A proposed law will give the minister for housing powers to adjust the monthly rental bracket for tenants who will be protected under the Rent Tribunal dispute resolution system.
The draft Landlord and Tenant Bill, which is currently at the Attorney- General’s office, is seeking to protect tenants from exploitative residential property owners.
The current law that was set in 1981 fixes monthly rental charges that are covered under the Rent Tribunal dispute resolution at Sh2,500; but this is set to be reviewed upwards to Sh20,000 according to the Permanent Secretary in the Ministry of Housing, Tirop Kosgey.
“The new Bill is expected to enhance tenant protection, especially for the low income earners,” said Mr Kosgey, adding “There are hardly any households paying a monthly rent of Sh2,500.”
If passed into law, the new legislation could, however, also discourage the construction of low and middle-income houses as investors seek to avoid providing housing for this cadre of tenants.
Landlords of rental property going for below the maximum threshold will be stripped off powers to arbitrarily raise the rental charge on residential property — a departure from the prevailing situation where prices are largely demand-driven. The Bill will be forwarded to Parliament early next year, according to Mr Kosgey.
The increase in cost of housing over the years has rendered the Rent Tribunal, which has powers to set a reasonable rental charge based on the overall condition of housing, irrelevant.
Mr Kosgey said allowing the housing minister to review the threshold would ensure that low income households are protected. Rental charges have shot up mainly due to under-investment in the property market amid a high population growth rate and increased urbaniSation.
A survey by real estate firm HassConsult reveals that rental prices have more than doubled since 2001 in the high end of the market in Nairobi. Rental increases in the middle and lower income market segments has been faster than in the high-end market.
This means the increase in the cost of housing has affected the urban poor more than the rich.
Beatrice Mathenge, the deputy chair at the Rent Tribunal says housing cost inflation has exposed a majority of would-be beneficiaries to market conditions. “The amendments in the new Bill will ensure it is relevant to the current market conditions,” said Ms Mathenge. “To ensure higher compliance, the Tribunal will be run like a contemporary court and will be headed by officials appointed by the Judicial Service Commission,” she added.
Property experts have supported the need to review the threshold on rental charges on residential property, but have cautioned that the implementation could slow down investment in the commercial segment.“ I am totally against laws that are one-sided, tending to protect the tenant whereas the investor tied up their money in the project for a return,” said Daniel Ojijo, the chairman of property development company, Mentor Holdings.
“We should be looking at creating laws that will encourage new investments in the housing market, irrespective of the segment in the market, to enhance harmony between the tenant and landlord, to possibly unblock the housing deficit”
Simeon Rono, a portfolio manager at Regent Management, said tenants in commercial property should not be protected under the Bill.
“Tenants in commercial property have in the past mis-used provisions in the Bill to refuse paying rent,” he added.The law protects tenants in commercial property with a tenancy period not exceeding five years, irrespective of the rental charge – a factor that pushed owners of commercial property to set a minimum tenancy period of six years.