The Cabinet Secretary for National Treasury and Planning recently published the Stamp Duty (Valuation of Immovable Property) Regulations, 2020 and the Stamp Duty (Amendment) Regulations, 2020 with the objective of simplifying land transactions in Kenya as part of the “ease of doing business” initiative. The key highlights of these regulations are set out below.
1. The Stamp Duty (Valuation of Immovable Property) Regulations, 2020 (in this section referred to as the “Regulations”)
The Regulations provide for the following:
Appointment of Private Valuers by the Chief Government Valuer (“CGV”)
The Regulations permit valuation of immovable property by a private valuer appointed by the CGV pursuant to section 10A of the Stamp Duty Act (Cap.480, Laws of Kenya). This appointment is on application in writing by the private valuer to the CGV. The criteria for appointment is prescribed under rule 3 (2) of the Regulations as follows:
(i) the private valuer must be entered in the register maintained pursuant to section 6 (1) of the Valuers Act (Cap.532, Laws of Kenya);
(ii) the private valuer must provide proof of a physical office address; and
(iii) the applicant must provide a valid tax compliance certificate issued under the Tax Procedures Act, 2015.
The CGV is required to approve or reject the application within (30) days of receipt and notify the applicant in writing. An appointment of a private valuer is valid for three (3) years unless the registered valuer ceases to be qualified in accordance with the requirements of the Regulations or the appointment is revoked pursuant to rule 15 of the Regulations in the event that they commit an offence under section 113 of the Stamp Duty Act (Cap.480, Laws of Kenya). Upon lapse of the term of three (3) years, a private valuer may apply for re-appointment.
The CGV is required to keep and maintain a list of appointed valuers. It is not clear if this list will be made available to the general public.
Application for Valuation
Under rule 4 (1) of the Regulations, a transferee or their authorized representative is required to apply in writing to the CGV for valuation of the immovable property prior to conveyance or transfer of any immovable property.
Valuation by a Government Valuer
Pursuant to rule 4 (2) of the Regulations, a transferee or their representative may request the CGV to assign their application for valuation to a Government Valuer. The transferee bears the costs of valuation by the Government Valuer.
Appointment of registered private valuers on the transferee’s request
Rule 4 (2) of the Regulations allows a transferee to request the CGV to assign an application for valuation to a registered private valuer, that is, a valuer appearing in the CGV’s list of appointed valuers. The CGV is then required to assign and notify the transferee of the assigned registered valuer within seven (7) days of the transferee’s decision to utilize a private valuer. It is not clear whether a transferee will have the discretion to select his or her preferred registered private valuer although this will likely be the case. Further, there is no provision permitting change of appointed valuers except on revocation of their appointment as a registered private valuer in accordance with the Regulations.
The transferee bears the costs of valuation by the registered private valuer. Valuation fees and other expenses relating to the valuation must be in accordance with the provisions of the Valuers Act. Rule 4 (5) of the Regulations requires a private valuer to submit the valuation report only after payment is made by the transferee.
Timelines for submission of the valuation report
Under rule 4 (5) of the Regulations:
- a Government Valuer is required to submit the valuation report to the CGV within twenty-one (21) days from the date the transferee chooses to have the valuation done by the Government Valuer; and
- as stated earlier, an appointed registered private valuer is only required to submit the valuation report to the CGV after payment is made by the transferee. This could delay registration in the event of a fee dispute between the transferee and the private valuer.
Requirements for Valuation Reports
(i) Information to be included or enclosed with the valuation report
Rule 5 (2) of the Regulations prescribes the information to be included in a valuation report as follows:
- the names and addresses of the registered owners of the immovable property;
- the location of the immovable property;
- the land reference number or land title number of the immovable property;
- the tenure of the immovable property;
- the details of the immovable property;
- the valuation methodology used by the valuer;
- the basis for the valuation of the immovable property;
- the market value of the immovable property;
- the date of the valuation of the immovable property;
- any other relevant information obtained by the valuer during the valuation of the immovable property; and
- the signature and seal of the valuer.
The valuation report must also be accompanied by the following:
- a copy of the cadastral map indicating the location of the immovable property;
- a copy of the title to the immovable property;
- the KRA Personal Identification Number (PIN) of the transferee; and
- any other relevant documents relating to the immovable property.
(ii) Approval of the valuation report by the CGV
The valuation report, whether prepared by the Government Valuer or the registered private valuer, is required to be submitted to the CGV pursuant to rule 5 (1) of the Regulations. Rule 17 of the Regulations makes it mandatory for the submission to be done electronically unless otherwise authorized in writing by the CGV.
The CGV is required to review the valuation report and may approve it if in agreement with the report. The approved valuation report is valid for twelve (12) months from the date of approval by the CGV.
