City Hall demands lease fees despite public land deals ban

Nairobi City Hall. The City Council of Nairobi’s legal affairs department yesterday advised individuals and firms to remit their payments at effective rates until the next general election, downplaying the impact of a recent decision by Cabinet to freeze leases.

City Hall has moved to protect one of its most important revenue sources by insisting that it will continue collecting land rates even after the existing leases expire.

The declaration came just days after the Cabinet banned the renewal of public land leases before the setting up of a land commission.

The City Council of Nairobi’s legal affairs department yesterday advised individuals and firms to remit their payments at effective rates until the next general election, downplaying the impact of a recent decision by Cabinet to freeze leases.

“My reading of the Cabinet directive is that some property owners will not have valid leases, but they remain liable to pay us at effective rates until the next elections,” said Aduma Owuor, the council’s legal affairs director.

Land rates are the single largest component of revenue for City Hall followed by parking fees and business permits. In its Sh14.8 billion budget for the 2011/12 financial year, the council planned to raise Sh3.5 billion from land rates, up from Sh2.6 billion the previous financial year.

Parking fees and business permits are expected to bring in Sh1.6 billion each, up from Sh1.4 billion and Sh1.3 billion respectively.

Last week, the Cabinet stopped, with immediate effect, the renewal of leases for public, private and trust lands until a national land agency is set up. It also reversed all land leases that have been renewed since the Constitution came into force in August last year.

The ban was slapped in the first month of the year when most leases come up for renewal, causing uncertainty on land transactions.

However, the City Planning departments said it had not received any official communication to stop recommending new releases to the office of the commissioner of lands.

While the Ministry of Land will lose revenues when land transactions stop, City Hall officials said its rate collections were assured by virtue of the fact that it is a secondary holder of land on behalf of the government.

City Hall officials said the physical planning Act and a number of county legislations will prevent local authorities from discharging current functions on land once the elections are held.

Previously, the commissioner of land, working directly under the control of the Lands Ministry, enjoyed sweeping powers to approve land leases to individuals and companies.

The Constitution, however, has given an independent agency - the Kenya National Land Commission (KNLC) – the mandate to manage public land on behalf of the national and county governments.

Professionals who handle land transactions such as lawyers and surveyors said the Cabinet move was aimed at curbing irregular allocation of land which characterised the run-up to previous elections.

“It will arrest politically-driven land distributions but the uncertainty that comes with it is not healthy for investors and professionals in the land sector”, said Collins K’Owuor, the chairman of the Institution of Kenya Surveyors.

The professionals said they too would lose incomes derived from land transactions.

The KNLC Bill 2011 which is expected to give life to the agency is yet to leave the Attorney General’s chambers, signalling that sector players will have to wait a long while before it can be presented to Parliament where it will be debated and passed.

“This law should have been passed in 2010 to allow for the establishment of KNLC together with agenda four commissions,” said Mr K’Owuor.

Once set up, the agency is expected to conduct research and design a national policy detailing how the available land and natural resources can be put to optimum use. It is also charged with the responsibility of advising the government on the registration of land titles.

Last week’s Cabinet decision is also expected to significantly dent the Land Ministry’s revenues from payments which are estimated at Sh40 million per day.

In the last financial year (2010/11), the ministry netted Sh8 billion from land transactions, a phenomenal rise from Sh800 million it used to collect five years ago.

The freeze comes amid uncertainty over the impending demolition of structures built on public land, especially around airports where security concerns have risen since Kenya started the war on Al-Shabaab.

Among public institutions, the first casualty of the new directive is the Postal Corporation which recently advertised a 5.03 acre prime land in Nairobi’s Kilimani area which had earlier been promised to Bharti Airtel at Sh543 million.

The directive means the land will remain in the hands of Posta even after the competitive bidding process until the land commission is set up.

The National Social Security Fund, which recently advertised two prime properties on Uhuru Highway in Nairobi for sale, will also be affected. Despite the fund being a statutory workers’ pension body, the government exercises fiduciary responsibility over it to protect workers’ contributions.

“Being government bodies, these transactions will have to wait until the KNLC is formed,” Mwenda Makathimo, managing director of Vidmerck Ltd said, adding only private transactions are not affected.

The Cabinet also froze the disposal of public assets by both the Central and Local governments until a comprehensive national inventory is undertaken by the Treasury.

The move is expected to end the raging debate over the formula for sharing out the national assets among the 47 counties after the next election.

Last week, the Treasury advertised for bids from firms to help the state create a data bank of all public assets to guide the devolution after the general elections.

“The firms are expected to develop a national asset register to provide a rationale for ownership and use of public assets,” said Mutua Kilaka, the financial secretary at the Treasury.

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