Review and Structuring of a Real Estate Lease in Indonesia

A German investor was preparing to lease a Bali bungalow under an MoU and was asked for a 10% downpayment before notarisation. The transaction was restructured to reduce payment risk and add missing protections.

Context

A German investor entered into a Memorandum of Understanding (MoU) with a local property agent regarding the lease of a bungalow in Bali.

Prior to a scheduled notary appointment, the investor was requested to make a 10% downpayment and sought independent review of the transaction and underlying documentation.

Role

Advising the client on contractual, structural and procedural aspects of the transaction prior to execution.

Scope of Work

Review of the MoU and identification of enforceability risks

Assessment of payment structure and associated risks

Recommendations on securing the downpayment through a trusted intermediary

Guidance on proper notarisation of the agreement

Identification of gaps in the contractual framework

Support in negotiating amendments with the counterparty

Key Issues Identified

The MoU was drafted in English only, raising enforceability concerns under Indonesian law

The proposed payment structure exposed the client to unnecessary risk

The counterparty initially intended to proceed without full notarisation

The draft agreement lacked key provisions relating to liability, lease extension and access rights

No inventory of existing assets was included

Outcome

The transaction structure was adjusted to reduce payment risk, including the use of a trusted intermediary for the downpayment. The parties agreed to proceed with proper notarisation of the agreement. Additional contractual protections were incorporated, including provisions on liability, lease terms, access and asset documentation. This resulted in a significantly improved and more balanced contractual framework prior to execution.

All matters are anonymised. No client names, exact locations or sensitive details are disclosed. References available on request, with the relevant client's prior agreement.

Outcomes describe what happened in specific past engagements. They are not predictive of any future result and should not be read as a guarantee.

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