In Kenya, land rate and land rent are two distinct charges imposed on landowners, each serving a different legal and administrative function. Understanding their differences is crucial for property owners, investors, and legal practitioners.
1. Definition and Legal Basis
Land Rate
Land rate is a tax imposed by county governments on private landowners within municipal and urban areas. It is a form of property taxation aimed at funding county services such as infrastructure, waste management, and security.
The authority to levy land rates is derived from the Rating Act (Cap 267) and Article 209(3) of the Constitution of Kenya 2010, which allows counties to impose property-related taxes.
Land Rent
Land rent is a fee paid to the national government for leasing public land. It applies to individuals or entities holding leasehold interests in government land. The government retains the reversionary interest in the land, meaning ownership reverts to the state upon the expiry of the lease unless renewed.
It is governed by the Land Act, 2012, the Land Registration Act, 2012, and Article 62 of the Constitution, which categorises land as public, community, or private.
2. Who Pays It?
Land rate s paid by the registered owner of freehold and leasehold land within county jurisdictions. Land rent on the other hand is paid by leasehold owners (those who lease public land from the government).
Example:
If you own a freehold plot in Kikuyu area, you will pay land rates to Kiambu County Government.
If you lease a parcel of government land for 99 years in Kikuyu, you will pay land rent to the Ministry of Lands and Physical Planning.
3. Mode of Assessment
Land rate is assessed based on the market value of the land at a percentage rate determined by the county government. Different counties have different rating formulas.
Land rent is calculated as a fixed annual fee per acre or as specified in the lease agreement.
Example:
Nairobi County may charge land rates at 1% of the unimproved site value of your property.
The national government may impose KSh 5,000 per acre annually for leasehold land in an industrial zone.
4. Payment Frequency
Land rate is often paid annually to county governments. Failure to pay can lead to penalties or even land auction by the county.
Land rent is paid annually to the national government. If unpaid, it can result in penalties, loss of lease, or repossession of land by the government.
5. Consequences of Non-Payment
Land Rate
If a land rate is not paid accordingly, the following penaltiesay apply:
· Accruing penalties and interest.
· County government may place a charge on the property.
· Risk of public auction by the county.
Land Rent:
If land rent is not paid as established in law, the following penalities may apply:
· The Ministry of Lands can refuse to process transactions such as land transfers or subdivisions until arrears are cleared.
· Risk of forfeiture of leasehold rights to the government.
In summary, land rate is a county government tax applicable to all properties within its jurisdiction, while land rent is a national government fee for leasehold land. Understanding the differences ensures compliance with legal requirements, avoiding penalties and disputes with government authorities.
