How to extend your lease for leasehold properties
Posted on July 18, 2013 – Featured, Investment.
by Christopher Chan
The extension of leases for leasehold properties is governed under section 197 of the National Land Code (Act 56 of 1965) pertaining to the applications for approval of surrender of the whole of the land, as well as the land rules of the various states.
For the state of Selangor, the extension of lease is governed by the Selangor Land Rules 2003 and Selangor Quarry Rules 2003.
The Selangor government has come out with two options relating to this matter as follows:
1) Option no.1
To pay a mere RM1,000 for the extension of lease. This is provided the owner of the property does not re-sell it to profiteer. However you are allowed to transfer the property to family members. The State Authorities will lodge in a Registrar Caveat on the property to prevent the owner from disposing the property under this option; OR
2) Option no.2
To pay the full rate of premium for the lease extension. With this option, the owner can then dispose the property immediately after obtaining the new title. Currently the Selangor State Government is giving 30% rebate on the rate of premium under this option.
Bear in mind that under Option 1, after the new title has come out, the owner would not be able to receive the rebate anymore should he or she later decide to sell the property on the open market, and would then have to pay the the full rate of premium.
Some lawyers are charging a fee of RM1,000 to do the application for their clients regardless of option 1 or 2.
How to calculate the premium in Selangor
If you wish to renew your lease for a residential property within the state of Selangor, the formula for the calculation of the rate of premium is as stated below. The formula is derived from Section 7 entitled ‘Premium’ of the Selangor Land Rules 2003 & Selangor Quarry Rules 2003.
Premium = ¼ x 1/100 x Market Value of land (in sq ft) x number of years to renew x land area (in sq ft)
Example: For a 3,000 sq ft residential property in PJ with 10 years remaining on the lease (assuming it was valued @ RM120 per sq ft by the Authorities), the lease renewal fee calculation is= 0.25 X 0.01 X 120 X 89 X 3,000 = RM 80,100.
Leases are usually renewed so that there are 99 years of lease on the title. Therefore, if you have 10 years remaining on your lease, you need only pay for an extension of 89 years (99 years-10 years).
After deducting the 30% rebate, the fee payable would be RM 56,070.
The calculation of the rate of premium as mentioned above is on the land itself and does not include the building erected on the land.
Under Option no. 1 and no. 2, there is a further RM500 to be paid as contribution to the state’s cemetery trust fund, Tabung Amanah Perkuburan. The fund will enable the State Government to buy land for cemeteries.
Process of lease extension
The process of lease extension involves the government department called ‘Pentadbir Tanah Daerah Petaling’.
Among other things, the applicant (who is also the owner of the property) has to do the following:
To complete Borang 12A ‘Permohonan Untuk Menyerahkan Balik Tanah (Mengenai kesemua tanah itu)’ (application to surrender and re-alienate land to extend lease duration);
To complete ‘Borang Perihal Tanah dan Peribadi Pemohon’;
To complete ‘Jadual 1 (Peraturan 2) Kanun Tanah Negara Perintah Tanah Kerajaan’;
To complete the Form ‘Butir-Butir Permohonan Tanah Oleh Individu’;
To give the original title of the property;
To give copies of your quit rent (cukai tanah) and assessments (cukai taksiran) receipts for the current year;
To give a copy of his/ her National Registration Identity Card (NRIC)
The whole process may take approximately 2 years from the time of submission of the application right up to the obtaining the new title.
Christopher Chan MBA is a registered real estate agent and an associate director of Hartamas Real Estate (Malaysia) Sdn Bhd. He has been in the real estate industry for over 15 years and was an adjunct lecturer at UCSI University in Management Studies for both the Diploma and Bachelor degree programmes in the years 2008 to 2009.