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Quit Rent & Parcel Rent: Here's What You Need to Know Before Buying a House

Updated 04 Jun 2019 – By Philippe Andrews



Are you a Malaysian who's planning to purchase property for the very first time (Congratulations!), but haven't heard of 'quit rent' or 'parcel rent' before?

If you're nodding in response to this question, you might want to pause your property-buying process and calm your 'Just buy lah!' spirit down a little.

Why? Because recently, there's a sudden hike of land tax under the conversion from quit rent to parcel rent. The change from quit to parcel shocked a lot of people and we know you might be just one of them. According to The Star, the drastic increase that residents are seeing is between 500% to *800% from the previous amount. The change was made last year on June 2018 to help unit owners who want to sell or transfer ownership of the property. Before this, any owner who wants to sell or transfer ownership has a hard time to do if records at  land office showed the other property owners still haven't paid their rent. With the new rent system, the said process should be easier. 

So, have some teh tarik and give this article a read, because what follows is a brief guide to quit rent and parcel rent: two very important concepts that you should know before buying any type of property in Malaysia!
 

So, what is quit rent?



It may seem like a rather unusual term at first, but quit rent is actually one of the most common and fundamental systems in Malaysia's property scene.

Referred to as 'cukai tanah' in Malay, quit rent is the payment that owners of local properties make to the Malaysian government through the Land Office — or Pejabat Tanah Dan Galian (PTG).

This payment is calculated by multiplying the size of an owned property in square-feet or square-metres by a specified rental rate. For instance, if your property covers an area of 3000 square feet, and the specified rate is RM0.040 per-square-foot, your quit rent would be RM120.

The quit rent for properties that are of the exact same size may not necessarily be the same across Malaysia, though. This is because the specified rate differs from one state to another, so a 2500 square-foot home in Penang can be cheaper or more expensive than an identical unit in Kedah.


Additionally, and ironically, you can't quit paying this rent either. It is charged annually, so you will need to pay your quit rent every year until you transfer the ownership of your property to someone else.


And what is parcel rent?



Here's a fun fact! The relationship between parcel rent and quit rent is just like the one between Neslo and mocha. They are essentially the same drink but are still different due to small variations.

In the case of parcel rent and quit rent, those small variations would refer to one main thing: strata.

To put it simply, parcel rent is actually a type of quit rent that is specifically meant for strata properties which are governed by the Strata Management Act (SMA) 2013 and the Strata Titles Act (STA) 1985.

What are the strata properties? These are properties or developments that are organised by splitting a piece of land or a building into parcels or boxes. 


Popular forms of this class of properties include apartments, townhouses and gated housing communities. Ever been to Desa ParkCity? That's an example of a massive strata development!

Each parcel is owned by the party that purchases it from the developer, while common areas like parks or a swimming pool are recognised as general parcels which belong to the developer. 
 


Here's why parcel rent is more expensive than quit rent



"Eh? Not so different what. No need to stress lah!"

If that's what you're thinking, you might want to think again — because there's definitely more than meets the eye when it comes to these concepts, especially when you're dealing with high-rise and multilevel buildings like apartments and condominiums.

With quit-rent, the payment for an apartment building is divided between all the owners of parcels or units in that building. For example, if apartment Block A consists of 10 vertically-arranged parcels and covers an area of 4000 square feet, the quit-rent of RM200 for that building — given a rate of RM0.05 per-square-foot — would be split amongst these parcels and each parcel owner would pay RM20 a year as quit-rent.

In the context of a parcel rent system, however, each parcel owner would have to pay for that 4000 square-feet and would be required to make individual payments of RM200 annually. 

This would mean that each owner has to pay a higher amount than in a quit-rent environment, but it also allows the Land Office to keep tabs on individual parcel owners and prevent them from defaulting on their rent payments, which is a very severe problem in high-rise buildings.


So why should I care?

Duh, of course lah you need to care, not paying your rent payments could lead you being chased out of your own house. Can you imagine that? Spending years paying your house loan just to be kicked out because of a tax. Refusing to pay your rent payments after two notices will result in the unit being taken back by the state government and can be sell/auction to another buyer. 

So, please take note, especially for starters, when purchasing property, it is always important to know and understand the kind of rent you'll have to pay — particularly when you have to make these payments repeatedly for years, which would affect your finances.

It's also good to know how this rent is calculated, as Land Offices across Malaysia have begun implementing parcel rent systems throughout the country, and the lines between strata and non-strata properties continue to grow unclear. As such, you wouldn't want to be confused by a sudden change in your rent payment amount!

Last but not least? Regardless of whether it's a simple quit rent system or a parcel rent system, you can't avoid these payments. So why not prepare yourself for them instead?

Having said that, wanna know which house loan fits the best for you? Click here to know more. Also, don’t forget to check your eligibility using Loanstreet Comprehensive Home Loan Eligibility Report to know the most suitable property price range for you. 
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