How landlords rip off tenants through service charge

NAIROBI, KENYA: The list of shame on the notice board said it all. The board, strategically placed just outside the well-known estate near Mombasa Road, had names of those who had defaulted on service charge.

The management apparently thought the best way to deal with that was to name and shame the defaulters by writing their initials, their house numbers and arrears.

Failure to pay this monthly fees that may lead to cutting off of services like garbage collection, denial of access to the premises, and the posting of public notices aimed at embarrassing the tenant or home owner.

In some cases, it has resulted in tenants being kicked out of the houses even if they have paid rent.

A resident in one of the estates who has encountered such treatment narrated to Home and Away her ordeal.

"It started one day when I was going to work that I found estate tenants watching at the blackboard erected on the gate grills, I was forced to park my car a side to see for my self what was going on. I got shocked that my house was among those on the 'List of Shame' as having failed to pay a service charge of Sh3,600," she says, adding that she had to pay the amount.

She says its so absurd that property managers can employ such uncouth methods of embarrassing tenants when they fail to pay for service charges by putting their house numbers on the gate notice board.

"Between service charge and rent, which is more important? how can I pay rent of Sh40,000 and fail to pay service charges of Sh3,600?," she wonders.

Service charge comes with its own fair challenges, in some cases, what the tenants or homeowners pay for is not rendered with sometimes no garbage being collected or collected late, and no water among others.

Sometimes service charge is arbitrarily raised by money-minded property agents since no one regulates them, leading to court battles in some cases between the tenants and property managers.

Some tenants or homeowners have found themselves paying exorbitant amounts.

Service charge in property situations refers to monies paid by tenants to cover the operating expenses of the buildings or premises.

Service charge is paid over and above the rent and attracts VAT at the current rate of 16 per cent.

In commercial and residential property, service charge covers items such as Water, Electricity for common areas, security, insurance, cleaning, garbage collection, maintenance, repairs, managements costs, salaries of staff employed in the property among other charges.

According to Timothy Mutisya, a Director at Lloyd Masika, a Property Agent and Valuers company, it is absolutely right to charge service charge as this is the practice even in the most advanced countries or economies.

"Service charge payments and it's application is stipulated in the leases or covenants signed by tenants and this forms the basis of payment and it's application or use," he says in an interview.

Lack of bodies or authorities to regulate service charges have exposed some tenants to property managers, who never miss an opportunity to milking them dry.

Mutisya says the amount of service charge paid by tenants depends on the level of services provided in each building or property. The more the services the higher the service charge.

In commercial property situations the average service charge is between Sh20 month to Sh30 per square feet per month.

While in gated residential properties it ranges from Sh2500 per month to Sh6,000 for apartments say in middle class areas such as south B,C, Embakasi and Kilimani .

While in other high-class gated communities such as Karen, Lavington it could be as high as 35,000 per month.

Timothy says service charge must be audited at the end of each calendar year to ascertain the actual costs incurred, a point which is supported by Cyrus Maina, a city -based commercial and property lawyer.

In long-term leases for apartments or office blocks, the service charge is payable to the management company that will provide common services.

"The management company must account for the service charge usage and its account will be audited by its auditors. To avoid abuse, the lessee have the right to inspect book of accounts and demand accountability from the directors of the management company," says Cyrus.

Mutisya adds: "If what has been collected from the tenant is insufficient, then tenants are required to pay the amount in a lump sum as what is normally called excess service charge adjustment."

If the amount expended is less than what has been collected then tenants are given credits accordingly.

Timothy admits that some unscrupulous landlords take advantage and fleece tenants by not crediting these amounts and it should be the duty of each tenant to demand audits so that the correct amounts are paid.

A point, which is supported by Urban Tenants Association of Kenya (UTAK) Secretary General Ephraim Murigo.

"Lack of tenants' knowledge about service charges have exposed them to corrupt landlords and property managers who fleece them huge amounts of cash," says Murigo who admits also that they get several cases of such kind among other forms of harassment like, illegal eviction.

Among the core values of UTAK are addressing conflicts and disputes arising from landlords and tenants, advocating for tenants in case of infringement, awareness creation, education and training on tenants' obligations among other things

The money of the service charge will depend on the contract between the parties (landlord and tenant or lessee and lessor).

According to Consumer Federation of Kenya (COFEK) Secretary General Stephen Mutoro, the way in which the service is organised is set out in the tenancy or purchase agreement.

The levy covers the cost of such matters as general maintenance and repairs, insurance of the building and where the services are provided for instance, security, lifts, lighting and cleaning of common areas among others.

"The aspect of service charge is supposed to be negotiated before either buying or leasing property with common areas. This is particularly common in multi-storeyed flats and gated communities," explains Stephen.

He adds: "Ideally, the cost of service charge is supposed to be equally distributed among neighbours. They can also come up with standards of services based on their budget."

Stephen explains further that if the landlord must manage the service charge, it should be on transition. Leaseholders or property owners can choose to register a company with limited by shares where the landlord can be a shareholder up to and until his interests are fully met.

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