Many Bali lease agreements give the tenant a “priority right”, “first right” or “first option” to extend the lease.
These words can sound reassuring, but they do not necessarily mean that the landowner is unconditionally required to grant another lease term.
A priority right may only apply if the landowner decides to lease the land again. If the owner chooses not to offer another lease, the tenant may have no automatic right to force an extension.
This distinction becomes critical when a villa, swimming pool and other permanent improvements have already been built on the land.
A
properly drafted agreement should therefore distinguish clearly between a priority to negotiate and a binding contractual obligation to grant an extension.