Q.
a) According to National Land Code, what are the various categories of land use? In case if Sarawak, how is it categorized?
b) How to calculate the additional premium when a land is converted from its original category to another category? In case of Sarawak, how is it calculated?
c) And, what if there is extension of lease? Give an example of 50 years of extension of lease on a land lease expiring in 7 years.
A.
Premium payable for lease extension in West Malaysia.
a) Pursuant to the NLC 1965 s.52, land use is categorized into "agriculture", "Building" and "Industry".
b) Premium calculation is largely in the hands of the State Authority, however there are a few general elements for consideration. For conversion of use category, usually factors like Condition of land at the date of valuation, Type of development approved for the land, Location, Shape and Size would be studied to arrive at a premium.
c) If a lease is expiring, the extension of lease can be applied with a premium paid for such extension.
The formula for calculation of extension premium is subject to a factor of duration of lease and type of category use.
For example, in Selangor a residential land to apply for lease extension to another 50 years:-
Residential: 1/4 x 1/100 x value of land x term (years) of lease
Example:
For a piece of 10,000 sqf land valued at RM200/sqf, the premium to extend lease to another 50 years would be:
1/4 x 1/100 x (RM200 x 10,000 = RM2,000,000) x 50 = RM250,000.
However, usually an application for extension is submitted before the expiry of the lease. In the below example, the existing lease is expiring in 7 years, so the formula would be:
1/4 x 1/100 x RM2,000,000 x (50-7) = 0.0025 x RM2mio x 43 years = RM215,000.
Further reading:
Extension of leasehold land in Selangor and Kuala Lumpur by Christopher Chan here.
Residents Association Section 5 Petaling Jaya FAQ from
http://rasection5pj.webs.com/Microsoft%20Word%20-%20FAQ's%20on%20leasehold%20extension%20to%2099%20years%20_2_.pdf