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New Bill could stop random rent increases

REAL ESTATE
By Harold Ayodo | April 30th 2021

Is it possible for the Government to cap payment of rent as it recently capped interest rates towards cushioning Nairobians from economic anguish every month end?

There are practical experiences of landlords and landladies increasing rent with impunity and even evicting tenants who dare ask the reasons for the increase, without undertaking renovations.

Fatuma, Nairobi

Landlords have a free hand to charge and increase rent of their property at will over lack of laws capping the monthly payments.

The runaway rent in the capital city has forced many Nairobians to relocate to satellite towns like Ngong, Kitengela, Rongai, Ruiru and along Kagundo Road. Interestingly, landlords in the satellite towns are cashing in on the reality of increasing demand by raising rent!

However, the State may assume powers to control rent of private commercial and residential houses if Parliament enacts into law Landlord and Tenant Bill 2021.

The Bill that has been sponsored by National Assembly Majority Leader Amos Kimunya seeks to kill two birds with one stone: protect tenants while offering returns to property investors.

The Bill proposes that rent increase should not exceed the annual average inflation rate for the preceding year – therefore, if the Bill sees the light of day, rent increase this year should be capped at 5.2 percent—the average 2020 inflation.

Landlords, may however, bend the rules in case of sharp increases in rates paid to counties and other State agencies or when they introduce an additional service charge like security, garbage collection, swimming pools or home internet. They can also increase rent after making renovations.

Rent caps are not new to global cities. Take the case of Berlin, Germany, where Mietendeckel (meaning a lid on rents) which came into force early last year. It barred landlords from charging rent over what was agreed by 18th June 2019.

Rents that exceeded the acceptable rent caps by more than 20 percent – calculated according to residential location and the quality of fittings – had to be reduced.

Landlords that failed to comply faced heavy fines. Many real estate investors have reaped returns from among the fastest growing sectors following the ever-growing demand for housing.

Real estate firms like HassConsult that monitor property price index in one of its recent surveys indicated that rents in the capital city have witnessed an upward trend since 2007.

The Landlord and Tenant Bill 2021 seeks to introduce laws that balance the interests of landlords and tenants in a free market economy by ensuring that landlords earn reasonable income and also protects the tenant.

It also provides for cuts on rents when landlords withdraw some of the services that had prompted earlier increases in building lease costs. Building owners will be allowed to increase rent once a year for residential houses and once in two years for commercial premises, lowering the cost of doing business.

Those in breach of the proposed rent regulations risk a fine of Sh20,000 or an undisclosed period in jail.

Harold Ayodo is an Advocate of the High Court of Kenya

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