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 →
A residential tenancy agreement with one counterpart: term 5 years, monthly rent $100,000, first 2 months rent-free, with an option for the tenant to renew for 3 years at $120,000 a month. What stamp duty is payable?
Why: For a term exceeding 3 years, the rate under Schedule 1 of the Stamp Duty Ordinance is 1% of the annual or average annual rent; the renewal option's term and rent are ignored when stamping the original lease.The rent-free period leaves only 10 months' rent in the first year, so average annual rent = ($100,000 × 10 + $100,000 × 12 × 4) ÷ 5 = $1,160,000.Stamp duty = $1,160,000 × 1% = $11,600, plus $5 for the counterpart, totalling $11,605; $12,005 results from wrongly counting the rent-free months as rent.
A tenant has signed a two-year tenancy with an option to renew for two more years. To protect the tenant's interests, which of the following should an estate agent advise? (i) Authorise the estate agent to sign the tenancy on the tenant's behalf (ii) The tenancy should be stamped (iii) The tenancy should be registered at the Land Registry (iv) The tenancy should be lodged with the Building Authority
Why: (i) Incorrect: the tenancy should be signed by the tenant personally; there is no need to authorise the agent to sign.(ii) Correct: the Stamp Duty Ordinance requires a tenancy to be stamped within 30 days of execution (EALP Part 7 p6).(iii) Correct: a lease not exceeding 3 years at market rent is an overriding interest, but the renewal option must be registered at the Land Registry to be enforceable against third parties such as a new owner.(iv) Incorrect: there is no legal requirement to lodge a tenancy with the Building Authority.Therefore the answer is B.
Under the Stamp Duty Ordinance, within how many days of execution must a tenancy agreement be stamped, and what is the maximum late-stamping penalty as a multiple of the duty?
Why: A tenancy must be stamped within 30 days of execution; the late penalty has three tiers: twice the duty if not more than one month late, four times if more than one but not more than two months, and ten times otherwise, so the maximum is ten times (EALP Part 3 p31). '30 days; twice the duty' is only the first tier for delays of up to one month, not the maximum penalty.
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