What is lease premium?

A lease premium is a non-refundable lump sum paid by the tenant (lessee) to the owner (grantor) upon signing a tenancy agreement. In the accounts, the premium will be capitalised as a leasehold asset and amortised over the term of the lease. The amortisation is then added back for tax purposes.

What does premium mean in apartment?

A premium is the regular cost you pay to keep an insurance policy active. Depending on the renters insurance policy you purchased and how you prefer to pay for it, you can pay your premium monthly, semi-monthly, or annually.

What is the difference between premium and rent?

In the language of the law of contract, the premium is the consideration paid by the tenant in return for the landlord letting out the property. A premium should be distinguished from the rent payable under the lease: The payment of rent is an obligation inherent in the lease, being ‘attached’ to the property.

How is lease premium taxed?

A premium paid for a very long lease is clearly a capital sum, as this is treated as a part disposal of the underlying freehold interest. In this case there would be a charge to capital gains tax. If the lease is for more than 50 years then none of the premium is treated as income.

What is a lease surrender premium?

Surrender payment made under the lease The surrender payment is treated as a premium for CGT purposes. However, the landlord is treated as having made a disposal of his interest in the lease itself, rather than the freehold or superior leasehold out of which the lease was granted.

What can impact the cost of renters insurance?

The deductible on your policy determines how much you must first pay before the insurance company kicks in and pays the remaining amount. The higher your deductible, the cheaper your cost of renters insurance. That’s because you’ll have to pay more and the insurance company will pay less per claim.

Are lease premiums deductible?

LEASE PREMIUM CALCULATOR It is usually paid in a lump sum at the commencement of the lease. Section 11(f) of the Income Tax Act contains the deduction for the lessee. The amount must be spread over the period of the lease, from commencement to end, including renewal periods, to a maximum spread of 25 years.

Is a lease surrender premium taxable?

Surrender payment made under the lease The surrender payment is treated as a premium for CGT purposes. Accordingly, for a long lease, a surrender payment cannot be split into an income and capital element if the lease has a short expiry date at the date of the transaction.

Who surrenders a lease?

landlord
A lease is surrendered when the tenant’s interest is transferred back to the landlord and both parties accept that it will be extinguished. This can be done formally, by deed, but this is not always necessary.

What is reverse premium?

A reverse premium is a capital sum paid by a landlord or outgoing tenant to induce a new tenant to enter into a leasehold agreement. This differs from an ordinary premium whereby the capital sum is paid by the purchaser of a leasehold interest to the landlord or outgoing tenant.

Is a premium a fee?

In the most simple terms, the insurance premium is defined as the amount of money the insurance company is going to charge you for the insurance policy you are purchasing. The insurance premium is the cost of your insurance.

What is a premium payment on a lease?

When the owner of the freehold of a property grants a lease to a new tenant, it is not unusual for the tenant to pay a lump sum up front, as well as agreeing to pay an amount of rent monthly or quarterly during the term of the lease. Such an upfront payment is usually known as a “premium”.

What is a reverse premium on a lease?

Reverse premiums. If a lease is onerous in some way, perhaps because the rent is higher than a market rent, or there is something undesirable about the premises, the landlord (when the lease is granted) or the outgoing tenant (on an assignment of the lease) might offer a “reverse premium”.

What is a rent premium when buying a house?

In addition to the normal rent, the person renting the home must also pay an additional fee, known as the rent premium, which is subtracted from the purchase price of the house if the renter exercises the option to buy. If there is no eventual purchase, the seller of the house gets to keep this extra premium.

Can a short lease be assigned for a premium?

Sometimes a short lease will be granted or assigned for a premium, e.g. if the lease is particularly attractive because of its low rent or the location of the premises. Our template Deeds of Assignment contain optional wording referring to a premium being paid by the assignee (buyer) to the assignor (seller).