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Topping up 20 years of a lease
30 Aug 2018 (37 views)


Someone said that in the UK, you can top up 20 years of the lease by paying a small premium. This is the example quoted:

"a lease extension of a £250,000 flat in London, with 81 years remaining on the lease, is likely to have a premium between £3,000 and £6,000". This is between 1.2% to 2.4% of the capital value.

The lease has 81 years left. After topping up, it becomes 101 years of lease.

I will calculate how much it will cost to top up a lease from 79 to 99 years in Singapore. 

We have to refer to this table from the Singapore Land Authority. 

79 years - 90.5%
99 years - 96.0%

We have to make an assumption about the land component of the property. Let us assume that it is 50%.

To top up the lease from 80 to 99 years, the owner has to pay (96%-90.5%) X 50% =5.5% X 50% = 2.75% of the capital value. This is quite close to the example quoted for the London property.

This is not the same as topping up the lease from 1 year to 21 years, i.e. close to the expiry of the lease. In this case, the cost is much higher

1 year - 3.8%
21 year - 49.5%

In this case the cost of topping up is (49.5%-3.8%) X 50% = 45.7% X 50% = 22.85% of the property value.

Why is there a difference between 2.75% and 22.85%. Well, the 2.75% is paid 78 years earlier. 
 


Topping up 20 years of a lease
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Someone said that in the UK, you can top up 20 years of the lease by paying a small premium. This is the example quoted:

"a lease extension of a £250,000 flat in London, with 81 years remaining on the lease, is likely to have a premium between £3,000 and £6,000". This is between 1.2% to 2.4% of the capital value.

The lease has 81 years left. After topping up, it becomes 101 years of lease.

I will calculate how much it will cost to top up a lease from 79 to 99 years in Singapore. 

We have to refer to this table from the Singapore Land Authority. 

79 years - 90.5%
99 years - 96.0%

We have to make an assumption about the land component of the property. Let us assume that it is 50%.

To top up the lease from 80 to 99 years, the owner has to pay (96%-90.5%) X 50% =5.5% X 50% = 2.75% of the capital value. This is quite close to the example quoted for the London property.

This is not the same as topping up the lease from 1 year to 21 years, i.e. close to the expiry of the lease. In this case, the cost is much higher

1 year - 3.8%
21 year - 49.5%

In this case the cost of topping up is (49.5%-3.8%) X 50% = 45.7% X 50% = 22.85% of the property value.

Why is there a difference between 2.75% and 22.85%. Well, the 2.75% is paid 78 years earlier.