Leasehold in Bali: Lease Terms, Extensions and What Happens When the Lease Ends
A Bali leasehold gives you the right to use an Indonesian owner’s land, and the villa on it, for an agreed number of years. Typical terms are 25 to 30 years, with extensions only if the contract says so, and when the term ends the land and the buildings go back to the owner unless an extension was agreed. Indonesian law recognises the lease and protects it against the death of either party and against a sale of the land. It does not turn it into a registered title.
That last point shapes everything else. With a Hak Pakai or a strata title, the land office holds a record of your right. With a lease, your right is the contract and nothing more, so the wording of the extension clause, the use clause and the transfer clause is what you are really buying. A well-drafted 25-year lease can leave you in a better position than a loosely written “30 + 30” one.
Most foreign villa purchases in Bali are leaseholds, and this guide covers how they work as of October 2026: the legal basis, terms and extensions, what happens at the end, and the gaps in the tax rules that nobody has settled yet.
What a leasehold is in Indonesian law
The Basic Agrarian Law (UUPA) calls it Hak Sewa untuk Bangunan: the right to use someone else’s land for buildings against payment of rent. Article 44 allows the rent to be paid in one lump sum or in instalments, before or after use. Article 45 lists the eligible lessees, and “foreigners domiciled in Indonesia” are among them.
In practice, the lease is a contract between you and the Indonesian landowner or owners. It should be signed as a notarial deed before a notary, because private agreements carry little weight as evidence in Indonesian courts. The notary makes the deed (akta sewa), but nothing is registered at the land office the way a Hak Pakai is. In effect, many foreign buyers in Indonesia hold an unregistered long-term rental.
This is a different thing from Hak Pakai, the fixed-term right of use a foreign individual can hold in their own name. Hak Pakai is a land right created by a deed before a land deed official (PPAT) and registered with a certificate, and it comes with a minimum price and immigration-document conditions. A lease has none of those formalities and none of that registration. Our overview of what foreigners can own in Bali sets the two side by side.
How long Bali leases run
There is no statutory term for a Bali lease. The parties agree it. The usual 25 to 30 years is market practice, not law.
Marketing often adds the options together: “30 + 30”, “25 + 25 + 20” or “up to 80 years”. Such totals are contractual options, not a legal right. Only the first term is certain. Everything after it is a promise in the contract, worth exactly what its wording makes it worth.
The “80 years” figure also gets borrowed from Hak Pakai on State land, which can reach 30 + 20 + 30 years. That has nothing to do with a lease of private land, and a seller who mixes the two up is telling you something about the rest of the sales pitch.
Extensions: where most of the risk sits
An extension exists only if it is written into the original contract. It should fix the price, or a price formula, at the start, set clear notice periods, and spell out what happens to the building at expiry. Never leave the extension price “to mutual agreement”. An option whose price the landowner can set freely in 25 years’ time is, in practice, a right to start negotiating.
The extension is also a new legal act. A lease extension requires a new notarial deed and a physical signing. The landowner, or the landowner’s heirs if the original owner has died, will need to sign it. Bali land is often held within families, so confirm at the outset that every required family consent has been obtained. Which signatures are legally required on a given plot is a question for a lawyer, not for the agent.
Several points are worth settling in the original deed rather than later:
- the extension price or the exact formula for it;
- the notice period, and whether the option lapses if you miss it;
- whether the option passes to a buyer of your lease and to your heirs;
- a commitment by the landowner, and their successors, to sign the new deed.
When the lease ends, or something happens before it does
At expiry, the land and the buildings revert to the landowner unless an extension was agreed. This includes the villa you built or paid for. A lease can set out what happens to the building at the end, which is one more reason to read the expiry clause as carefully as the price.
Two rules of the Indonesian Civil Code protect the lessee during the term. Article 1575 says a lease does not end on the death of the lessor or the lessee, so heirs on either side step into it until the agreed end. Article 1576 says a sale of the leased property does not end the lease, unless the lease itself provides otherwise. Check that your contract does not contain such a clause.
For heirs of a foreign leaseholder, the position is simple and limited. They inherit the remaining term only, and any extension still depends on what the contract says. If you want the option to survive you, write that into the deed.
