Commercial Leases and Stamp Duty in NSW

Stamp duty can be a difficult concept to understand and is particularly challenging when parties are considering whether this is payable across NSW in relation to various commercial leases. It is important that thorough consideration is afforded to this area of law to ensure that no unwarranted penalties are incurred throughout or after the leasing transaction has been completed.

Stamp Duty is a tax imposed on the purchase of assets and certain transactions relating to property. In 2008, NSW abolished stamp duty on new Leases and on Variation of Leases, but there are still some commercial leasing transactions that require stamp duty to be paid.

Stamp duty is payable on the following commercial lease transactions:

i)      Transfer/Assignment of Lease – A Transfer/Assignment of Lease is a relatively common leasing transaction, particularly in relation to a Sale of Business. In this transaction the lease is transferred by the current Tenant (Assignor) to the incoming Tenant (Assignee) and is subject to a nominal sum of $10.00 stamp duty for the transfer. The duty is to be paid by the Assignee (incoming tenant).

ii)     Surrender of Lease – A Surrender of Lease occurs in matters where the parties agree for the Lease to end. When the Tenant of a lease voluntarily gives up their Lease and forgoes the accompanying rights to the Landlord before the term has expired, a Deed of Surrender of Lease and a Land Registry Services Form 07DL are required to be executed/lodged. Similarlily, this attracts a nominal $10.00 duty sum and is payable by the Lessee when surrendering the Lease.

In some special circumstances, duty can be required in relation to a new lease. This occurs when a proposed tenant puts forward a lump sum payment to entice a landlord to grant a lease and is held to be a capital payment. However, this is a rather infrequent occurrence.

Commercial Leasing transactions can be complex for parties, so it is essential that parties obtain suitable legal advice to ensure that all of the necessary legal requirements are addressed and that there are no hidden costs down the line.

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