Parliament sets threshold for rent agreements

Anybody who pays rent from sh500,000 and above must sign a written agreement with the Landlord, Parliament has ruled.

Debating the Landlord and Tenant Bill, the House chaired by the Speaker of Parliament, Rebecca Kadaga, agreed that for rent below sh500,000, the agreement may be writing, verbal or by phone message depending on the parties.

The House rejected an earlier recommendation made by the MPs on the infrastructure committee to lower the threshold to sh100, 000 and above.

The committee in its report to Parliament had argued that the threshold needed to be lowered because the majority of the landlords in Uganda charge rent in the range of sh100,000 and above.

The committee concurs with the proposal of tenancy agreements of sh100,000 or more to be in writing. This will reduce on informalities in tenancy agreements, streamline landlord and tenant relations and foster harmonious co-existence between landlords and tenants which is important for the orderly and sustainable development for the rental housing industry," committee chairman Robert Ssekitoleko argued.

In addition, Ssekitoleko argued that lowering the threshold would formalise tenant-landlord relations and augment government efforts in broadening the rental tax base.

But the MPs and the minister of lands, Betty Amongi, put up a fight and rejected the proposal by the committee to lower the threshold saying a majority of the tenants in Kampala and other urban areas pay sh500,000 and above.

Amongi argued that sh500,000 was a substantial amount for one to lose in case the landlord turns around and denies any payment.

"This threshold was set after consultation with Kampala City Traders Association members and other traders around the country who complained that some landlords in downtown Kampala were avoiding paying taxes because there were no agreements," she said.

The government in February 2019 tabled the Landlord Tenant Bill that repeals the Distress for Rent Act 1938 and also the Rent Restriction Act 1949; laws which are obsolete.

If passed into law, the legislation is also expected to create a mechanism for the proper functioning of the rental market for both residential and commercial premises.

"At present, there is no comprehensive law regulating the relationship between landlord and tenant. As a result, there is a lack of proper regulation of the landlord-tenant relationship and hence disharmony among the key players," the Bill states.

The Bill stipulates the responsibilities of each party, ensuring that each party stays clear of the other.

MP Muhammad Nsereko (Kampala Central) proposed that all tenants must sign a written agreement with the landlords.

"Agreements by word of mouth are very difficult to enforce. This is why it's a challenge in downtown Kampala. By word of mouth, people will turn around and say I didn't say that unlike when there is a record. We owe people a duty of protection. Oral agreements lead to fraud or hiding taxes. The landlords have been using it to evade tax," he argued.

But Kadaga ruled that under the contract law, an agreement can be oral, written or implied. "When you have agreed to an oral contract you have agreed," she said.

MP Betty Nambooze (Mukono Municipality) however wondered why the government should make a law based on the requests of business people yet rent is paid by both business and non-business people.

"Then this law is discriminatory. You want to regulate for the country or KACITA alone?" she asked. 

Although Kafeero had argued that the agreement should be given prior to entering the house, the House ruled that the time should be left to the parties.

The MPs also disagreed with the committee's recommendation to give a tenant a 48-hour notice in case the landlord wants to inspect the premise. Parliament instead lowered the time to 24 hours.

MP Elizabeth Karungi (Kanungu) said some people have a tendency of burying the dead in the house.

"I propose for 24 hours. 48hours, the tiles would have dried already by the time the tenant gives you permission," she argued.