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Construction Lease Agreement for Indonesia

Construction Lease Agreement Template for Indonesia

A comprehensive legal document governed by Indonesian law that combines elements of both a lease agreement and construction authorization. It establishes the terms under which a lessee can both lease a property and undertake construction work on it, complying with Indonesian building regulations, the Civil Code (KUHPerdata), and local property laws. The agreement details construction specifications, timelines, and requirements while also covering standard lease terms such as duration, rent, and maintenance obligations. It particularly addresses Indonesian-specific requirements regarding building permits, environmental compliance, and local authority approvals.

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What is a Construction Lease Agreement?

The Construction Lease Agreement is a specialized legal instrument used in Indonesia when a tenant requires both property lease rights and construction authorization. This document is particularly relevant when businesses need to modify, develop, or construct on leased property, whether for commercial, industrial, or retail purposes. The agreement must comply with Indonesian property law, construction regulations, and local building codes, including the Basic Agrarian Law (UUPA) and Building Law (UU Bangunan Gedung). It's commonly used in development projects, retail fit-outs, industrial facility construction, and commercial property improvements. The Construction Lease Agreement includes detailed provisions for construction specifications, timelines, regulatory compliance, and standard lease terms, making it essential for projects requiring significant property modifications under a lease arrangement.

What sections should be included in a Construction Lease Agreement?

1. Parties: Identification of the lessor and lessee, including their legal status and authority to enter into the agreement

2. Background: Context of the agreement, including property details and intended construction purpose

3. Definitions: Definitions of key terms used throughout the agreement

4. Lease Terms: Duration, rent amount, payment terms, and renewal options

5. Construction Rights and Obligations: Scope of permitted construction works, responsibilities of each party

6. Permits and Approvals: Requirements for obtaining necessary construction permits and approvals

7. Construction Timeline: Construction schedule, completion dates, and milestones

8. Property Access and Use: Rights of access during construction and subsequent use

9. Construction Standards: Required building standards and quality requirements

10. Insurance and Liability: Insurance requirements and allocation of risks

11. Maintenance and Repairs: Responsibilities for maintenance during and after construction

12. Compliance with Laws: Obligations to comply with relevant Indonesian laws and regulations

13. Default and Remedies: Events of default and available remedies

14. Termination: Grounds and procedures for termination

15. Dispute Resolution: Procedures for resolving disputes, including jurisdiction and governing law

16. General Provisions: Standard boilerplate clauses including notices, amendments, and entire agreement

What sections are optional to include in a Construction Lease Agreement?

1. Environmental Requirements: Required when the construction has significant environmental impact or requires environmental permits

2. Foreign Investment Provisions: Required when either party is a foreign entity, addressing investment laws and restrictions

3. Special Use Requirements: Required when the construction is for specific purposes (e.g., industrial, commercial) with special regulatory requirements

4. Financing Arrangements: Required when construction involves external financing or specific payment structures

5. Force Majeure: Detailed force majeure provisions when required by specific circumstances or location

6. Security Arrangements: Required when additional security or guarantees are needed

7. Subletting and Assignment: Required when parties want to allow or restrict subletting rights

8. Green Building Requirements: Required when the construction must meet specific environmental or sustainability standards

What schedules should be included in a Construction Lease Agreement?

1. Schedule 1 - Property Details: Detailed description of the property including land certificates and boundaries

2. Schedule 2 - Construction Plans: Architectural and engineering drawings approved for construction

3. Schedule 3 - Technical Specifications: Detailed technical requirements and building specifications

4. Schedule 4 - Construction Timeline: Detailed construction schedule with milestones and completion dates

5. Schedule 5 - Rent Schedule: Detailed breakdown of rent payments and escalation terms

6. Schedule 6 - Required Permits: List of required permits and approvals with responsible parties

7. Schedule 7 - Insurance Requirements: Detailed insurance requirements and coverage levels

8. Appendix A - Form of Bank Guarantee: Template for any required bank guarantees or security deposits

9. Appendix B - Environmental Impact Assessment: Environmental impact analysis and mitigation measures

10. Appendix C - Building Permits: Copies of obtained building permits and approvals

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Indonesia

Publisher

Ƶ

Document Type

Project Agreement

Cost

Free to use

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