Land rates may be payable on your freehold property

The Daily Nation recently reported that property owners in Nairobi, Mombasa, Nakuru, Kisumu, Eldoret and Kiambu may have to dig deeper to pay for their land rates and rents following plans to review rates within these jurisdictions.

The nomenclature of land rates and rents may look obvious to those within the realm of land administration and management.

However, the two terms do cause confusion to proprietors, and, perhaps, affects anticipated compliance. Indeed, we have received quite a number of enquiries from proprietors who felt that they aren’t obliged to pay land rates since they hold properties under freehold tenure.

Their understanding has been that land rates are only payable by those holding properties under leasehold tenure. This discussion helps to debunk this view.

A freehold proprietor holds an unlimited right to use and dispose their land in perpetuity subject to the rights of others, and the existing regulatory regime by government and other state organs.

For instance, while such a proprietor enjoys unlimited rights of use and disposal in perpetuity, they are liable to regulation in the interest of land use planning, public safety and public health, among others.

On the other hand, the proprietor of land under a leasehold tenure only holds the land for a specified period of time after which the land reverts to the person who had granted them the lease.

Such leases may have been granted by the national government, or the previous local authorities which have since transitioned to the jurisdiction of county governments.

The entity that grants the lease, or the lessor, often expects the lease leaseholder, or the lessee, to pay some annual fee. This is usually referred to as the annual rent and is only payable by those who hold properties under leasehold tenure.

The annual rent is payable by the lessee to the lessor through some mechanism, usually agreed upon under the mutual contract.

Let’s now look at the matter of land rates, which is totally different from land rent. The Constitution gives county governments power to impose property rates. The Rating Act provides for the imposition of rates by a rating authority.

In Kenya’s circumstances, rating authorities are counties. A rateable property includes any property within the jurisdiction of a rating authority. Counties have been imposing rates on properties in urban areas, municipalities and cities.

However, there are exceptions! Rates aren’t payable for roads, public land, land used for religious purposes and that under non-profit making educational institutions. Charitable institutions, libraries, sports fields and national parks are also exempt from paying land rates.

The Valuation for Rating Act empowers rating authorities to value land for purposes of levying rates. The Act allows for the preparation of valuation rolls by rating authorities, which then become the basis upon which land rates are assessed and charged.

The preparation or review of valuation rolls is always a public process, in which the views of the proprietors to be affected are taken into account.

It should, therefore, be clear that while the payment of rent is tenure dependent, the payment of land rates is jurisdiction dependent.

Properties under freehold or leasehold tenure hence qualify to be rateable, and to pay land rates, provided they fall within the jurisdiction of a rateable authority. The rates payable against each property must be based on a valuation roll.

- Mr Mwathane is a consultant on land governance, [email protected]; Dr Makathimo is a Land Economist, [email protected]