The companies that employ expatriates are normally responsible for providing housing for their expatriate employees who are relocating to Indonesia. For companies that are new to Indonesia, they 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 of a house or apartment.
How are rents quoted and paid?
Rents are typically quoted using a USD monthly rental rate, however the rent payment must be paid in Rupiah. It is common practice that the rate of exchange will be determined by the date that the lease is signed. 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 apartments.
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), Internet, 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. Often apartments or houses that are located in a housing compound will also have monthly maintenance fees.
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. If the tenant thinks that he/she might be in Indonesia for more than one year, the renewal clause should be included in the original lease. Apartments will typically have a 10-15% yearly rent increase at renewal time, while the house rental increases are determined at the whim of the homeowner.
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, if so stated in the lease agreement. In most cases, this is the only way to recover some of the your pre-paid rent, should the expat be repatriated early.
Only embassies may be able to have a diplomatic clause inserted in their lease agreement which allows the embassy to terminate the lease if the expatriate is transferred outside of Indonesia.
Our thanks to Colliers International for their generous contribution of this article!