Government waives building charge on extension of state leases

The government is doing away with the building premium it charges on all buildings when granting lease extensions.

The government currently charges both a land premium and a building premium when extending a state lease.

The charging of these premiums was based on the Common Law principle that both land and buildings would revert to the landlord at the end of the lease.

The waiver of the building premium is because the government wants to encourage lessees to continue to invest in the upkeep and improvement of the leased property.

In 1997, the government waived the building premium for short-term industrial and institutional leases to make costs more competitive to investors.

The waiver is now applicable to all types of uses including commercial, agricultural and conservation properties when lease extensions are granted.

Building premium is calculated based on the condition of a building. Thus, many lessees tend to let the properties deteriorate until the leases expire before filing for an extension in the hope of paying less.

Lessees of long-term industrial uses are seen as the ones likely to benefit the most from the waiver.

Source : Channel NewsAsia – 1 Sep 2008

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