How new law affects landlords and tenants

Friday June 28 2019

Regulated. Tenants of Zai Plaza in Kampala

Regulated. Tenants of Zai Plaza in Kampala strike over unfair increment of rent by the landlord last year. A new Act seeks to bar landlords from charging tenants in foreign currency. photo BY Rachel Mmabala 

By Thembo Kahungu Misairi

For nearly three years, traders renting commercial buildings, including arcades and shopping malls in Kampala city have suffered the burden of buying US dollars to be able to pay for their monthly rent.
Such demands plus other harsh conditions required for renting residential and commercial properties have for years caused fights between tenants and landlords.
Also, arbitrary increments of rent rates by landlords did not spare the wallets of tenants, who have been left without any choice but to accept the terms or vacate the premises. Even with these tough conditions, many other people would still line up to occupy such prime premises.
Similarly, some tenants have vacated rented properties at will, leaving landlords to incur costs of maintenance and repair to make the property habitable for prospective tenants.
But most of these problems for both landlords and tenants will soon be history when President Museveni assents to the Landlords and Tenants Act, 2018, that was passed by Parliament on Wednesday.
The Bill was introduced in Parliament by Lands, Housing and Urban Development minister Betty Amongi last year, with Parliament passing it on Wednesday after more than a year of a protracted fight between landlords, especially in real estate and commercial buildings, and the tenants.
But the big question will be the effectiveness of enforcement of the new tough law as has been witnessed for several other laws passed in Uganda.
Nonetheless, government has backed the law, saying it will promote access to adequate housing as well as create a mechanism for proper functioning of rental market for both residential and commercial premises.
When it becomes law, government will regulate the relationship between a landlord and a tenant.
But in this new law, there are more gains for tenants, especially on landlords ‘insistence that some city tenants should pay them in dollars for upscale apartments and commercial buildings.
When the Bill had just been tabled, the property owners held a number of meetings with Prime Minister Ruhakana Rugunda, but the meetings ended with no agreement, with property owners, demanding that Clause 23 should not restrict payment to only Uganda Shillings.
In one meetings, the landlords termed the Bill as “a recipe for disaster” and warned that any attempts to force the Bill through Parliament, will ‘kill the economy’ and scare away investors.
So how will the new law affect landlords and tenants once assented by President Museveni?

Landlords
Clause 23 of the new law will affect the “big” landlords who have been charging rent in dollars.
Parliament overwhelmingly decided that the currency of transaction between landlord and tenants shall be the Uganda Shilling.
The justification given is to protect the Uganda Shilling that has continuously depreciated against the dollar.

Utility bills
The new law states that the issue of landlords collecting utility bills contributions or payments from tenants outside the monthly rent will be regulated.
The tenants have been charged by landlords, for instance whenever electricity bills are issued.
A new clause was introduced after Clause 12 to provide that the landlord shall install prepaid meters for all tenants to avoid exploitation.
The installation charges are for the landlord whereas every tenant shall pay for their bills.

Penalty for landlords
In the new law, it will be a crime for the landlord to act in a way that annoys his or her tenant. The annoyances covers actions of the landlords that amount to interference with the rights of the tenant to enjoy the rented premises. Clause 51 provides for one year imprisonment or a fine of Shs3m (150 currency points) or both on conviction.

Unlawful eviction
The law also provides for lawful means of evicting a tenant who does not comply with the tenancy agreements. However, the landlord shall issue a notice of six months to a tenant to vacate the premises unless otherwise when there is breach of the tenancy agreement.
In Clause 49, for unlawful eviction of a tenant, the landlord upon conviction faces a custodial sentence of one year or a fine equivalent to three months payable of rent or both.

Security deposits
The old practice by landlords requiring that a tenant deposits three months’ rent as security deposit to cater for repairs and maintenance in case of damaged now changes. The tenants now needs to deposit only one month rent as security deposit according to Clause 32.

Toilets
For commercial buildings, the landlords will no longer rent out toilets as has been the practice. Both tenants and their clients have been paying a fee to use toilets.
But the new law in Clause 50, says the toilet facilities will be part of the rent agreement. But tenants will pay for extra amenities such as security, sanitation and conservancy.

