What to Look for in a Contract When Buying a Villa in Bali?

A client approached us to review a contract with a developer selling villas. During the review, our lawyers identified several issues that raised serious questions and concerns.

The contract does not specify how much time the developer is given to fix deficiencies that may be discovered during the inspection of the property upon handover. It should be clarified that defects must be rectified within 14 days from the time they are discovered.

All rights and obligations of the management company, as well as the conditions for the Investor's personal use of the apartments, are governed by a separate agreement which the Investor will sign separately. This means that all details related to the management company will only be known after signing the agreement, which may be inconvenient for the Investor.

The contract does not specify the amount of payments to the management company, yet signing an agreement with them is mandatory. The Investor has no right to refuse the services of the management company, placing them at a disadvantage.

All terms concerning the management company (payments, interest, fees) will be known to the Investor only after signing the contract. If later the Investor is dissatisfied with the services or costs, they cannot cancel the contract with the management company. The only option would be to terminate the contract, which is unlikely to be beneficial for the Investor.

The developer has the right to make changes to the location of the apartments (for instance, moving them to another floor or building) without worsening the contract conditions. This raises serious concerns because changing the location of the property may significantly alter its characteristics, which is a violation of the Investor’s interests.

The contract does not specify timeframes for addressing warranty cases. It is recommended to clarify that all claims and complaints should be resolved within 10 working days from the moment the complaint is submitted to the Developer.

The warranty on structural elements of the property (walls, roof, foundation) depends on the work of the management company. This is an unjustified risk for the Investor, as poor maintenance by the management company could deprive them of warranty rights.

If the Investor breaches the contract and sublets the apartments independently, the Developer has the right to terminate the contract and sell the apartments. The contract does not clarify whether the Investor will be compensated for the cost of the apartments or how the fact of subletting or contract violation will be proven.

In case of contract termination, the booking amount is non-refundable regardless of the reasons. This means that if the Developer decides to terminate the contract with the Investor, the amount will be lost, which is a very unfavorable condition.

We strongly recommend checking contracts with experienced lawyers before signing to identify legal and financial risks and protect your interests.

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