Rents: Can landlord and tenant freely agree rents in Indonesia?

Rents are freely negotiated in Indonesia.

Rents are usually quoted in US dollar terms but paid in rupiah. Rents are typically paid in advance for the duration of the lease agreement. However, with an oversupply of rental units, tenants are now able to negotiate smaller advance payments or monthly payments. Tenants are also able to fix the exchange rate to protect them from devaluation of rupiah.

Rents are typically adjusted after 3 years, but the increase it typically capped at a maximum of 20% about the previous year's rental.

Deposits

A refundable security deposit of about a month's rent is required for unpaid bills and repairs.

Even if the rent is paid in advance for the duration of the lease with a security deposit, tenants can ask for a withholding fee to ensure that repairs are done to their satisfaction. The withholding fee is about a month's rent.

What rights do landlords and tenants have in Indonesia, especially as to duration of contract, and eviction?

Lease periods typically vary from 1 to 3 years. The terms depend upon the bargaining skills of the tenant and the landlord. Tenants typically have an option to renew.

Since most apartment units are rented out to foreigners, eviction is not a common problem. Expatriates lease the units for the duration of their assignment and typically leave before the expiration of their lease agreement. For some extraordinary cases, a "diplomatic clause" is inserted to allow the lease to be terminated if the expatriate is transferred outside of Indonesia.

It is also typical for companies to lease apartment units for their employees. In such cases, subleasing is usually allowed with the approval of the landlord. Maintenance and minor repairs (typically under US$ 100) are shouldered by the tenant. Standard lease agreements provide that major repairs (above US$100) are the responsibility of the landlord. It is advisable for tenants to negotiate a withholding fee, usually equivalent to 1 month's rent or 10% of the total lease value to be utilized in the event that the major repair is not addressed to the satisfaction of the tenant. Other aspects of the contract such as notices to leave are by agreement of the parties.

How effective is the Indonesian legal system?

There are no reported serious cases of landlord and tenant disputes in the popular media.

Legislation

There are no specific provisions for landlord and tenant regulation. The general law covering land in Indonesia is Basic Agrarian Law (Law No.5 of 1960). The right of lease (Hak Sewa) is not registered with the National Land Agency. However in practice, some local land offices will allow notation of the lease to be made in the official land records and/or on the title certificate itself.