KENYA Law and Practice Contributed by: Anne Kinyanjui and Bonface Abuya, DLA Piper Africa, Kenya (IKM Advocates)
leased premises, and pays utility costs directly to the utility providers. For shared utilities, the landlord or management company will apportion the costs to the tenants, who will pay the landlord or management com - pany in the form of service charges for onward payment to the utility providers. 6.11 Payment of Property Taxes The real estate taxes relating to rental property are: (i) stamp duty payable on the tenancy agree - ment; and (ii) tax payable on rental income. Tenants are responsible for the stamp duty pay - able on the tenancy agreement, and landlords are responsible for payment of taxes on the rental income. Resident persons (landlords) earning rental income between KES288,000 and KES15 million for the use or occupation of residential property during any year of income are liable to pay resi - dential rental income tax at the statutory rate of 7.5% on the gross rental receipts. Resident persons under this category, however, have the option to opt out of paying the residen - tial rental income tax and instead declare their rental income alongside other sources of income while filing their annual income tax returns. Rental income paid to non-resident persons, on the other hand, is subjected to withholding tax at a rate of 30%. This is deducted by the tenant at the source and remitted to the KRA as a final tax. 6.12 Insurance Issues The landlord insures the building while the ten - ant insures the contents in the leased premises, including the assets of the tenant within the premises. The lease indicates the insured risks,
which may include fire, burglary and natural dis - asters. In recent times, insurers have offered cover for losses suffered due to the COVID-19 pandemic. There is no data on the uptake of these types of cover or recovery rates for pan - demic-related losses. 6.13 Restrictions on the Use of Real Estate The landlord may contractually restrict the use of the leased premises by a tenant if such restric - tions are permitted by law. Furthermore, the law imposes user restrictions on tenants, with the Physical Planning Act and county legislation regulating the use and devel - opment of land in Kenya. These restrictions may be indicated on the title document. The LA also implies covenants on the use of leased premises by tenants. 6.14 Tenant’s Ability to Alter and Improve Real Estate Section 67 (2) (e) of the LA restricts tenants from developing the leased premises beyond what is permitted in the lease. The landlord’s consent would be required for restricted developments, and is granted on the following conditions: • the tenant complies with the applicable laws, including obtaining all development approv - als; • the tenant engages the relevant qualified pro - fessionals, such as architects; and • the tenant restores the leased premises to its original state (subject to reasonable wear and tear) at the expiry of the lease (unless other - wise agreed).
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