Part 7: Part 7: Leasing and Tenancy Matters
Estate Agency Qualifying Examination · Part 7: Part 7: Leasing and Tenancy Matters
Further reading: Part 7: Leasing and Tenancy Matters study notes →
Calculate the stamp duty payable on a residential tenancy agreement (together with one counterpart) based on the following terms: • Lease term: 5 years • Monthly rent: $100,000 • Rent-free period: first 2 months rent-free • Renewal option: tenant may renew for 3 years at $120,000 per month
Why: For a lease exceeding 3 years, the applicable stamp duty rate is 1% of the annual rent or average annual rent. The renewal option (including its rent and term) is not taken into account when calculating stamp duty on the original lease. The rent-free period reduces the actual rent collected: only 10 months' rent is collected in the first year of the lease. Average annual rent calculation: ($100,000 × 10 + $100,000 × 12 × 4) ÷ 5 = $1,160,000. Total stamp duty payable: $1,160,000 × 1% + $5 (counterpart fee) = $11,605.
A tenant has signed a two-year tenancy agreement with an option to renew for a further two years. To protect the tenant's interests, which of the following actions should an estate agent advise the tenant to take? (i) Authorise the estate agent to sign the tenancy agreement on the tenant's behalf. (ii) The tenancy agreement should be stamped. (iii) The tenancy agreement should be registered at the Land Registry. (iv) The tenancy agreement should be lodged with the Building Authority.
Why: A tenancy agreement must be stamped in accordance with the Stamp Duty Ordinance (Cap. 117). A tenancy agreement containing a renewal option or purchase option should be registered at the Land Registry so that the option is binding on third parties (e.g. a subsequent purchaser of the property). A lease not exceeding 3 years at a market rent is an overriding interest and protects the tenant even without registration; however, a renewal option must be registered to be enforceable against third parties. There is no requirement for an estate agent to sign the tenancy agreement on behalf of the tenant, nor is there any requirement to lodge the agreement with the Building Authority.
Under the Stamp Duty Ordinance (Cap. 117), what is the statutory time limit for stamping a tenancy agreement, and what is the maximum additional penalty payable for late stamping?
Why: A tenancy agreement must be stamped within 30 days of execution. If stamping is not carried out within the statutory time limit, the maximum additional penalty is ten times the amount of stamp duty payable.
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