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Extension of leasehold properties

leasehold_extension

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:

Option 1
• Pay RM1,000 for the extension of lease.
• Property is not allowed for resale, only transferable to family members.

Option 2
• Pay the full rate of premium for the lease extension with the option to sell the property at a later date. Currently the Selangor government is offering 30% rebates off full rates.

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. It is advised that those wanting to renew their leases, do so only when they have 10 years left. As the new lease resets once the renewal is done, the remaining years on the lease will be forfeited.

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 will need to pay for an extension of 89 years (99 years-10 years). 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 1 or 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 hand in the following:

• Borang 12A ‘Permohonan Untuk Menyerahkan Balik Tanah (Mengenai kesemua tanah itu)’ (application to surrender and re-alienate land to extend lease duration);
• ‘Borang Perihal Tanah dan Peribadi Pemohon’;
• ‘Jadual 1 (Peraturan 2) Kanun Tanah Negara Perintah Tanah Kerajaan’;
• Form ‘Butir-Butir Permohonan Tanah Oleh Individu’;
• Original title of the property;
• Copies of quit rent (cukai tanah) and assessments (cukai taksiran) receipts for the current year;
• 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.


Adapted from an article by Christopher Chan, starproperty.my, 18th July 2013.

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