The New Land Rates Regime And Why Counties Need To Work Overtime to Comply With The National Rating ACT 2024

On December 4th 2024, The President assented to the National Rating Act, 2024, effectively repealing the previously existing Rating Act, Cap 267 of the Laws of Kenya and Valuation for Rating Act, Cap 266 Laws of Kenya and introducing a new regime for levying land rates by County Governments. Before the enactment of the new legislation, Counties relied on the repealed statutes together with County specific legislations to levy and collect land rates. Counties are now required to align their respective legislations with The National Rating Act within two years from the date the law came into force being 24th December 2024.

Below we give a brief overview of the National Rating Act and also the procedure which Counties must adopt in the levying of land rates.

A Brief Review Of The Provisions Of The National Rating Act, 2024

A. Introduction

The National Rating Act, 2024 (hereinafter “the National Act”) was enacted to provide a framework for the imposition of rates on land and buildings by County Governments in Kenya. It details the valuation process, including the roles of valuers and the National Rating Tribunal. The National Act also outlines procedures for payment of rates, remission, and dispute resolution. The National Act replaces or repeals the Rating Act and the Valuation for Rating Act, which were deemed outdated. By doing so, it introduces modernized guidelines for property valuation and taxation, promoting equity and efficiency in revenue collection for Counties.

B. What is new in the current Kenya National Rating Act, 2024

The National Act introduces several new elements and changes compared to the former Rating Act and Valuation for Rating Act. These changes aim to provide a more comprehensive and modern framework for the imposition of rates. Key innovations include:

• Levying of rates on freehold property

Under section 5, the National Act explicitly states that the same does not apply to freehold agricultural land for purposes of levying rates. Making land specified to be agricultural land is the only type of property not subject to the payment of rates. This means that freehold property used for purposes other than agricultural use, such as commercial, industrial and residential use, may be subjected to payment of rates.

• Specific definition of a rateable owner

Under section 8, the National Act provides a detailed definition of a rateable owner, which includes a broader range of individuals and entities beyond just the registered owner of the property. This includes leaseholders with unexpired terms of over 21 years, executors, trustees, administrators, liquidators, sectional property holders, occupiers, and beneficial owners receiving profit from the rateable property. It makes clear who is responsible for paying rates on a property. This clarity was not explicitly included in the former Rating Act.

• Chief Government Valuer

The National Act establishes the Office of the Chief Government Valuer under section 25, who shall act as the principal advisor to both national and county governments on valuation matters. The Chief Government Valuer also has a role in developing guidelines for standardising valuation rolls and maintaining a record of all valuation rolls from county governments. This centralisation and standardisation are new to the rating framework.

Establishment of the National Rating Tribunal

The National Act establishes a National Rating Tribunal under Section 39 to hear and determine all matters relating to valuation or rating referred to it under the Act or any other written law. This is a significant change, as it introduces a dedicated body to handle rating disputes, offering a more structured and specialised approach to resolving disagreements compared to the previous legislation. The Tribunal has the power to grant equitable relief including injunctions, penalties, damages or specific performance. The Tribunal's decisions can be appealed at the Environment and Land Court.

• Detailed rating procedures

The National Act introduces a more detailed procedure for the levying of rates, including requirements for public notices prior to the adoption of any form of rating and for the publication of rating areas. It also outlines processes for the setting of rate struck, payment of rates, and the process for remission of rates. The previous legislation did not provide such specific guidance. The Act also mandates public participation in the setting of rates and valuation rolls.

Under Section 10 of the National Act, the County Executive Committee is required to issue a Sixty (60) days’ notice prior to the adoption of any form of rating. The Notice is to be published in at least two newspapers of nationwide circulation.
Under Section 11 of the Act, after the adoption of the form of rating, the County Executive Committee is required to publish a notice in the Gazette showing the form of rating to be applied.
Under Section 15 of the Act provides for the Notice of Rate and provides that a notice ought to be issued on the applicable rate sixty (60) days prior to the due date.
Section 35 of the Act provides that a 21 days’ notice after the adoption of the valuation roll.

