Leasehold in Bali: what hak sewa is, and what it is not

Two articles of a 1960 statute, one paragraph of its elucidation and one article of a 2021 regulation. That is the whole law of Bali leasehold, and it is shorter and stranger than the listings suggest.

Leasehold, hak sewa, 25 + 25, prepaid lease: twelve names, one contract

Most of what gets said about leasehold in Bali is said in listing language. The right underneath it is short, old and specific, and it is one article of a 1960 statute. The table below maps what you will be told onto what it is, with the article that decides each line.

Three of the twelve lines are things that do not exist as described: a leasehold certificate, a lease from the State, and a lease that turns into freehold for a foreigner. Each is common in conversation and each is worth stopping on.

What the statute actually says, all of it

Leasehold in Indonesia is not built from a long regulation. It is two articles of the Basic Agrarian Law and one paragraph of its official elucidation. Here they are in full, in English, with what each one decides.

Article 44(1): what the right is

A person or a legal entity holds hak sewa over land when entitled to use the use of another's land for the purposes of a building, paying the owner a sum of money as rent (UUPA (Law 5/1960) art. 44(1)). Two things follow. The right exists only against an owner, so the landowner’s own title is your foundation. And it is a lease for a building — the elucidation says hak sewa is provided only for buildings, and that a lease of agricultural land is temporary by nature.

Article 44(2): how rent may be paid

Rent may be paid once or at set intervals, and before or after the land is used (UUPA (Law 5/1960) art. 44(2)). The Bali habit of paying 25 years on signing is therefore not a workaround. It is the statute’s own option (a), one payment, combined with option (b), before use. What the statute does not do is protect the prepayment: if the lease fails early, getting money back is a matter of the contract.

Article 44(3): the one limit on the terms

A land lease may not carry conditions that contain elements of extortion (UUPA (Law 5/1960) art. 44(3)). That is the only statutory control over what a lease may contain. There is no statutory term, no statutory extension right, and no statutory rent review. Everything else is drafting.

Article 45: who may hold it

There are four classes of holder (UUPA (Law 5/1960) art. 45): Indonesian citizens; foreigners domiciled in Indonesia; legal entities established under Indonesian law and domiciled in Indonesia; and foreign legal entities with a representative office in Indonesia. The foreigner limb says berkedudukan di Indonesia — domiciled in Indonesia — and the article does not define it. That wording is worth raising with the notary if you will not be living here.

The elucidation: what the State cannot do

The official elucidation to both articles adds one sentence that settles a recurring sales pitch: the State cannot lease out land, because the State is not its owner (UUPA elucidation to arts. 44 and 45). Land said to be “leased from the government” is being offered under some other right, or under no right at all. Either way it is not hak sewa, and the difference is the whole deal.

No certificate of its own, but it can go on the owner’s

This is the part of Bali leasehold that almost nothing written in English gets right, in either direction.

A lease is not a registered land right. PP 24/1997 article 9(1) lists what land registration covers: land held under hak milik, HGU, HGB and hak pakai; hak pengelolaan land; wakaf land; strata title; hak tanggungan; and State land. Hak sewa is not among the objects of land registration. So there is no leasehold certificate, and a document presented as one is something else.

But a lease over registered land can be recorded. PP 18/2021 article 90 provides that an interested party may apply to the Land Office to record a lease agreement over registered land, and that the record is made recorded on the public register and/or the land certificate. The same article covers conditional sale agreements (PPJB).

What the article does not say is what the record does against a later buyer or lender of the land. That is for the implementing ministerial regulation, which PP 18/2021 article 99 delegates to and which we have not read. Our reading, and it is only that: a lease that anyone checking the owner’s certificate can see is in a stronger practical position than one that sits in a drawer. Ask the notary whether recording is being done and what it will cost; it is a question with a yes or no answer.

Leasehold against freehold, hak pakai and HGB

These four get compared as if they were four prices for the same thing. They are four different kinds of legal object. The columns that matter are what creates each one and whether it gets its own certificate.

Read across the first row and the reason leasehold dominates Bali listings is visible. It is the one right a foreigner can hold that needs no grant from the Land Office, no stay permit written into the right itself, and no company. The price of that simplicity is the last two columns: no statutory term and no certificate of its own. Hak pakai trades the other way — PP 18/2021 art. 49(2)(e) names foreigners expressly, and the right is registered — but it ties you to a house to live in and a valid immigration document. The three foreign routes compared cell by cell.

Because the statute is silent, the contract is the asset

Everything the statute leaves open has to be closed in writing, or it stays open. These are the clauses that decide what a Bali lease is worth. None of them is set by regulation; this list is our analysis of what article 44 leaves to the parties.

The term, stated as dates

Start date and end date, not “25 years”. A remainder bought from an earlier lessee starts from the original signing, not from yours. Why years remaining is the whole asset.

The extension, with a price or a formula

“Option to extend” without a price is an option to negotiate. The figure, or the method that produces it, is what makes the second number in “25 + 25” real.

The permitted use

Living in it, letting it, or running it as a business are three different uses. If the plan is rental income, the lease has to allow it and the licensing has to follow. Renting it out, structure by structure.

What happens to the building at the end

You will usually build or renovate on land you do not own. Whether the building reverts, is paid for, or must be removed is a clause, not a rule.

Death, sale and assignment

What happens if the landowner dies or sells, and whether you may assign the lease or sublet. Ask for these in writing, with the landowner’s family where the land is family land.

Recording under article 90

Whether the lease will be recorded on the owner’s certificate, by whom, and at whose cost.

We are not an agency and do not sell leases. We are paid a fixed fee per enquiry whether you sign or not, which is why this page argues from articles rather than from listings.

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