What is a leasehold?
A leasehold (Hak Sewa) is the most common legal structure used when foreign nationals purchase property in Bali. Unlike freehold ownership — which is reserved for Indonesian citizens — a leasehold grants the buyer the right to use and build on a parcel of land for a defined period, typically 25 or 30 years.
This structure is not unique to Bali. Major global cities like London, Hong Kong, and Singapore use long-term leaseholds as a standard ownership model. In Bali’s case, the leasehold sits under Indonesian civil law and is enforceable through a notarized agreement.
The key distinction: you own the building, not the land beneath it. The land remains with the Indonesian landowner, and the lease defines the terms under which you occupy and use it.
How the 25+25 structure works
A “25+25” lease means the initial lease term is 25 years, with a contractual option to extend for an additional 25 years — bringing the total potential tenure to 50 years.
In practice, the extension clause is written into the Sale and Purchase Agreement (SPA) and the lease agreement itself. The buyer typically has priority to renew before any other party can negotiate for the land.
The extension is not automatic. It requires a renewal process, which typically involves a new agreement and an extension fee. However, when structured correctly with a priority clause, the buyer has a legally protected right to renew ahead of any third party.
The extension fee is usually agreed in advance or calculated based on a formula defined in the original contract. This avoids the uncertainty of renegotiation at year 25.
Priority extension vs guarantee
This is where most buyers — and many agents — get confused. There is a meaningful difference between a “priority extension” and a “guaranteed extension.”
Priority extension means the buyer has the first right to renew. If the landowner decides to re-lease the property, they must offer it to the current leaseholder before anyone else. If the buyer agrees to the terms, the extension proceeds.
Guaranteed extension implies the renewal is unconditional. In Indonesian law, no private party can guarantee a future lease extension with absolute certainty — because circumstances (regulatory changes, land disputes, or landowner death) can introduce variables.
What reputable developers do is structure the lease to minimize these risks: using notarized agreements, specifying extension fees upfront, and sometimes placing the land under a long-term nominee or PMA arrangement that adds layers of security.
What to check in the SPA
Before signing any lease agreement, a foreign buyer should verify several specific clauses. These are the details that distinguish a well-structured lease from a risky one:
| Clause | What to look for | Risk if missing |
|---|---|---|
| Extension priority | Explicit first-right-of-renewal language | Landowner can re-lease to someone else |
| Extension fee | Pre-defined amount or formula | Fee can be set arbitrarily at renewal |
| Building ownership | Clause confirming buyer owns all structures | Ambiguity over who owns the villa |
| Transfer rights | Right to sell or transfer the lease to a third party | Villa cannot be resold |
| Dispute resolution | Arbitration clause with a named body (e.g., BANI) | Disputes default to local courts |
Leasehold vs freehold: a practical comparison
For foreign investors, the leasehold-versus-freehold debate often distracts from the practical reality. In Indonesia, foreigners cannot hold freehold title (Hak Milik). The comparison that matters is between a well-structured leasehold and a nominee arrangement that simulates freehold.
The leasehold path is transparent, legally clear, and enforceable. The nominee path introduces a third-party Indonesian citizen who holds the title on your behalf — which, while common, carries real counterparty risk.
Lush Development Group uses a 25-year leasehold with priority extension, structured through notarized agreements with pre-agreed extension terms. We believe this offers the best balance of legal security, operational clarity, and long-term value for foreign buyers.
How Lush structures its leases
At Lush Villas Seminyak, every lease is structured with three principles in mind: transparency, enforceability, and long-term buyer protection.
Each buyer receives a notarized lease agreement that includes the priority extension clause, pre-defined extension terms, building ownership confirmation, full transfer rights, and an independent escrow arrangement for payment security.
We also provide every buyer with access to an independent legal review before signing — because trust is built through transparency, not pressure.
If you have questions about the legal structure, our team is available for a private consultation with no obligation.
