If you are a property owner in Nairobi and you have not been remitting your land rates fees to the City Council of Nairobi, you have got reasons to have sleepless nights, writes HAROLD AYODO?
Reality is now sinking in that the cash strapped City Council of Nairobi (CCN) could auction the property of defaulters over outstanding rates of Sh12.8 billion.
City Hall may soon be on a selling spree to the highest bidders to recover its money once it secures court orders in line with the law.
For starters, land rates are annual levies paid to local authorities by property owners as provided in the Valuation for Rating Act.
Civic bodies use the annual tariffs as part of their revenue collections towards improving services within their jurisdictions.
However, schools, hospitals, churches, morgues, cemeteries, national and game parks and charitable institutions are exempted from the duty.
??CCN acting chief accountant in charge of rates Peter Muriithi says figures on defaulters on rates are mind-boggling.
“Land buying companies in Eastlands owe us accumulated unpaid rates of Sh7.8 billion,” Muriithi says.
?Even residents of the leafy suburbs like Karen and Runda have accumulated unpaid annual revenues running into billions of shillings.
?“Some residents of Karen and Lang’ata associations owe us up to Sh2 billion while those in Runda are yet to pay millions of shillings,” Muriithi says.
According to Muriithi, majority of palatial homes in Runda sit on a quarter acre of land and should pay rates of about Sh42,000 annually.
?“We have sold some residential houses over the years over unpaid accumulated rates and have started the legal process of doing the same — via public auction,” he says.
major culprit
?According to Muriithi, the government is also a culprit owing it slightly over Sh1.8 billion.
?Legally, State institutions pay land rates, which are calculated under the Contribution in Lieu of Rates.
He says some parastatals are yet to pay up land rates totalling Sh1 billion with Kenya Broadcasting Corporation (KBC) leading the pack with a whooping Sh500 million.
?“Kenya Railways, which is among the largest land owners in the country, owes us Sh100 million,” Muriithi says.
?According to Muriithi, account books at City Hall show that the Kenya Railways Pension Scheme owes CCN Sh170 million while its postal services counterpart owes Sh200 million.
?“The two pension schemes (Railways and Posta) may have sold some of their houses but never informed us so our records still have them as owners,” he explains.
?Houses in Mugoya Estate in South C that are mainly owned by officers in the military owe City Hall Sh100 million in unpaid rates.
?The National Assembly (Parliament) has a debt of Sh26 million and Central Organisation of Trade Unions (Cotu) Sh2.5 million, according to City Hall.
?Moreover, Kenya Planters Co-operative Union, already under receivership, has a debt of Sh4 million while the Kenya Printers Co-operative is yet to settle Sh2.3 million.
?In its attempt to recover the outstanding rates, City Hall has published names of prominent personalities who have defaulted despite notices.
?For instance, Trade Minister Moses Wetangula has been published in the mainstream media for outstanding rates of nearly Sh2 million for properties in Karen and Lang’ata Road.
?Other political leaders whose names have been published in the list of shame include?Ol Kalau MP Erastus Mureithi and former Livestock and Fisheries Minister Joseph Munyao.
leadership and integrity
?According to civil society organisations, leaders aspiring to contest in the forthcoming General Election should be barred unless they settle outstanding rates as part of leadership and integrity under the Constitution.
?Recently, City Hall held a meeting and resolved to advertise waivers on the rates but acting Local Government Minister Fred Gumo vetoed the suggestion.
?“We wanted to publish a grace period in the media to see whether defaulters would volunteer and pay but the Minister thought otherwise,” Muriithi says.
Gumo directed that City Hall gives notice to the perpetual defaulters before auctioning their property in line with the law.
Gumo wants the local authority to act fast and even recover other debts owed by Government departments running to over a whooping Sh106 billion.
The Minister says the Department of Defence owes the council Sh61 billion, parastatals Sh47 billion and Government departments Sh1.9 billion.
Gumo spoke after it emerged that City Hall has defaulted on a Sh212 million loan it borrowed 28 years ago to build houses in Umoja.
debt recovery
Consequently, Treasury was forced to step in and bail out the local authority by paying the United States Agency for International Development the debt that had accumulated to Sh1.5 billion due to interest.
Details of the 28-year debt are contained in the latest issue of the Controller of Budget’s report.
City Hall Chairman of Finance Committee Mike Ogada says its wage bill has increased from Sh320 million to Sh600 million against revenue collection of Sh400 million.
The council is seeking to double its land rates collection from last year’s Sh1.7 billion to Sh3.5 billion to finance its operations.
“City Hall should give notices to defaulters that their properties will be sold towards getting funds for service delivery and payment of workers,” Gumo says.
According to Town Clerk Roba Duba, there will be no waivers on interest on the revenue to property owners.
“A list of shame with detailed particulars will also be published and forwarded to the Credit Reference Bureau (CRB),” Duba adds.
Even property owners within the city who pay rates are not lucky as Gumo wants the annual revenue increased in line with current rent charged.
“We have many buildings in Nairobi but rates collected are very low… they pay about Sh50,000 a month yet collect over Sh10 million on rents over the same period,” Gumo says.
When meeting with councillors, chief officers and workers at City Hall, Gumo observed that the rates, which are paid annually, had not been reviewed for decades.
“City Hall should be able to co-ordinate with other service providers to ensure rate defaulters do not get water and electricity supplies,” Gumo says.
Even as Gumo breathes fire, increasing the current land rates would not be a walk in the park as the law provides otherwise.
Currently, City Hall uses the unimproved site value to calculate land rates, meaning revenue is calculated based on bare land and not value of the building.
“Rates are slightly higher within the Central Business District (CBD) compared to residential areas in the outskirts,” Muriithi says, adding that investors who buy property within Nairobi should register with them.
“There are people who bought property from the Kenya Power and Postal Corporation and have not yet updated records with us,” Muriithi says.
Legally, property owners must open files with local authorities and provide physical addresses where bills of outstanding land rates are sent.
According to lawyer Peter Mwangi of Mwangi and Company Advocates, property owners will kiss their property goodbye after following due process.
“Property (land and homes) could be attached and auctioned after the local authority obtains court orders,” Mwangi warns.
legal approach
?According to Mwangi, City Hall should first write demand letters to defaulters to pay up and publish gazette notices on the same before going to court.
?“Property owners can also go to court to contest legal suits of accumulated land rates and stop planned auction of their land and homes,” Mwangi says.
?City Hall has repeatedly published names of the defaulters in the mainstream media without success of full payment.
?Normally, the list of affected defaulters includes senior officials in Government, prominent business personalities and land buying companies.
?Others are banks, mortgage firms and financiers that extended loans to property owners without confirming whether rates were paid on property issued as security.
?As City Hall goes for the defaulters, owners and prospective buyers of property should beware of repercussions of defaulting on land rates.