Rate struck

The "rate struck" is defined in the National Rating Act, 2024 as the percentage of the tax rate levied on the assessed value or rateable value of a property. This percentage is to be determined by a County government from time to time. Section 14 of the National Act provides that the County Executive Committee member responsible for finance is tasked with setting up the rates struck. This is done within the Finance Act of the relevant financial year. The proposed rate struck is then submitted to the County Assembly for consideration, approval, and passing.

In setting the rate struck, the County Executive Committee member must consider the values and use of rateable property, as well as the prevailing economic situation. The County Executive Committee member is required to provide the grounds and circumstances that inform the determination of the rate struck for the applicable financial year. Once the rate struck is determined, it is applied to the assessed value or rateable value of the property to calculate the amount of property tax owed by a rateable owner. Each county government is responsible for setting its own rate struck through its respective legislation.

• Use of technology

The National Act mandates the use of appropriate technology in the preparation and implementation of the valuation roll and the supplementary valuation roll. This reflects the move towards modernising government processes that was not a feature of the previous act.

• Comprehensive valuation process

The National Act introduces a structured approach to valuation, including the preparation of valuation rolls and supplementary valuation rolls. These rolls must include details on the description, situation, area of the land, the name and address of the rateable owner, the use of the property, the site value, the assessment for the improvement rate and any other necessary information. This level of detail and the procedures that must be followed were not so rigorously defined in the previous Rating Act.

• Objection and appeal mechanisms

Section 36 of the National Act sets out the process for lodging objections to the valuation roll, with a clear procedure for review and determination by a County Valuation Board. It also specifies the process for appeals to the National Rating Tribunal. The former Act did not offer such a clear dispute resolution mechanism.

• Provisions for public land

The National Act specifically addresses the issue of public land and how rates are to be paid on it, with a "contribution in lieu of rates" mechanism for national government entities. This also includes a process for determining which public land is included and excluded from the valuation roll, by providing that rates shall not be charged for land that is used exclusively for public purposes such as public religious worship, cemeteries, crematoria, burial grounds or grounds for burning of the dead; public health facilities; public educational institutions and libraries; dams; way leaves; museums and national monuments; or public outdoor sports.

• Enforcement of rates payment

The National Act has specific measures for the enforcement of payment of rates, including penalties, denial of services, lawsuits, charges against the rateable property and even the appointment of a receiver or auctioning of property to recover rates due.

• Miscellaneous provisions

The "Miscellaneous" part of the National Act, covers a few key administrative and procedural aspects of the Act. It mainly deals with notices and the repeal of previous legislation.

Notices: This section specifies how notices required under the National Act are to be published and served. Unless otherwise specified in the National Act, any notice required to be published by the County Executive Committee member must be published in the Kenya Gazette for a period of 21 days. It must also be advertised in one or more newspapers with wide circulation in the respective county. Additionally, it should be posted on any social media platform with county-wide reach, as approved by the County Executive Committee member.
Service of notices: The National Act outlines various methods for serving notices, demands or other documents. These include;
- Delivering it to the person directly.
- Leaving it at their usual place of residence or business, or the company's registered office.
- Sending it by ordinary or registered post.
- Delivering it to someone at the premises or, if no one is there, fixing it conspicuously on the property.
- Sending it by email.
- Using short message services (SMS) or any other prescribed method.
Addressing notices: Notices can be addressed to the "rateable owner" without further name or description.
Deemed service: If a notice is sent by post (ordinary or registered), it is considered to have been delivered at the time it would normally be delivered by post, unless proven otherwise.

Repeal: This section repeals the Rating Act and the Valuation for Rating Act, indicating that the National Act replaces these older laws.

