Member Article

With an estimated economic growth of 5.1% – 5.2% for 20181, economic
activities in Indonesia are expected to show a strong improvement. One of
the indications of strong economic activities is the growing need for office
space for businesses. It is expected that office space in Jakarta will increase
by another 1.5 million square meters in 2018 – 20202 from 6 million square
meters at the end of 20173.

Leasing an office space is an easy way for a business to acquire office space
in a prime area, and to help the business to free up working capital. In this
regard, a carefully prepared lease agreement is invaluable for the lessee and
the lessor. A number of issues may be encountered when leasing a building
for office space in Indonesia. This article highlights five of the most common
ones.

In Indonesia, commercial lease agreements between lessees and lessors are
not covered by any specific law, unlike in several other countries, where in
some cases, standard format lease agreements are available (CMS, 2016).
Agreements between lessees and lessors on leasing an object are generally
regulated under the Indonesian Civil Code (the “ICC”). Under the ICC, a
lease is an agreement under which a party binds itself to provide the
enjoyment of an object to another party, for a certain period against a fixed
price to be paid by the latter. This covers both movable and immovable
goods. The obligations of the lessors under the ICC are to deliver the leased
object to the lessee, maintain the object in a sufficiently good condition that it
serves the purpose of the lease and to allow the lessee to have peaceful
enjoyment during the term of the lease. On the other hand, under the ICC,
the obligations of the lessee are to maintain the object of the lease as a good
house-father and for the purpose stated in the lease agreement (or, without
such a provision, according to the supposed purposes given the
circumstances), and to pay the rent at the determined time.

Given the very generic scope of the provisions of the ICC, there are numerous
type of lease agreement for office leases in Indonesia.

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