A leasehold’s remaining term shortens every year. A villa with 25 years left today will have 15 left in a decade, and anyone buying it from you will be buying those 15 years plus whatever extension rights the contract gives. Do that arithmetic before you sign.
The contract clauses to insist on
No statutory model lease exists. These are the clauses we expect a sound Bali lease to cover.
| Clause | What to look for |
|---|---|
| Term and start date | A fixed number of years from a fixed date. For off-plan, check whether the term starts at signing or at handover. |
| Rent | The amount and whether it is paid upfront or in instalments (the UUPA allows either). |
| Extension option | The price or price formula fixed now, notice periods, and the landowner’s obligation to sign a new deed. |
| Building at expiry | What happens to the villa when the lease ends. |
| Rights to build and renovate | What you may build, alter or demolish, and whose permits are needed. |
| Sublease, assignment and sale | Whether you can rent out, sublease or assign the lease to a buyer without fresh consent. |
| Heirs | That the lease and the extension option pass to your heirs. |
| Permitted use | Residential use or commercial rental, consistent with the zoning and with the licences a rental needs. |
| Annual land tax (PBB) | Who pays it. Under a lease this is a contract term. |
| Disputes | Indonesian law, and the forum for disputes. |
The permitted-use clause deserves more attention than it usually gets. A lease that allows commercial rental does not make rental lawful if the land is zoned for farming or the business is unlicensed. Since February 2026, Bali’s provincial regulation Perda 4/2026 restricts converting productive farmland to commercial use, and the national tourism ministry has been delisting unlicensed rentals from booking platforms. See our pieces on zoning in Bali and on renting out a villa legally.
Tax, finance and resale: the open questions
Leaseholds sit awkwardly in Indonesia’s property tax rules, and some questions are still open.
- Acquisition duty (BPHTB). The duty applies to acquisitions of Hak Milik, HGB, Hak Pakai, strata title and HPL. A lease is not on that list, but nothing expressly excludes it either, so do not treat that as settled.
- Selling your lease. How an assignment of a lease is taxed is not settled, including whether the 2.5% transfer tax applies to it. Take this to a tax adviser before you price a resale.
- VAT incentive. The 2026 government-borne VAT incentive covers the VAT on the first IDR 2 billion of brand-new houses and apartments with title, priced up to IDR 5 billion and delivered by the developer. A leasehold villa does not fit that description, so do not count on it.
- Notary fees. The 1% cap on PPAT fees applies to land-deed officials’ deeds. Notary fees on lease deeds have no fixed scale and are negotiated.
- Mortgages. A registered Hak Pakai can be mortgaged. Do not expect a bank to lend against a Bali leasehold; plan on cash or a developer’s instalment plan.
Our article on what a Bali villa costs to buy and own covers the rates that are settled, including rental income tax.
Leasehold is not a nominee deal
When a Bali listing says “freehold” to a foreign buyer, it is often describing a nominee structure, and that is legally the opposite of a lease. A lease is a right the UUPA gives foreigners. A nominee deal puts Hak Milik in an Indonesian person’s name for a foreigner’s benefit, which is void under Article 26(2) of the same law, and since February 2026 it is expressly prohibited in Bali, with sanctions reaching intermediaries and facilitators. If the paperwork includes any side agreement on who the “real owner” of the land is, you are not looking at a plain lease. Our article on the risks buyers meet in Bali covers how to tell them apart.
What to check before signing a lease
- Verify the land certificate and the named owner directly at the land office (BPN), and do not deal through an intermediary when the person on the certificate is not present.
- Ask a lawyer which family signatures are legally required, and get all of them.
- Sign as a notarial deed, never a private agreement.
- Count only the first term as certain. Read every extension right as if you will have to enforce it against the owner’s heirs.
- Fix the extension price or formula, the notice period and the fate of the building in the original deed.
- Check the zoning and, for a built villa, the building approval (PBG or older IMB) and the certificate of function (SLF).
- Get tax advice on resale before you buy, because the answer affects your exit.
For the steps of an off-plan purchase, see buying off-plan in Bali step by step. You can browse leasehold villas in our Bali listings, and our Indonesia page explains how we work with buyers here.
