Sale Leaseback Agreement Template for Indonesia

A Sale Leaseback Agreement is a specialized financial arrangement that allows you to sell your property to an investor while simultaneously leasing it back for continued use. This transaction enables you to unlock the capital tied up in your real estate while maintaining operational control of the premises, making it an attractive option for businesses seeking to optimize their capital structure under Indonesian law.

When do you need this document?

You need a Sale Leaseback Agreement when your company owns valuable real estate but requires immediate capital for business operations or expansion. This arrangement is particularly beneficial for manufacturing companies with expensive factory facilities, retail businesses with prime commercial locations, or service companies operating from costly office buildings. The agreement allows you to convert illiquid property assets into working capital while avoiding operational disruption. Indonesian companies often use this strategy during economic uncertainty or when pursuing aggressive growth plans that require substantial capital investment.

Key legal considerations

The agreement must clearly separate the sale and lease components to ensure both transactions comply with Indonesian property and contract law. You must establish a fair market value for the property sale, typically requiring professional valuation to satisfy tax authorities and prevent disputes. The lease terms should include detailed provisions for rent adjustments, maintenance responsibilities, and renewal options. Consider including purchase options that allow you to reacquire the property in the future. The agreement should address what happens if either party defaults, including remedies and termination procedures. Tax implications are significant, as the sale may trigger capital gains tax while lease payments become deductible business expenses.

Legal requirements in Indonesia

Under Indonesian law, the property transfer must comply with the Basic Agrarian Law (UUPA) and require involvement of a Land Deed Official (PPAT) for deed preparation and registration. The sale component must satisfy Civil Code requirements for valid property sales, including proper consideration and legal capacity of parties. If the property involves Right to Build (HGB) or other limited land rights, you must ensure the buyer can legally hold such rights. The lease component must comply with relevant regulations governing commercial leases, including maximum terms and renewal procedures. You must register the property transfer with local land authorities and pay applicable taxes including land and building tax (PBB) and transfer duties. Foreign buyers face additional restrictions and may require approval from the Indonesia Investment Coordinating Board (BKPM) depending on the property type and location.