• Provisions on delegated legislation:

This is provided for under section 58 of the National Act. The section outlines the powers of various bodies to make regulations for the effective implementation of the National Act. This section also provides a framework for delegated legislation, allowing for detailed rules and procedures to be developed and implemented at both the national and county levels. It ensures that the National Act can be effectively applied while allowing flexibility to address local variations and specific needs. The National Act provides that the Cabinet Secretary, in consultation with the Council of Governors, is empowered to make regulations to better carry out the provisions and purposes of the Act. These regulations may cover a broad range of topics, including;

Preparation of valuation rolls and supplementary valuation rolls.
Property that is exempt from payment of rates.
Timelines for implementing the Act.
Penalties on interest rates.
Annual rental value rate.
Valuation of inter-county rateable properties.
Tax rates to ensure compliance with Article 209(5) of the Constitution.

The National Land Commission (NLC) is responsible for making regulations for the valuation of public land for the purpose of paying contributions in lieu of rates. Each County Government is mandated to enact its own legislation and regulations for the better implementation of the National Act, provided that these are consistent with the Act and the regulations made by the Cabinet Secretary and the NLC. These county-specific regulations can address areas such as:

The use of technology in implementing the Act.
The circumstances for discounts, waivers, and remissions.
Procedures for auctioning rateable property.
Procedures for issuing agency notices.
County services to be denied upon default.
Procedure for transmitting and tabling draft valuation rolls and draft supplementary valuation rolls.
Setting the rate struck.

In summary, the National Act brings a more modern, detailed and comprehensive approach to property rating. The National Act establishes clear procedures and responsibilities for all parties involved and creates a dedicated dispute resolution mechanism. This framework is a significant step forward from the previous Rating Act and Valuation for Rating Act.

• Transitional provision.

Under Section 59, County Governments are required to comply with the provisions of the National Act within twenty-four months after commencement.

PROCEDURE FOR LEVYING RATES WITHIN COUNTY GOVERNMENTS

The National Act establishes a detailed procedure for levying rates on land and buildings by County Governments as follows:

A. Adoption of a rating method

A County Government is required to adopt one of several forms of rating, that is, annual rental value rating, area rating, unimproved site value rating, or a combination of site value and improvement rating. Prior to adopting any rating method, the County Executive Committee member must issue a notice of not less than sixty days inviting public comment on the proposed method.

This notice must be published in the Gazette and at least two newspapers with wide national and county circulation. It should also be circulated through electronic media, including local TV, radio, and road shows, to ensure wide public awareness. The notice must be in both English and Kiswahili and, where appropriate, a local language. The notice must contain a brief explanation of property rating, the commencement date of the rating process, the stages involved, who will conduct the exercise, the proposed methods of rating and areas to be rated, and avenues for raising objections or seeking clarifications.

Once a form of rating is adopted for a specific area, no other form of rating can be adopted in that area during the validity of the initially chosen method. The County Executive Committee member must publish a notice in the Gazette, demarcating on a county spatial plan, the different forms of rating to be applied in different areas.

B. Valuation of rateable property

The County Government must appoint a valuer to undertake valuation and prepare a main valuation roll and/or supplementary roll if need be. The basis of valuation is the market value of the rateable property. Valuers may use any suitable method of valuation that conforms to local and international standards and considers existing physical and land use plans. A valuation roll must be prepared every five years and may include details such as the description, situation, and area of the land, the name and address of the rateable owner, the use of the property, the site value, and the assessment for the improvement rate.

The valuer will prepare a draft valuation roll and submit this, along with relevant maps, plans, and a summarized basis of valuation report to the County Executive Committee Member for tabling before the County Assembly. The report shall include the valuation methodology used, the basis and date of valuation, and any other relevant information obtained by the valuer.

C. Review and approval of valuation roll

The County Executive Committee Member will forward a copy of the draft valuation roll to the Chief Government Valuer, who has 30 days to submit a written report. The County Executive Committee Member must conduct public participation for comments on the draft valuation roll, and make the roll available for inspection and copying for a fee. The County Executive Committee Member submits the Chief Government Valuer's report, along with the draft valuation roll, to the County Assembly. The County Assembly must approve or reject the draft valuation roll within 60 days of submission. If no resolution is made within this period, the roll is deemed approved.

