Who pays outstanding rates when property is sold?

In practice the buyer inherits the problem, because arrears attach to the land rather than to the person, and a transfer will generally require a clearance certificate. Which party bears the cost is a negotiation item that belongs in the sale agreement with a stated mechanism, not in a verbal assurance.

What is a rates clearance certificate?

Evidence from the county that land rates on the property are settled, generally required before a transfer can proceed. Obtaining it takes time and can reveal arrears from periods before the current owner, which is why applying for it early is worth doing.

What happens if land rent is not paid on a leasehold title?

Payment is a condition of the lease rather than an optional charge, so persistent non-payment engages the lessor's remedies and can put the title at risk. How that plays out in a specific case is a matter for advice, but it is not a charge to let run.

Land rates and land rent

Also called: rates · ground rent · county rates · rates clearance certificate

Two separate recurring charges on land in Kenya: land rates, levied by the county on the property, and land rent, payable to the lessor on leasehold titles, both of which must generally be cleared before a transfer can proceed.

These are two different charges, payable to two different bodies, on two different bases, and they are confused constantly, including by people selling property.

Land rates are levied by the county government on property within its area. They are a local tax, they apply regardless of tenure, and they are assessed on a basis the county sets.

Land rent is payable to the lessor on a leasehold title, frequently the national government. It is a condition of the lease rather than a tax, and a freehold title does not attract it.

A leasehold property in a county typically attracts both. A freehold property typically attracts rates only.

Why a buyer cares

Arrears attach to the land, not to the person.

That sentence is the whole entry. A seller who has not paid rates for six years does not carry that debt away with them. It sits on the property, and it becomes the buyer's problem, and it usually becomes the buyer's problem at the worst possible moment: when the transfer cannot proceed.

Clearance certificates

A transfer will generally require evidence that these are settled: a rates clearance certificate from the county, and where the title is leasehold, evidence that land rent is clear.

Practical consequences:

These take time to obtain. They are a routine cause of transactions slipping, and starting them late is an avoidable delay.
They can reveal arrears nobody expected, including from periods before the current owner.
The amount is a negotiation item, and it belongs in the sale agreement with a mechanism and a responsible party, not in a conversation.

For an owner holding property

Rates arrears accumulate quietly. There is frequently no demand arriving anywhere anybody reads, particularly where a property was inherited, was bought years ago, or is held through a company with a lapsed registered address.

The first many owners hear of it is when they try to sell or to charge the property, at which point the arrears are large, the transaction is live, and there is no time to query anything.

Land rent arrears on a leasehold title are more serious than they look. Payment of rent is a condition of the lease, and persistent non-payment engages the lessor's remedies. Whether and how that plays out is a matter for advice, and it is not a charge to let run.

Where it sits in a yield calculation

Both are running costs of holding property and belong in the net rental yield calculation, alongside insurance, maintenance and non-recovered service charge. They are among the costs most often left out of a gross yield quoted in a listing.

What goes wrong

The buyer assumes the seller's word. "Rates are up to date" is not a clearance certificate.

Clearance is sought late. A transaction ready to complete, waiting on a certificate nobody applied for, is the commonest avoidable delay in Kenyan conveyancing.

Rates and rent are treated as one thing. Clearing one and assuming the other is covered leaves half the obligation outstanding.

An inherited property is sold years later. Nobody paid anything in the interval, and the arrears exceed what anyone budgeted.

Common questions

What is the difference between land rates and land rent in Kenya?: Land rates are a charge levied by the county government on property in its area, applying regardless of tenure. Land rent is payable to the lessor on a leasehold title, frequently the national government, as a condition of the lease. A leasehold property typically attracts both; a freehold one typically attracts rates only.
Who pays outstanding rates when property is sold?: In practice the buyer inherits the problem, because arrears attach to the land rather than to the person, and a transfer will generally require a clearance certificate. Which party bears the cost is a negotiation item that belongs in the sale agreement with a stated mechanism, not in a verbal assurance.
What is a rates clearance certificate?: Evidence from the county that land rates on the property are settled, generally required before a transfer can proceed. Obtaining it takes time and can reveal arrears from periods before the current owner, which is why applying for it early is worth doing.
What happens if land rent is not paid on a leasehold title?: Payment is a condition of the lease rather than an optional charge, so persistent non-payment engages the lessor's remedies and can put the title at risk. How that plays out in a specific case is a matter for advice, but it is not a charge to let run.