What is the premium calculation formula for leasehold property renewal?

Question

Accepted Answer

Premium Calculation Formula for Leasehold Property Renewal

The premium for renewing a leasehold property is calculated using a specific formula that takes into account the land's value, remaining lease term, and area. Property owners are eligible for a 30 per cent discount on this calculated premium. Once the Form 5A for lease renewal is issued, the premium must be settled within a six-month period.
Formula Components

The calculation hinges on the formula: [¼ x 1/100 x Value of land x 99 years x Area of Land]. This means the premium is directly proportional to the land's assessed value and its total area, with a multiplier reflecting the desired lease extension period. For instance, a property with a higher land valuation or a larger land size will naturally incur a greater premium.
Discount and Payment Timeline

A significant incentive for property owners is the provision of a 30 per cent discount on the calculated premium. This reduction aims to make the renewal process more accessible. However, the payment itself is time-sensitive, requiring settlement within six months from the issuance of Form 5A, which signifies the official commencement of the lease renewal process.
Implications for Property Owners

This premium structure, particularly for properties with shorter remaining lease terms, can present financial challenges. The substantial premiums, even after the discount, can strain the finances of many owners, especially senior citizens relying on retirement savings. The looming expiry of leases, as noted with some in Petaling Jaya having around 42 years left, also affects property values and the ability to secure loans, as banks often hesitate to finance properties with leases below 20 to 25 years.

Reading history

Hide →

This history is cleared when the page is closed.

What is the premium calculation formula for leasehold property renewal?

Loading

Was this article helpful?

Helpful

Not helpful

Report an issue

1

0

0

Share with friends