NOVATION / ASSIGNMENT OF LEASE

NOVATION
What is a Novation or Assignment of Lease?
A Novation document may be executed in a situation where an existing tenant assigns all the tenancy rights to an incoming tenant.

An Assignment of Lease may be executed in a situation where an existing landlord assigns all the tenancy rights to the new owner who has purchased the property subject to tenancy.

BASIC REQUIREMENTS FOR A NOVATION
-A novation requires a valid previous contract
-Mutual agreement of all the parties to the contract, and the termination of the original  
  contract or discharge of the original parties before the substitution of a new contract
  and/or parties to it, respectively.
-A novation could arise when one party is experiencing financial or operating difficulty   
  in a real estate transaction.

STAMP DUTY
The Novation / Assignment of Lease document needs to be stamped. The stamp duty rates will depend on the terms stated in the document.

What are the stamp duty rates and how to compute?
STAMP DUTY RATES
Stamp duty payable on Novation / Assignment to Lease will depend on the terms stated in the document.
As announced in Budget 2011, fixed duty has been removed for most documents executed on and after 19 February 2011.
If the document is executed before 19 February 2011, fixed duty remains payable.


DUTY – Novation (Tenant)
Novation involving an incoming tenant and outgoing tenant where no consideration is paid
$10 for document executed before 19 February 2011.
Duty is removed for document executed on and after 19 February 2011.

DUTY – Assignment of Lease (Landlord)
Assignment of lease involving an outgoing landlord and an incoming new owner / landlord who has purchased the property subject to tenancy
$10 for document executed before 19 February 2011.
Duty is removed for document executed on and after 19 February 2011.

FULL DUTY
Novation involving an outgoing tenant and an incoming new tenant where consideration is paid, stamp duty will be based on the consideration.
Based on the consideration

- Every $100 or part thereof of the first $180,000        
$1.00

- Every $100 or part thereof of the next $180,000       
$2.00

- Thereafter, every $100 or part thereof           
$3.00

DUTY ON DUPLICATE
Duty on duplicate is $2. This additional amount will be added to the stamp duty payable.
As announced in Budget 2011,
Duty on duplicate document executed on and after 19 February 2011 has been removed.
If the document is executed before 19 February 2011, duty on duplicate remains payable.

HOW TO COMPUTE?
An example on the computation of stamp duty on consideration or premium paid for a document relating to Novation / Assignment of Lease is as follows:

If the consideration / premium of $284,000 is paid, what is the stamp duty?
Every $100 or part thereof of the first $180,000
Every $100 or part thereof of the next $180,000
Stamp Duty on consideration / premium
= ($180,000 / $100) x $1
= $1,800
= ($104,000 /$100) x $2
= $2,080
= $3,880