Land taxation is a compulsory aspect of land ownership. Landowners in Kenya must understand the different types of taxes that apply to them and the consequences of failing to pay these charges on time.
Land rate and land rent are just two of the several taxes you’ll come across when you’re looking to buy land. Learning how they differ and when you’re required to pay either is essential for legal compliance and the retention of your land.
What Is Land Rent?
Land rent is a type of payment made for the use of land that holds a leasehold title. A leasehold title allows the lessee to possess and use the land for a stipulated amount of time, after which ownership reverts back to the original owner if the lease is not renewed.
In Kenya, leasehold titles are common in towns, municipalities, and other urban areas. The national government is often the one leasing out and therefore, land rent is paid to the ministry of land and physical planning through the Kenya Revenue Authority (KRA).
The amount you can pay as land rent varies depending on factors such as land size, location, and intended use of the land. You can also negotiate the land rent, especially during lease renewal. After applying and paying all outstanding rent and any interest fees, you’ll receive a land rent clearance certificate valid for one year, as proof for land rent payment in Kenya.
What Are Land Rates?
Land rate is a mandatory and recurrent annual tax levy paid by landowners to the local county government, whether with a leasehold or freehold title. The county government uses this money to fund public services and infrastructure such as community facilities, roads, and waste management.
The amount of land rates to pay varies from one county to another. To calculate the rates you should be paying after acquiring land in Kenya, a government valuer first determines the land’s value based on factors such as accessibility, intended use of the land, and location. The valuer then drafts a valuation roll which is tabled before the local authority for discussion. The final rates are then sent to landowners through a notice, giving them a chance to object or appeal the rates before their final publication.
You can check if a parcel of land you’re interested in has unpaid land rates and accrued interest before buying by conducting a land search. Land rates are payable through the Ecitizen platform, county M-pesa paybill numbers, bank transfers, or a county’s cash office. After paying, your county’s land offices will issue a land rates clearance certificate as proof of payment.
According to the National Rating Bill 2022, which was enacted in 2024, land used exclusively for public purposes is not subject to paying rates. These include, public hospitals, cemeteries, religious worshipping grounds, dams, and museums.
Differences Between Land Rent vs. Land Rates
Some of the notable differences between land rent and land rates in Kenya include:
Purpose
Lessees pay land rent to the national government for the purpose of using leased land for their needs, while land rates are paid for land ownership and the funding of public services by the county government.
Party Payable To
Land rent is payable to the Ministry of lands and physical planning through KRA as a source of revenue, while land rate is payable to the local county government where the land is located.
Who Pays Land Rate vs. Rent
Only landowners with a leasehold title pay land rent for the use of the land, while landowners with either a leasehold or freehold title must pay land rates.
Who Determines the Amount
The lessor or original land owner determines the amount a lessee will pay as land rent depending on factors such as intended land use and the location. Local authorities determine the amount of land rates payable by considering the land’s market value and its location.
What Happens if You Don’t Pay Land Rates and Rent in Kenya?
Depending on how much you have in arrears, authorities can take any of the following measures when you fail to pay your land taxes on time in Kenya:
- Impose penalties: KRA may impose an interest for late land rent payments, charged at 1% of the land’s value per month.
- Write a demand letter: The local rating authority or KRA may issue a demand letter ordering a landowner to pay pending land rates or rent within a specific number of days.
- Sue to recover the money: The relevant authority may initiate court proceedings by filing a lawsuit against the landowner to recover pending land rent or rate charges.
- Recover from tenants: The National Rating Bill 2022 allows relevant authorities to recover pending land rates or rent from tenants living on the land in question.
- Auction the property: Finally, the bill also gives county governments permission to auction land whose owners have defaulted their land rate payments.
When buying land in Kenya, ask for relevant clearance certificates to ensure the seller is up to date with the land rate or rent payments. Working with a trusted real estate company can make it easy to navigate the land acquisition and ownership process.