D. Publication of valuation roll and notice of rates

After the County Assembly approves the roll, the County Executive Committee Member must publish a notice in English, Kiswahili, and where appropriate, a local language, within twenty-one days after its adoption. This notice must be published in the Gazette, at least two newspapers of national circulation, through local radio, and any approved social media. The notice must state that the roll is open for public inspection for at least 45 days and invite objections.

The County Executive Committee member responsible for finance sets the rates in the Finance Act of the relevant financial year for approval by the County Assembly. In setting up the rate struck, the County Executive Committee member must take into consideration the values and use of rateable property and the prevailing economic situation and provide grounds and circumstances informing the determination of the rate struck. The County Executive Committee member must publish a notice in the Gazette at least sixty days prior to the due date, specifying the day for payment of rates and the amount payable.

E. Payment of rates

Every rate levied becomes due for the financial year for which it is levied. Rateable persons are responsible for paying the amounts due via an authorized bank account, electronic payment platform or any other means appointed by the County Executive Committee member. The County Executive Committee member may prescribe payment of property rates by way of installments or one-off payments and if simple interest is charged on property rates, the simple interest cannot exceed the prevailing Central Bank rate.

F. Objections and appeals

Any person may lodge an objection to the valuation roll with the County Executive Committee Member within 45 days from the date of publication. Objections must be in the prescribed form, accompanied by a non-refundable fee and must be based on grounds including the inclusion or omission of a rateable property from the roll, the value assigned to a property, or any other statement made or omitted in the roll. The County Executive Committee Member will notify the valuer of the objection and send a copy to the rateable owner.

The valuer must review the objection and submit a response to the County Executive Committee Member within 60 days. The County Executive Committee Member constitutes a County Valuation Board to hear and determine the objections. The County Valuation Board will communicate its decision in writing to the objector, the rateable owner, the County Executive Committee Member, and the Valuer. A person dissatisfied with the decision of the County Valuation Board may appeal to the National Rating Tribunal. If no objections are received within 45 days, the County Executive Committee Member endorses the valuation roll.

G. Enforcement of payment

If a person fails to pay rates within the specified time, the county government may issue a written demand, with consequences for failure to pay. If the person still defaults, the county government may levy a penalty, deny certain county services, institute a suit, create a charge against the rateable property, appoint a receiver, apply to be considered as a beneficiary in cases of succession, attach debts, or auction the property.

H. Contribution in lieu of rates

For public land held by the National Government, the County Government will assess the contribution in lieu of rates. The NLC , in consultation with the Cabinet Secretary and the Council of Governors, will make regulations to prescribe public land that should be included or excluded. The National Government entity responsible for the public land must remit an annual contribution in lieu of rates.

In the upshot, the process involves multiple stages, including public participation, valuation, review, and dispute resolution. The aim is to establish a fair, transparent, and consistent method for levying rates on properties within each County Government.

CONCLUSION

From the foregoing, the process of aligning County legislation with the new rating regime is long and quite involving. It involves enactment of various legislations and regulations both at the National and County level and if Counties do not start the process early, there is a danger that the transition period will lapse before full compliance.

It is also important to note that every step towards compliance must involve public participation and some elements of dispute resolution. Any delay in seeking compliance will cause Counties to lose substantial revenue from rates thereby affecting service delivery.

We are ready to offer guidance to ensure compliance with the new rating regime. The commercial team at McKay Advocates LLP possesses extensive expertise in policy and legal and legislative drafting, having assisted a number of government and public entities on preparation of various legislative and policy instruments. If you would like to consult on this article or any other legal issue, you may contact: info@mckayadvocates.com or the commercial team through: commercial@mckayadvocates.com