts are usually for one or two years. Occasionally a six month contract is an option, and in Bali, a three year period is not uncommon.
Contracts can be problematic for foreign residents whose length of stay does not fit standard, contractual time frames. Contracts for Indonesian-style housing usually demand full payment up front, especially if the contract is for six months or a year. As a result, there is a large sub-letting market, especially in Jakarta and Bali. Sub-letting is legal and widely accepted but must be done with the full knowledge of the landlord, because if any damages occur during the sub-letting period, the original tenant will be liable.
Pre-prepared contracts are a feature of Jakarta's large rental complexes and these are rarely negotiable. Otherwise, the landlord and tenant negotiate the terms in full and prepare a contract to suit their individual needs. The two parties sign the document, which is stamped with a materai tax stamp
- See General Taxes in Indonesia for more information on the materai tax stamp
Sometimes a notary is hired (usually by the tenant) to ensure that the contract is legal, but this is more costly. Notaries generally ask for 1 to 1.5 percent of the contract. (Indonesian notaries are like western-style lawyers and thus command larger fees than a paralegal.).
Most written contracts include:
- Length of contract
- Payment due
- Method of payment - whether a lump sum or an installment
- Specific rental considerations
- Security deposit
Any important issues that the tenant has should be made in writing, as part of the contract. The longer the contract period, the more careful the tenant needs to be about details.
Informal rental agreements are made for kos, or boarding rooms where rent is paid monthly. Contracts are generally not in writing.
Signing a Rental Contract
A prospective renter should not sign any housing contract without having seen a landlord's Certifikat Tanah (land certificate or title, which shows the land, and the house being offered for rent, and proves who actually owns it. The land title should be signed by the owner, not a proxy.
When the contract is signed, a landlord must present their Kartu Tanda Penduduk, or National Identity Card (KTP) and a copy of the land certificate. The tenant, if foreign, needs to show their passport and KITAS Visa (temporary residence visa).
Foreigners should not enter a contract unless they know:
- That they are dealing with a reputable landlord
- That the property to be rented is in good repair. An inventory report detailing the condition of the property, fixtures and furniture is advisable to avoid conflict at the end of the contract
A security deposit is demanded for rented housing that is furnished or has modern conveniences. Security deposits vary according to the value of the rental property. For example, landlords of flats in Jakarta often ask for about Rp 1,000 000.
Security deposits are not refundable unless all the rent has been paid and all repairs have been completed.
Utilities are usually the responsibility of the tenant, especially for a house. Pre-existing water and electricity installations will require a fee to transfer the utility into the tenants name.
Installing a landline telephone service can be expensive. A tenant has to pay for a telephone line to be installed from the nearest service box.
Internet services do not necessarily require telephone lines as access through either Wi-Fi or a USB modem is available where there are mobile telephone towers.
Giving Notice and Renewing a Contract
Theoretically, giving notice does not apply in Indonesia, as contracts cannot be broken. There is no law that stipulates that notice must be given, so when tenants want to leave, they simply tell their landlord.
If there has been a satisfactory relationship between a landlord and a tenant, the law supports the tenant's right to renew the contract. The cap on rent increase is currently 20 percent.