Where the CGV determines that the valuation report is deficient in any respect, he or she may revise the report and give notice of such revision in writing to the valuer who conducted the valuation.
(iii) Assessment of stamp duty payable
On approval of the valuation report, the CGV is required to notify the transferee and the Kenya Revenue Authority of the approved market value of the property and the stamp duty payable. Accordingly, the transferee will no longer be required to separately submit the transfer documents for assessment of stamp duty payable.
Pursuant to rule 18 of the Regulations, the notification by the CGV to the transferee and to the Kenya Revenue Authority may be served in person; or via registered post to the last known place of business or residence; or electronically. This facilitates the electronic stamping of documents as provided for under the Stamp Duty (Amendment) Regulations, 2020 (analysed below).
Objections to Valuation
Rule 10 of the Regulations permits a person who is liable to pay stamp duty and who is aggrieved by the valuation of a property to lodge an objection in writing to the CGV within twenty-one (21) days of receipt of the notice of valuation on limited grounds as follows:
- the value assigned to the immovable property;
- the apportionment of the area, dimensions or description of the immovable property;
- that the immovable property that should have been included in the valuation has been valued separately;
- that the immovable property that should have been valued separately has been included in the valuation; or
- the person named in the report is not the true transferee of the immovable property.
The objection is similarly required to be lodged electronically pursuant to rule 17 of the Regulations.
Within twenty-one (21) days of receipt of an objection, the CGV is required to notify the objector in writing of his or her decision and the reasons for the decision. In its decision, the CGV may either:
- dismiss the objection if he or she considers that an adjustment in the valuation of the immovable property is not justified; or
- adjust the valuation of the immovable property if he or she considers that the adjustment is justified.
The CGV may allow an application for extension of time to lodge an objection with or without conditions, if the transferee was unable to lodge the objection within the period stated above on the grounds of being outside Kenya, sickness or other reasonable cause. The extension granted may not exceed a period of one (1) year from the date of notification of the approved market value of the immovable property.
Under rule 14 of the Regulations, where a valuer commits professional malpractice in the course of rendering services under the Stamp Duty Act, the person alleging the malpractice may report the matter to the Valuers Registration Board and, in case the malpractice is proven, the relevant sanctions specified in the Valuers Act will apply.
2. The Stamp Duty (Amendment) Regulations, 2020 (in this section referred to as the “SD Regulations”)
The SD Regulations amend the Stamp Duty Regulations (herein referred to as the “Principal Regulations”) as follows:
Provision for electronic stamping of documents
Rule 3 of the SD Regulations deletes and replaces rule 2 of the Principal Regulations to provide that stamp duty payable on instruments in the First and Fourth Schedules of the Principal Regulations may be paid and denoted by:
- an adhesive revenue stamp affixed on the instrument; or
- subject to the provisions of regulation 3 (revenue franking machines), by means of a revenue stamp impressed by a franking machine or by electronic means.
Electronic payment of stamp duty
The SD Regulations introduce rule 2 (2) of the Principal Regulations which provides that the stamp duty chargeable on the instruments in the First and Fourth Schedules of the Principal Regulations is to be paid by electronic means or banker’s cheque and denoted by an embossed stamp. The stamp is to be embossed manually or by electronic means on the instrument under the direction of a collector in such manner as the collector may require.
Electronic submission of documents
The SD Regulations introduce rule 5 (10) of the Principal Regulations which provides for electronic submission of instruments, issuance of notices, applications and transfer of stocks, shares or marketable securities through the National Land Information System.
The SD Regulations expand the definition of “certificate” as used in the Principal Regulations to include certificates in electronic form. This permits issuance of electronic certificates including the Certificate on Transfer of Certain Marketable Securities under rule 9 of the Principal Regulations.
Forms for electronic transactions
The SD Regulations introduce rule 13 of the Principal Regulations which provides that the forms prescribed by the Principal Regulations may be used for electronic transactions with necessary modifications.
Electronic service of notices
The SD Regulations introduce rule 14 of the Principal Regulations which allows any notice under the Principal Regulations to be served by registered post or through electronic means including electronic mail and Short Message Service at the address set out in the instrument submitted for stamp duty adjudication.
According to the SD Regulations, the term “electronic” is as defined by the Kenya Information and Communications Act, 1998 (KICA). Under section 2 of KICA, “electronic” is defined to mean relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
On a positive outlook, we anticipate that the Stamp Duty (Valuation of Immovable Property) Regulations, 2020 and the Stamp Duty (Amendment) Regulations, 2020 will significantly ease the valuation and stamping processes and assist with quick turnaround on both. This may further assist with reduction in the backlog of applications for valuation and stamping and streamlining of the processes.