Houseowners looking to make significant changes to their property should bear in mind that the renovations can lead to an increase in their assessment rate.
Usually, the assessment bill is revised when the value of a property changes.
Take for instance the case of Agnes Tan, who purchased a double-storey link house in Sri Petaling, Kuala Lumpur.
Two decades ago, she thought it was the perfect home.
However, that notion soon changed when her parents came to live with her a few years ago.
Tan realised quickly that it was getting a little too crowded with four teenage children and parents under one roof.
Space constraints led to privacy issues and soon, it became clear that to maintain peace in the household, she needed to create more room and so, she added one more storey to the house.
Once renovations were completed, Tan received a new assessment bill.
It took her by surprise as the assessment tax had been revised and was almost double the amount she usually paid.
Kuala Lumpur City Hall (DBKL) Property Management and Valuation Department Director Kamarulzaman Mat Salleh said the department often received calls from angry homeowners complaining about the increase in their assessment bills for their renovated houses as many had not anticipated this extra cost.
“Renovations and upgrades to a home can make it more spacious and nice, but homeowners must be prepared to pay a higher assessment tax for the changes they did to their living space, ” he said.
He explained that assessment tax was based on the assessed value of the property.
Factors that determine the rate include property size (by square footage) and location of the property.
The type of property –- residential, commercial or vacant land –- also affects the amount.
Assessment fees are a tax collected by the local authority for the maintenance and upgrade of city assets and facilities as well as for services such as waste collection, drain cleaning and road sweeping.
It is determined by taking the estimated rental value of a property and multiplying it by the current percentage rate.
The percentage rate is different from one local council to another.
For landed properties, the rate is 4% of the annual rental value of the property.
For example, if the rental value of a property is RM1,000 a month, the yearly rate is RM1,000 x 12 = RM12,000.
So, the annual assessment bill of the property is RM480 a year (see graphic).
In Tan’s case, by adding another floor to her house, she had significantly added to the value of the property, thereby making her liable to the new assessment rate.
Apart from adding square footage to the property, one of the other ways that may incur higher rates is when owners purchase two units (houses) or lots (land) and want to turn the properties into one unit or lot.
Each year, DBKL carries out evaluations on properties that have been renovated.
A team of valuation experts visit the property to assess it and determine the new rate.
Owners who are unhappy with the new rates can object to the new valuation list and are entitled to be heard at a public hearing session.
The valuation officer may at any time amend the valuation list accordingly and rates shall be payable in accordance with the amended valuation list.
A 30-day notice will be given to anyone who wishes to amend their valuation and the person can object in writing to the local authority no less than 10 days before the time fixed in the notice.
The person shall be allowed the opportunity to be heard in person or by an authorised agent.
Kamarulzaman said the revaluation of property exercise was in line with Section 144 of the Local Government Act 1976, which allowed a revision on any property at any time.
“Most do not expect a substantial hike in the rate and if they are unhappy about the revised rate, they can object under Section 142 by writing to DBKL within the stipulated timeframe, ’’ he said.
According to the regulations, if owners are still unhappy with the rate after the hearing is completed, they can seek legal redress in the courts within 14 days from when the notice is issued.
As the movement control order and National Security Council’s restrictions were in effect to curb the spread of Covid-19, the objection hearing last year was carried out online for the first time.
Led by department heads, the session saw objections from 6,047 property owners involving 47,668 amendments to the existing valuation.
Objection hearings were carried out four times last year, on Jan 1, April 1, July 1 and Oct 1.
Those who registered for the hearing were given an online link to participate and property owners who took part were from all over the world.
At least 70% of the owners unhappy with the assessment hike cited the poor economy stemming from the pandemic as their main reason.
Kamarulzaman said many property owners found it difficult to get tenants, especially foreigners.
Some homeowners highlighted that they were retirees or senior citizens with no income.
He advised houseowners who were unable to find tenants for their property to apply for a rebate on their assessment bills.
The rebate, called “Vacancy Allowance”, will depend on the type of property and location and is provided for under Section 162 of the Local Government Act.
“The onus is on the owners to prove that they have done everything in their power to try and find tenants for the property, including putting an advertisement, ” he said.
Kamarulzaman also warned that property owners who had renovated their houses without applying for a permit would be penalised.
“Our team of officers are always conducting spot checks and sometimes, they will come across properties that were constructed illegally with bad planning, ’’ he said, adding that DBKL would take action by reporting to the building department.
There are 646,061 assessment accounts in the capital city.
Of this figure, 529,770 (82%) accounts are residential units, while the remaining 116,291 are commercial units.
“Assessment tax is our biggest source of revenue, ” said Kamarulzaman.
He said DBKL’s projected revenue for 2021 from assessment tax was RM1.2bil.
“This money goes into the day-to-day running of Kuala Lumpur, from waste management to painting and other maintenance work, ” he pointed out.
“A team of evaluators from DBKL visits a property to determine the value of a new building in Kuala Lumpur and the tax that needs to be paid after the Certificate of Completion and Compliance has been issued, ’’ he said.
He added that this was the same procedure for both commercial and residential properties in the city and the annual rental value varied from neighbourhood to neighbourhood.
For example, the rate on a property in Taman United, Jalan Kelang Lama will be different from one with similar renovations in Damansara Heights.
The same principle applies to commercial properties, so the annual rental value in the city centre such as Ampang will be different from Kepong.
Kamarulzaman said the top two buildings with the highest assessment taxes paid in Kuala Lumpur are The Exchange 106 skyscraper in the Tun Razak Exchange and Petronas Twin Towers.
Did you find this article insightful?
62% readers found this article insightful