Licence Agreement Property Template for Indonesia

A Licence Agreement Property is a specialized legal document that grants temporary usage rights to real property in Indonesia without transferring ownership or creating a formal lease relationship. Under Indonesian property law, this agreement provides a flexible framework for property access while ensuring compliance with the Basic Agrarian Law and associated regulatory requirements.

When do you need this document?

You need a property licence agreement when establishing temporary property arrangements that don't qualify as formal leases under Indonesian law. This is particularly common when foreign companies require property access for business operations but face ownership restrictions, when property owners want to grant limited usage rights without creating tenancy relationships, or when businesses need flexible arrangements for storage, manufacturing, or commercial activities. The document is also essential for situations involving government properties, industrial zones with specific licensing requirements, or properties requiring special permits for particular business activities.

Key legal considerations

Critical elements include clearly defining the scope of permitted use to avoid exceeding licensing boundaries, establishing proper payment structures that comply with Indonesian tax obligations, and ensuring the agreement doesn't inadvertently create lease or ownership rights that could conflict with agrarian law restrictions. You must address liability allocation between parties, particularly regarding property damage, regulatory compliance, and third-party claims. Insurance requirements, termination procedures, and dispute resolution mechanisms should align with Indonesian legal standards. The agreement must also consider any existing property encumbrances, mortgage restrictions, or government permits that could affect the licensing arrangement.

Legal requirements in Indonesia

Indonesian property licensing must comply with Law No. 5 of 1960 on Basic Agrarian Law, which governs fundamental property rights and usage restrictions. Government Regulation No. 40 of 1996 specifically regulates building rights and usage permissions that may impact your agreement. For business-related property usage, Law No. 25 of 2007 on Investment and the Omnibus Law (Law No. 11 of 2020) establish additional compliance requirements, particularly for foreign entities. Local authorities typically require proper business permits and zoning compliance certificates. The agreement must be drafted in Bahasa Indonesia for legal validity, and certain types of property licensing may require notarization or government registration depending on the property type and intended use.