Monday, June 27, 2016

Registering long-term lease agreements

Foreign investors report that they cannot register lease agreements. According to section 17(d) Registration Act 1908, leases of immovable property for any term exceeding one year have to be registered. Failure to register such a lease agreement results in it being void.

This is a cause of concern especially for telecom tower companies: They have a massive number of long-term lease agreements which are the basis of their business, and if they don’t manage to register them, potential investors may not be willing to pay as much as they would otherwise.

It has been reported that land record departments have refused to register lease agreements if one party was a foreign-invested company on the grounds that “foreigners cannot lease land long-term”. This is of course wrong - foreign-invested companies operating under an investment permit from the Myanmar Investment Commission can lease land for up to 50 years and may prolong this period to 70 years in total.

Although a hassle, it is certainly possible to register long-term lease agreements, even if the tenant is a foreign-invested company. However, registration poses logistical challenges if a lot of agreements have to be registered all over the country in a short period of time.

Here is what we think is important to obtain registration:
  •  Registration can only be obtained within four months after the date of signing of the agreement (section 23 Registration Act). This is something the officer checks, so you don’t have too much time to obtain registration. This provision is - together with stamp duty - a reason for leaving dates blank.
  • The person obtaining registration on behalf of the company must have a notarized power of attorney, and he has to take a witness along.
  • The landlord has to appear in front of the registration officer together with a witness (or, alternatively, has to send someone with a notarized power of attorney). If many lease agreements have to be registered in different places in a short period of time, this is difficult to organize, as someone basically has to pick up the landlord from his home and make sure that he doesn’t complain to the registration officer all the way through registration about having so many better things to do than being here…
  • The lease agreement has to be properly revenue-stamped. Without paying a fine of 10 times the applicable stamp duty, this is only possible if the agreement is presented for stamping within one month after signing. A lot of trouble can be saved in practice if the contract does not contain a date.
  • It is difficult to obtain registration when you’re unfortunate enough to crash into the middle of an inspection of the land record department or the registration of deeds office by a higher-ranking office.
  • Amazingly, proper title documentation or the existence of an MIC permit do not seem to be of paramount importance when trying to secure registration of a lease agreement.
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