Landlord-Tenant Bill: Changing future of real estate in Uganda

Wednesday May 9 2018

Landlord-Tenant Bill: Changing future of real estate in Uganda

Clients inspect an apartment. The National Risk Assessment survey was conducted in more than 26 entities including government ministries, departments and agencies, regulatory bodies and private sector organisations. FILE PHOTO 


Every time you see a big house or flat or apartment being erected in Kampala, know it is a big investment on the side of the owner. The investors in real estate are some of the major tax payers. However, the real estate developers in Uganda are crying foul as government moves to table the Landlord and Tenants Bill, 2018 any time this month.
The Bill seeks to promote access to adequate housing as well as create a mechanism for proper functioning of rental market for both residential and commercial premises. In the Bill, government wants to have a law that will regulate the relationship between a landlord and a tenant. Whereas the tenants through Kampala City Traders Association (KACITA) welcome the Bill, the landlords who own the properties they operate from are against it.

“The Bill has been long overdue because existing laws have been biased and are old. All those harassments the tenants have been getting from landlords will be no more because it is not supposed to be mandatory for anybody to pay [rent] in dollars,” says KACITA speaker Issa Ssekitto.
Ssekito says tenants have been pushing government to make a law that protects them from high rent charges for the last five years. They say the landlords harass them when collecting the rent.

Point of contention
The point of contention between the landlords and the government in relation to the Bill is in Section 23 (2), which says: “All rent obligations or transactions shall be expressed, recorded and settled in the shilling, unless otherwise provided for under any enactment,”
Tenants have celebrated this provision because they believe that by paying rent in foreign currency, they are being cheated by the landlords. But the landlords argue that this is not a good provision that must be kicked out of the bill.

“As landlords, we are not opposed to the Bill but we have issues with some of the sections therein. The section on only paying rent in Uganda Shillings is not good for us because we sometimes access loans in dollars to build those houses,” said Godfrey Kirumira the chairman of the Uganda Landlords Association.

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Kirumira says by bringing in place such a law with all the “controversial issues” the government is killing real estate, which has been giving it billions of money in taxes annually.
Pradip Karia, of Property Services Limited believes the government is not acting fairly to the landlords by focusing only on the side of the tenants. He says any law being enacted, must protect all the sides that are affected.

“We accept shillings from tenants so long as the conversion rate to a foreign currency is right. But the people of KACITA are not coming out to tell the truth about this. What they are only doing is to push for a law that will indirectly catch up with them,” Pradip says.
Hamis Kiggundu, the proprietor of Ham Shopping Centre at Nakivuvu, questions the role of politics in the matters of development, especially in the country’s construction industry.
“It is not possible for that Bill to be implemented. We don’t even need to discuss this because the determinant factor for rent is automatic from the prevailing circumstances,” he says.

City business lawyer Muzamiru Kibeedi, says the Bill will make landlords fail to secure “reasonable” loans for real estate development.
He says the rent control in the proposed law will deprive landlords from enjoying the principle of equal treatment that is provided for in the Constitution because the Bill does not provide for government control on the prices of goods and merchandise being sold in those rented premises.
“The real estate is central to the health of our economy. Commercial banks and other financial institutions heavily rely on it to secure loans they lend to their customers for development. And historically, it has been one of the most dependable for those seeking financial security, especially during their old age. As such, disrupting it at the altar of political expediency is a choice the next generation will never excuse us (for),” Kibeedi says.

Government responds
Since the announcement by Cabinet about a decision to approve the Bill, the government has faced pressure from the landlords and other real estate dealers. The landlords claim their views were not taken into account during drafting of the Bill.
State Minister for Housing Chris Baryomunsi, who is behind the Bill says government is listening to both sides. “It is true, I have had meetings with the landlords and tenants. Each group has been fronting its issues about the Bill. But the Bill has not yet been tabled in parliament. Therefore, all these views we are getting will be considered when the Bill is at committee level,” Baryomunsi said.

Tenants’ issues
Landlords say for many years they have been using the rent collections to pay both ground rent and VAT. Pradip says tenants (with tenancy agreements) in most of the shopping arcades, malls have been cheating taxes to Uganda Revenue Authority.
Pradip says tenants have been sub-renting premises to other businesses on the same buildings collecting more than what they paid to landlords.

“Our tenants are celebrating this Bill but they don’t know that we are also going to be strict. Imagine a tenant pays to a landlord a monthly rent of $100 and it is immediately taxed by URA. But this tenant will rent out to 10 more people inside the same room for Shs50, 000 a month each and that money is not taxed,” Pradip says.
Minister Baryomunsi, however, says landlords should not worry becausethe new law would allow them to charge rent in foreign currency so long as the amount quoted is convertible to the amount in shillings rated for the same property. And this should be a mutual consent between the landlord and the tenant.

Other key provisions in the bill

In section 3, it is proposed that the tenancy agreements shall be in writing or by word of the mouth or in the form of data message or may be implied from the conduct of the parties.
Further to this is that to be given a written tenancy agreement, the tenant shall first provide the national identification card or alien identification card for non-Ugandans.
Section 6 provides for the fitness of the condition of the premises before being rented out to any tenant. And that the landlord shall have the authority to assess the fitness of the premises any time but after giving a written notice to the tenant for 24 hours.

According to section 8 of the bill, the landlord shall be in charge of all repairs on the premises except for damages caused by the tenant. This section proposes that if the damages are cause by the tenant, the land lord shall issue a notice of repair to the tenant and that if the repairs are not done within 14 days of the notice, the landlord shall repair at the cost of the tenant.
After such repairs, the landlord shall serve the tenant with particulars of the cost of repair including relevant supporting documents to evidence the cost of repairs.

In most of the premises in Uganda, the landlord has an obligation to install utilities such as water, electricity among others. However, the bill provides in section 12 that if these utilities are separately metered, it shall be the duty of the tenant to pay the bills except for connection charges.
Section 14 of the Bill proposes that the tenant shall not use the premises for unlawful purposes (any crime described in the laws of Uganda) whereas section 15 proposes that the tenant shall not use the rented premises to cause nuisance to any occupants of neighbouring premises.

Section 19 also puts it to the landlord to ensure that he or she takes reasonable steps to ensure that the tenant has quiet enjoyment of the premises during the tenancy period.
Tenants will now be required to pay a security deposit. However, it cannot exceed one month’s rent.
Section 27 bars a landlord from increasing rent at more than 10 percent annually, and must give a 90 days’ notice. The increment internals should not be less than 12 months.