The amendments to the Stamp Duties Act announced by Finance Minister Trevor Manuel in the February budget come into effect on 1 June. This will come as good news to landlords and tenants, as they will no longer have to pay stamp duty on short-term leases (leases with a lease period of five years or less). All long-term leases (leases with a lease period of longer than five years) will pay stamp duty at a flat rate of 0,5%.
In terms of the Stamp Duties Act, the landlord is responsible for paying the stamp duty. It is, however, common practice, for the tenant to make the actual payment in terms of most Lease Agreements.
According to Tony Clarke, Managing Director of Rawson Properties, the amendments is good news to all landlords and by default the tenants who are making the payment. 'Exemption on stamp duty is now calculated according to the duration of the lease, and no longer on the value of the rental income for the duration of the lease. This is a considerable improvement as all landlords can now benefit from the amendments irrespective of the income they earn from each of their rental units'
Previously only leases with a stamp duty of less than R500 were exempt from paying stamp duty (this stamp duty represented rental income of less than R100 000 from the lease).
Clarke explains that the amendments to the Act categorise month-to-month lease agreements, as short-term leases. 'This means that no stamp duty will be payable on all month-to-month leases, as short-term leases are exempt from paying stamp duty in terms of the amendments'
In the case of long-term leases, the rule of paying stamp duty on the total period of the lease still applies. 'In the event of a ten-year lease agreement with an indefinite extension period, the indefinite period is regarded as five years in terms of the amendments. This means that stamp duty is payable on the total period of 15 years'
In the case of short-term lease agreements signed before 1 June 2007, all payments quantifiable after 1 June 2007 will not attract stamp duty.
Clarke says that he would like to see the amendments to the Stamp Duty Act lead to longer lease agreements in the residential letting market. 'Both landlords and tenants can now benefit from the saving on stamp duty and negotiate longer agreements'
