More pain as state seeks to tax leasehold land in urban areas

Lands Cabinet Secretary Alice Wahome. [Edward Kiplimo,Standard]

The government is seeking to amend the Lands Act to introduce levies on all land freehold title deeds in urban areas.

The proposed levy of the freehold land is contained in Lands Amendment Act 2023 section 54 which reads, "The owner of any freehold land situated within the boundaries of any urban area or city shall pay rent charged on a comparable leasehold land or property of the same size in the same zone.”

In a radical move that changes the country’s taxation, the provision is a departure from traditional practice where land rates were primarily imposed on property with leaseholds, predominantly in urban areas. 

To aid in the implementation of the law, the Bill proposes to amend the Land Registration Act of 2012 to block the registration of any land for which land rate has not been paid.

This means that if a freeholder is selling a parcel of land and transferring it to the new owners, the process will only be registered if the land rate has been paid.

The Bill which has already been tabled before the National Assembly by Majority leader Kimani Ichungwa, gives some roles of the National Lands Commission (NLC) to Lands Cabinet Secretary.

The roles include publication of Gazette Notices of Intention to acquire, inspection of property to be acquired, oversight on determination of legal and financial claims by project-affected persons and issuance of awards.

“Whenever the national or county government is satisfied that it may be necessary to acquire land under section 110, the respective Cabinet Secretary or County Executive Committee Member shall submit a request for acquisition of the land to the Cabinet Secretary to acquire the land compulsorily,” reads the Bill in part.

In yet another proposal, the government intends to remove the time limit to review all grants and disposition of public land and to allow continuous receipt of historical land injustices claims to be heard after 2026 by upholding the provision of beyond 10 years stated.

While Lands Cabinet Secretary, Alice Wahome has welcomed the Bill, the NLC, a section of opposition leaders and opinion leaders claim it will be would be a  recipe for chaos and may lead to clashes.

According to the commission, imposition of a land levy would amount to double taxation, and it will infringe on the provisions of the Urban Cities Areas and Cities Act.

NLC argues that several amendments proposed in the Bill will create a conflict of interest between the national and county governments.

"Clause 107 of the Land Laws Amendment Bill should be deleted because the proposed amendment will create a conflict of interest whereby the national government determines the location of projects, approves the acquisition, determines the value, provides compensation funds and makes the payment," said NLC Commissioner Getrude Nguku.

The Lands Committee after listening to the NLC noted that it supported less than 10 per cent of the proposed amendments but faulted it for what they described as "failing to provide justification or making alternative proposals."

“The impact of the proposed amendments to the Land Laws Amendment Bill is enormous. This Bill should be taken seriously. It is very important for this Committee to understand and take into consideration all dimensions of this legislation by interacting with all stakeholders," said committee chairperson Joash Nyamoko.

Civil society organisations have termed the move to transfer powers from NLC to the Lands Cabinet Secretary ‘unconstitutional’ warning that it risks watering down reforms in the land sector.

“We further wish to remind the public and the President that, before land reforms, land governance processes which were presided over by the then Ministry of Lands, were riddled with rampant land grabbing, severe land insecurity, poor accountability, inequalities in land allocation, rampant corruption, landlessness and poor land use planning,” said Mwenda Makathimo from National Land Coalition.

Plans to strip NLC powers were announced by President William Ruto on May 21 last year when he said that land evaluation would be done by the Lands Ministry to seal corruption loopholes in compensation.

He explained that the Ministry of Lands will henceforth do the exercise to ensure all Kenyans get equal compensation.

“Pale kwa Lands Commission imekuwa soko, mtu unaenda hapo unalipa pesa kidogo, shamba ya laki moja inakuwa milioni moja na kwa sababu hujatoa pesa shamba yako ya milioni moja inakuwa elfu mia moja,” Ruto said.

Jubilee Party Secretary General Jeremiah Kioni urged the MPs to reject the Bill claiming that it may open the old wounds of the emotive issue of land injustices.

“The import of the proposed law is that communities that found themselves in other regions away from their ancestral land may be displaced, if not rejected, the Bill will be a recipe for chaos and skirmishes in this country,” he said.

Kioni said Kenyans are already bearing the brunt of heavy taxation claiming that once levied, the ‘freehold titles’ will lose the meaning to be ‘leasehold.’

He warned that the Bill is loosely drafted and risks being misinterpreted and destabilizing the country, and called for review.

“Countries which had giant economies like South Africa and Zimbabwe had tried relooking land ownership during pre and post-colonial period and this affected their economic strength, that is a slippery road that we must avoid,” he said.

On the proposal to give some NLC powers to the Lands CS, Kioni said it was tantamount to introducing Kangaroo courts as the political appointees would act at the behest of their masters in the land adjudication.

However, CS Wahome defended the Bill saying it was good for the country and accused critics of advancing narratives to incite Kenyans.

“There is a narrative being propagated that government intends to collect levy on freehold. The fact is that we will not collect levy from freeholds but we shall levy freehold that are in cities,” she said noting that they will charge levies in cities such as Nairobi, Mombasa, Kisumu, Eldoret and Nakuru.

But section 54A of the proposed law states that: ‘The owner of any freehold land situated within the boundaries of any urban area or city shall pay an annual land levy equivalent to a land rent charged on a comparable leasehold land or property of the same size in the same zone."

The Bill may likely open a floodgate of litigation due to the constitutional provision in Article 255 (g) that protects independent commissions and Judiciary from mutilation by Parliament and instead provides that any proposal should be subjected to a referendum.

Lawyer Stephen Mbogo said: "The drafters of the Constitution did not envisage a situation where Parliament or the Executive purports to direct, oversee and usurp the powers of the independent institutions."