Rent reduction
Clause 29(2) of the new law, when assented to, will affect the landlords who cease to provide all the services agreed upon in the tenancy agreement. The rent shall be reduced propositionally with the service that is no longer being provided.

Other losses to landlords
• The security deposit will be inherited by the new landlord if the premise is sold out.
•Landlord to secure a court order to evict a tenant who refuses to vacate a rented property after a notice of vacation expires.
• Tenant shall only reimburse the landlord’s costs for payment for anything he or she is liable to pay only with an issuance of a request with a receipt attached.

Tenants
Rent increment
The new law will give relief to tenants from uncertainty over increment of rent. The landlord will not increase rent at will as law in Clause 27 provides a threshold of not more than 10 per cent increment on rent annually.
Interference
The tenants will have to enjoy their right to privacy in rented premises without frequent interference by visits by the landlord. The landlord will be required to issue a 24-hour notice prior to visiting a rented property. Clause 53 provides for a 24-hour notice save for emergencies like fire, insecurity and other disasters.

Rent advances
The burden to a tenant to be paying rent in advance will be no more when the law takes effect. The new law provides that a tenant will only pay three months’ rent in advance at the first time of occupying the property. Some landlords have been demanding their rent in advance for three months or six months.

Tenancy agreements
Unlike the current practice, especially in commercial buildings, where tenants sometimes don’t sign with landlords on the terms and condition of the tenancy, the new law enforces a tenancy agreement.
The Minister has been given powers to design a tenancy agreement form to be signed by the landlord and the tenant. The tenancy agreements are mandatory on rent that exceeds a monthly payment of Shs500,000 (25 currency points).

Other gains for tenants
•Six months’ notice of termination of tenancy by a landlord who wants to do something else with the rented property.
•Sub-letting the property to other tenants but with the knowledge of the landlord.
•Tenants to be issued with prepaid sub-metres to manage their electricity bills.
•No custodial sentences for a tenant who contravenes this Act
•Landlord will be responsible for property taxes and rates.
•No payment for the supply of sewerage services.

Reactions

Ibrahim Mbowa- Kampala Arcaders Advocacy Forum: “The law has been overdue because it was first drafted by the Ministry of Lands about 15 years ago. As traders, we complained to President Museveni when he visited downtown Kampala and we are happy that it has been passed. The biggest win for us is the removal of the US dollars as the currency of payment.
Many landlords have been using it as an excuse to increase rent because the dollar has continued to suppress the Uganda Shilling. Another big achievement is the provision that tenants can now sue their landlords when they are being oppressed.
Johnbosco Kakomo, trader in Kikuubo, Kampala: “I cannot celebrate because without capping the amount of rent in different locations, landlords will continue charging higher amounts which is not commensurate with the location and kind of businesses where the property is. Government should now ensure that the chief government valuer determines the amount of rent for every property.
Pradeep Karia, director of Property Services Limited:
“I think the MPs jumped their line because the original Bill was clear that the landlord and tenants can agree on the mode and currency of payment. We acquire loans in dollars and therefore, with the payment being made in Uganda Shilling, we will suffer the burdern of buying dollars. Let MPs also legislate that all loans be in Shillings. On payment of one month rent as security, that would work with a tenant renting for one year but it is unfair to deposit that for a long period of time. The law does not leave a window for landlords and tenants to negotiate and it will discourage potential investors in real estate business.
Godfrey Kirumira, chairman Kampala Landlords Association: “The law is not only killing real estate but also the economy because you cannot say the dollar be kicked out of circulation. This is a free market economy for everyone to do business the way they want as long as it is lawful.
Do those MPs mean that the loans that we have acquired in dollars be called off? Will they find ways of paying back the banks if we fail to pay now that the dollars are not coming into our hands anymore?
The law should not be made to affect only us in the city. MPs have to be fair but we know they are only looking at their votes.
Payment of rent in advance should have been left to be a matter of a win-win situation between the landlord and the tenant. We hope our President does not sign this Act so that the economy does not go back to where he found it.

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