Auntie’s answer: Yes, under the Stamp Duty Law (2019 Revision), it is required for stamp duty to be paid on all lease agreements. An official with the Valuation and Estates Office under the Lands and Survey Department explained how the fee is calculated.

The stamp duty rate depends on the length of the lease and this is contained in the law on page 29 as part of the schedule “Lease or Agreement for a Lease of Immovable Property or any Interest Therein”. The schedule sets out duty calculations for leases ranging from less than one year to more than 30 years.

If you are not inclined to read through all those options, the official provided an example of stamp duty for the average lease: “For a standard lease which has a term of five years or less, the stamp duty payable is 5% of the average annual rent or market rent, whichever is greater.”

Therefore, the official explained, for a five-year lease in which rent is $2,000 a month, or $24,000 a year, the stamp duty would be calculated at 5% of the average annual rent which comes to $1,200. “This would be a one-off payment to cover the entire term of the lease agreement. Additional stamp duty would be payable every time a new lease agreement is entered into.”

The assessed duty would be highest for leases exceeding 30 years and lowest if renting for less than a year, and different percentages are charged for less or more than five years and less or more than ten years.

The official compared those numbers to what would be charged on purchased property. In that instance, “stamp duty is payable at a rate of 7.5% of the consideration paid or market value, whichever is greater. Let’s assume the same property as detailed above is sold for $250,000; the duty owed would be $18,750 (7.5% of $250,000).”

You can determine which duty assessment would be cheaper for you according to the value of the property you would be buying or the rent of a place you would be leasing.

As for the actual payment of stamp duty on a lease, the law does not specify who should foot that bill, only that it must be paid on all leases, the official pointed out. “It’s usually agreed between the parties and often documented in the lease agreement – most often the onus is placed on the tenant.”

If you want more details, the Lands and Survey website contains lots of information on stamp duty. For advice based on your specific circumstances, however, it would probably be best to consult with a lawyer.

To contact the Valuation and Estates Office directly with any questions call 244-3420 or email LV@gov.ky.