A LOOK INTO THE NATIONAL RATING ACT IN KENYA

 A NEW DAWN FOR RATING IN KENYA

1. Introduction

Land rates are levies paid to the county governments by landowners. On 4^th December 2024, the National Rating Bill was assented into law repealing the Rating Act and the Valuation for Rating Act and representing a new dawn for rating in Kenya.  

The new legislation creates a standardized framework for county governments to assess and impose rates on land and buildings. It introduces modernized guidelines for property valuation thus promoting equity and efficiency in revenue collection for counties.

This article analyses some of the salient changes introduced by the new law and the effect they may have on you as a land owner within a ratable area.

• Guiding Principles

The guiding principles set out under Section 4 of the Act emphasizes on implementation of the Act by the county governments in a manner that is fair, just, efficient and in conformity with the national values and principles of governance and public service set out under the Constitution.

• Ratable Areas and Owners

Section 28 of the Act declares all areas within a county government as rateable areas. This implies that any land not expressly exempted from payment of rates under the Act is deemed to be a rateable area, with the exception of freehold agricultural land which is explicitly excluded under section 5 of the Act.

The Act has expanded the definition of rateable owners which now includes holders of leases with a term of not less than twenty-one years that confers ownership as well as holders of sectional properties. Most leases that confer ownership are granted in developments where the lessees contribute towards payment of outgoings through payment of service charge. It is worth noting that rates have historically been levied on the project titles. It therefore follows that implementation of the Act may lead to changes in traditional structures of developments to allow for individual payments of rates by the unit owners. It will be interesting to understand how levying rates on leases will affect the rates payable on the project titles for subsequent years especially for developments where the common areas are owned by the management companies. Apart from this, the inclusion of sectional properties increases the rates base and allows the counties to collect more revenue contrary to when the rates were only payable on the mother title of a development. Most importantly, an individual unit owner is able to handle rates payments directly and not rely on the management company which in some cases would delay and create unnecessary challenges especially where one was borrowing from a financial institution and a rates clearance certificate is required as a condition to the disbursement of funds.

• Technology

Technological themes can be found throughout the Act. This aligns with Vision 2030, requiring counties to upgrade systems with technological innovation and advancement[1]. It’s, therefore, not surprising that sections 6, 23, 35 and 58 of the Act require counties to create systems for property valuation[2], adherence to Data Protection laws[3] and create regulations for these technological changes[4]. This represents a right step into technological innovation and advancement.

•  Valuation

The Act adjusts the frequency of valuation of properties for purposes of rating under section 30. Rateable properties are now valued at least once every 5 years[5], as opposed to once every 10 years[6]. This ensures that the county keeps up to date with the changes being made and implies an increased level of consolidation on the amount of rates payable on each property.

Moreover, section 25 of the Act also introduces the office of the Chief Government Valuer, whose primary duty is to advise the national government and the county governments on all matters relating to valuation. The introduction of the office is expected to create a harmonized rating process in Kenya and avoid disputes that have seen proprietors in some counties sue the county governments lack of proper procedures.

•  Exemptions

The Act has reduced the types of properties and use of property that are exempted from payment of rates, with charitable organizations, private schools and private libraries no longer exempted from payment of rates. Under the Act, the following are exempted from payment of rates:

1. Public Religious Worship areas;
2. Cemeteries, crematoria, burial grounds or grounds for burning the dead
3. Public health facilities
4. Public educational institutions and libraries
5. Wayleaves
6. Dams
7. Museums and National Monuments
8. Public outdoor sports[7]

The Act further specifies that where the religious place of worship use the land to earn a profit or where the land will be used for residential purposes, adjustments will be made accordingly to account for the profit made and valuation for payment of rates will be done. It goes on to state that where the property is leased to foreign missions, the landlord is still obligated to pay the rates.[8]

• Public Participation

The Act also seeks to enhance public participation in the process of valuation of rates by providing  that county governments involve the public directly and through their elected representatives when making decisions on the rates amounts[9] and valuation methods used to value a property.[10] This is a welcome change as it gives the public a chance to take part in the process of rating directly and through their representatives, while also upholding the constitutional principle of public participation entrenched under article 10 of the Constitution of Kenya.

The fact that the minimum period within which a county government can review the valuation roll is definite protects the rateable owners by ensuring that the valuation rolls are not amended as and when the county governments deem fit but within the timelines set out in the law and thereby introducing predictability on the amount payable for a specific period.

• Remission

The Act defines remission as partial or total discharge of payment of rates due including interest and penalties. It makes provision for remission through the county government as opposed to the cabinet secretary, as was the case under the repealed laws. A rateable owner can now apply for remission in a standard form and the county governments are required to either grant the application partially or wholly or decline the same giving reasons. The Act does not give room for speculation as it gives timelines for feedback and further provides that where a county does not respond within a period of sixty days, then the application for remission is deemed to have been granted until the end of the next financial year or for a period of twelve months. The inclusion of the option for remission with clear timelines is a breath of fresh air as the rateable owners are now able to apply for remission provided that the application is justified and are assured of an outcome irrespective of whether a formal response is issued or not.

• Dispute Resolution

The national rating tribunal has been established to cater for dispute resolution detailed under section 36 of the Act. A rateable owner who is aggrieved with the process can now file an objection with the county executive board by serving the county executive committee member with a 45 days[11] notice. The board will then set a date to hear the objection. If it rules against the objection and the proprietor is unsatisfied with the decision, the proprietor can appeal to the national rating tribunal.[12]Though the system seems long, it provides proprietors with an additional appeal mechanism and aggrieved parties are given a longer window to object to any inconsistency in the process.  

1. Enforcement of payments

In the event of default in remittance of rates and failure to remedy the default upon issuance of a sixty-days written notice, the Act provides for enforcement mechanisms that may be adopted by the county governments under section 19. The mechanisms are:

1. The county may be listed as a beneficiary for a deceased persons estate in the event that the owner is deceased;
2. The county may appoint an official receiver over the property;
3. The county may attach debt; or
4. The county may auction and sell the property at the market value[13].

It is important to note that irrespective of whether other parties such as banks have a registered interest on a rateable property, rates is an overriding interest. Accordingly, in the event that the County government choses to exercise any of the available enforcement mechanisms, the county governments’ rights and interest in property shall take precedence over other interests, even if not registered against the title.

1. Conclusion

The Act was enacted to consolidate previous laws and provide a legal framework on valuation and payment of rates. The introduction of a well-defined dispute resolution framework offers a reprieve to aggrieved proprietors on matters relating to rates. The recognition of sectional properties as well as long term leases as ratable properties increases the revenue base for counties and removes the uncertainties brought about by the common payment of rates on the mother title through collection of service charge. It is also imperative to point out that by expressly exempting freehold agricultural  parcels of land from payment of rates, the Act has allayed the fear that troubled most proprietors of land especially in rural Kenya . 

[1] Vision 2030, ‘Foundations for the Pillars’, (Kenya Vision 2030) <Foundation For The Pillars | Kenya Vision 2030> accessed 20th January 2025

[2] Section 6, National Rating Bill 2024

[3] Section 23 and 35, National Rating Bill 2024

[4] Section 58, National Rating Bill 2024

[5] Section 30, National Rating Bill 2024

[6] Section 3, Valuation for Rating Act CAP 266

[7] Section 38, National Rating Bill 2024

[8] n (7)

[9] Section 3, National Rating Bill 2024

[10] Section 34, National Rating Bill 2024

[11] Section 36, National Rating Bill 2024

[12] Ibid.

[13] Section 19, National Rating Bill 2024