It is important for owners of leasehold land to apply for extension of lease before the lease expires.
When the owner does not renew the lease and the lease expires, the land will revert to the state government.
The land will be made available to anyone who wishes to apply for ownership.
In this article, we describe how to calculate the premium for extension of your leasehold land for land in Selangor and Kuala Lumpur.
The formula for calculating the premium for extension of leasehold land is found in Selangor Land Rules 2003 & Selangor Quarry Rules 2003.
The formula to calculate the premium for lease extension for residential property is:
1/4 x 1/100 x Market Value of Land (RM/sf) x (Lease period – remaining years of lease) x Land Area
The two options of payment given by the Selangor government in their guideline for private residential ownership are as follows:
Option 1: To pay the full rate of premium with a 30% rebate.
Land Area = 7000 sf
Land value = RM200 psf
Remaining Lease = 49 years
Extended to 99 years
1/4 x 1/100 x 200 x (99-49)x 7000 = RM175K
Premium =RM 175,000 x 0.7= RM122,500
Option 2: To pay a premium of RM1000.
To extend the lease to 99 years, the owner must stay in the property.
A registrar caveat will be lodged on the property preventing the owner from transferring the property to a third party.
Should the owner decide to sell the property in the future, the owner will have to pay full premium at the time of transaction.
The formula to calculate the premium for lease extension of commercial and industrial land is:
3/4 x 1/100 x Market value of land (RM/sf) x (Lease period – remaining years of lease) x land area
There is no rebate for full premium payment for commercial and industrial land.
For Kuala Lumpur
The formula for calculating the premium for extension of leasehold land is found in Federal Territory of Kuala Lumpur Land Rules 1995.
The formula to calculate the premium for lease extension of residential land:
1/4 x 1/99 x Market value of land (RM/sf) x (Lease period – remaining years of lease) x land area
The formula to calculate the premium for lease extension of commercial and industrial land:
1/2 x 1/99 x Market value of land (RM/sf) x (Lease period – remaining years of lease) x land area
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About the Author
Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyors Malaysia, Member of Malaysia Institute of Estate Agents and Member of Business Valuers Association of Malaysia.