For many property buyers, the purchase price often represents the final cost of acquisition. However, true ownership extends beyond initial payment. Investors must recognise land ownership and carry ongoing financial obligations particularly in the land rates and rent. These are important levies imposed by county and national governments and failing to comply can lead to penalties, legal disputes and even loss of property.
Before that, it is essential to understand the land tenure system in Kenya
- Freehold – This ownership means you own both property and land indefinitely with full control over the property. It is only applicable to Kenyans and owners of freehold are subject to land rates but not land rents.
- Leasehold – This involves leasing land from government to a private owner for a specific period of time 33, or 99 years. It is common in urban areas and applies to both Kenyan citizens and non citizens. Leasehold owners pay land rent to the national government and land rates to the county government.
So what are land rates and rents,
- Land Rates – These are mandatory tax charges imposed to all landowners, whether freehold or leasehold. This payment is crucial to support and fund local public services such as garbage collection, street lighting and ensure a safe clean environment. It is determined by various factors such as size and designated land use category, serving as a means to distribute the cost of public service fairly. Payments are done annually by the end of March though deadlines may vary by counties.
- Land Rent – Land rent is a payment to the national government for the use of public or leasehold land. It is paid to the Ministry of Lands and Physical Planning through Kenya Revenue Authority (KRA) and a land rent clearance certificate valid for 1 year is issued. The payment is typically done by the end of January and is based on the unimproved land value (around 2%) though it can vary from location, land size and intended use. This secures the tenants continued use and possession of the land.
Recognising the distinction between land rates and land rent is paramount for an investor. By understanding the land tenure system, a prospective buyer can accurately budget for the ongoing annual obligations and compliance ensures a successful investment strategy.
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Email: info@optiven.co.ke
