Lease duty crackdown set to begin

A Lands & Survey Department initiative to collect outstanding stamp duty owed on commercial property leases will begin soon.

Stamp duty is payable on all written commercial leases, no matter how long the lease term.

Lands & Survey Senior Valuation Officer Uche Obi said letters will be sent to all businesses trading from commercial premises.

In addition to using data already collected from when commercial buildings are sold, the Valuation Office will undertake a physical survey of businesses on the island to establish the mailing list for the letters, Mr. Obi said.

‘We’ll go from building to building and mail letters to all tenants with signage on the property,’ he said.

Businesses that are found to be past due on any stamp duty on a leased premises be required to pay retroactively, and to also pay interest penalties, Mr. Obi said.

The rate of stamp duty on commercial leases of five years or less is five percent of the average annual rent or the market rent, whichever is higher. Thus a business with a five year lease for $2,000 per month through the whole term of the lease would have to pay a one-time $1,200 stamp duty.

In the case of a lease less than a year, stamp duty is assessed at five per cent of the total rent paid or the market rent, whichever is higher.

Mr. Obi said leases of more than five years but less than 10 years have a stamp duty rate of 10 per cent of the average annual rent; leases between 10 and 30 years in length have a stamp duty of 20 per cent of the average annual rent, or the market rent, whichever is higher.

A lease longer than 30 years would have stamp duty assessed as if it were a Transfer of Land.

All leases are subject to assessment by a Valuation Officer to determine if the lease is for fair market value, Mr. Obi said.

A press release sent out last month by the Ministry of District Administration, Planning, Agriculture and Housing stated that the Lands and Survey Department ‘suspects that there are many commercial property leases in existence, which have not been presented for stamp duty assessment.’

Mr. Obi said the exercise was not so much about Lands and Survey seeing how much money it could receive in stamp duty.

‘It’s about upholding what the law says and educating people,’ he said.

Many business owners could be unaware of the law, or at least certain aspects of it. For instance if a lease expires, another stamp duty is payable when the lease is renewed, which is something many people with businesses fail to do, Mr. Obi said.

There are some benefits to registering a lease in that it provides protection of rights to both parties of a lease in the event of a dispute.

Businesses that receive the mailing from the Lands & Survey Valuation Office are required to complete and return the form within 45 days, regardless of whether their lease is verbal, expired, or they have moved to another location. Failure to supply the information requested, or providing misinformation, can be punished on conviction by a fine up to CI$500,000 and/or five years imprisonment under section 6 of the Stamp Duty Law (2005 Revision).

Stamp duty is also payable on residential leases for terms of two years and more, although the Valuations Office will not be looking into residential leases as part of the initiative.