Exemption of Public Educational Institutions from County Land Rates in Kenya

Public educational institutions, including public schools, are generally exempt from county land rates where the land is used for the statutory exempt purpose. The exemption is now expressly provided for under section 38 of the National Rating Act, No. 15 of 2024, which came into force on 24 December 2024.

However, the precise position depends on the nature and use of the land, the period for which rates are being demanded, the ownership of the property and whether any part of the land is being used for profit or residential purposes.

1. The current statutory exemption

The principal provision is section 38 of the National Rating Act, 2024.

Section 38(2) provides that a County Executive Committee Member shall not charge rates for land used exclusively for public purposes.

More specifically, section 38(3)(d) provides that valuation for purposes of rating shall not be conducted in respect of land used for “public educational institutions and libraries.”

This is a significant statutory protection for public schools.

Accordingly, where land is genuinely used as a public educational institution, the County ordinarily has no basis for subjecting that land to valuation for purposes of imposing ordinary land rates under the National Rating Act.

The exemption is, however, subject to the proviso in section 38 that the exemption does not apply to land used for profit or residential purposes.

2. The exemption existed under the previous law

Where a County Revenue Authority is demanding arrears relating to a period before 24 December 2024, the applicable legislation must also be considered.

Before the National Rating Act came into force, the relevant provisions were contained in the Valuation for Rating Act, Cap. 266.

Section 27(1)(d) of that Act provided that no valuation for rating purposes was to be made in respect of land used directly and exclusively for:

“educational institutions (including public schools within the meaning of the Basic Education Act...)”

The provision also extended to residences of students provided directly by educational institutions or forming part of, or ancillary to, educational institutions.

The statutory proviso excluded land used for profit or, subject to specified exceptions, residential purposes.

The former Rating Act, Cap. 267 also operated together with the Valuation for Rating Act in the rating regime.

The Rating Act and Valuation for Rating Act were subsequently repealed by the National Rating Act, 2024, which commenced on 24 December 2024.

Consequently, where a County is demanding historical arrears, it is important to identify the particular years for which the rates are allegedly due rather than treating the entire demand as governed by the current Act.

3. The courts have recognised the exemption for educational institutions

There is a particularly relevant Kenyan decision on this issue.

In Republic v County Government of Machakos ex parte Victory Faith Ministries [2018] eKLR, the Environment and Land Court at Machakos considered a rates demand of approximately Kshs. 58 million in respect of property used for religious and educational purposes.

The County argued, among other things, that the schools operating on the property were commercial institutions because students paid fees.

The court rejected that argument on the evidence before it. Justice Angote held that section 27(1)(d) of the Valuation for Rating Act exempted land used for educational purposes, subject to the statutory exclusion relating to land used for profit.

Importantly, the County had not produced evidence demonstrating that the schools were being operated for profit. The court consequently held that the demand for rates was unlawful and granted the relief sought by the applicant.

The decision is particularly useful because it demonstrates that the mere fact that students pay school fees does not, without more, establish that land is being used for profit for purposes of the statutory rating exemption.

The critical question is the actual character and purpose of the use of the land.

4. “Public school” and “commercial school” should not automatically be treated as the same

The distinction between a public educational institution and a private or commercial educational enterprise is important.

Section 38(3)(d) of the National Rating Act expressly refers to public educational institutions and libraries.

Therefore, where the property is occupied and used by a public school for ordinary educational purposes, the statutory exemption is considerably stronger.

A County Revenue Authority should not simply assume that land is rateable because:

• students pay fees;
• the institution collects money;
• the institution has income;
• the institution operates a school canteen;
• the school has boarding facilities; or
• the school has other incidental revenue-generating activities.

The legal question is whether the land is being used for the exempt educational purpose or whether it is being used for a separate profit-making purpose within the meaning of the statutory proviso.

The decision in Republic v County Government of Machakos ex parte Victory Faith Ministries [2018] eKLR is useful in this respect because the court required evidence establishing that the school was in fact operated for profit before the exemption could be displaced.

5. Incidental commercial use may require separate consideration

The exemption should not, however, be interpreted as an absolute exemption covering every activity conducted on land belonging to a public school.

For example, a school may have land containing:

• classrooms and laboratories;
• administration offices;
• teachers' accommodation;
• boarding facilities;
• playing fields;
• a school library; and
• other facilities directly connected with education.

These uses would ordinarily have a strong connection with the educational purpose.

But suppose part of the school's land is separately leased to a commercial entity for a supermarket, petrol station, commercial office, private residential development or other independent profit-making enterprise.

The County may then have an arguable basis for treating that portion differently.

The wording of section 38 must therefore be applied to the actual use of the particular land or portion of land rather than merely to the identity of the registered proprietor.

6. Payment of fees does not necessarily destroy the exemption

This is an issue likely to arise where the County argues that a school cannot be exempt because it collects fees.

That argument should be approached carefully.

The fact that an educational institution receives fees does not necessarily mean that the land is being used for profit.

In Republic v County Government of Machakos ex parte Victory Faith Ministries [2018] eKLR, the County made substantially that argument. The court nevertheless found that the County had failed to establish that the schools were being operated for profit and held the rates demand unlawful.

The focus should therefore be on the purpose and character of the land use, rather than merely the existence of revenue.

For a public school, this distinction is particularly important because the collection of fees or other statutory charges may form part of the financing of educational services without converting the institution into a profit-making commercial enterprise.

7. Ownership of the land is also important

The legal analysis should also establish who owns the land.

There is an important distinction between:

• land registered in the name of the National Government;
• land held by a county government;
• land vested in another public body;
• land registered in the name of a school or educational trust; and
• privately owned land upon which a public school operates.

The treatment of public land may involve the statutory regime concerning contribution in lieu of rates, rather than ordinary rates imposed on private rateable property.

Under the former regime, for example, section 25 of the Valuation for Rating Act dealt with the basis upon which public land was valued for purposes of contributions in lieu of rates.

The current National Rating Act contains its own provisions concerning public land and contributions in lieu of rates.

Consequently, before responding to a County's demand, the school's title and the legal status of the land should be established.

8. The County cannot rely solely on its valuation records

The fact that a property appears on a County valuation roll or rates account does not necessarily resolve the question of whether the property is legally rateable.

If the property falls within a statutory exemption, the County must apply the exemption.

This principle is particularly relevant where a public school has been incorrectly entered as an ordinary rateable property.

In Republic v County Government of Machakos ex parte Victory Faith Ministries [2018] eKLR, the County sought to justify its demand partly on the basis of its records concerning the property's use. The court nevertheless considered the statutory exemption and the evidence concerning the actual use of the property.

A school receiving a rates demand should therefore ask the County to identify:

1. the statutory provision under which the rates are demanded;
2. the valuation roll in which the property appears;
3. the registered owner;
4. the assessed rateable value;
5. the period to which the demand relates;
6. the basis upon which the County considers the land to be rateable;
7. whether the County alleges that the land is being used for profit; and
8. the evidence supporting that allegation.

9. The constitutional framework

County governments derive their power to impose property rates from Article 209(3)(c) of the Constitution of Kenya, 2010.

That provision gives county governments power to impose property rates.

However, the power to impose rates is not unlimited.

The County must exercise its rating power within the framework established by national legislation, including the National Rating Act and any applicable county legislation.

The principle that a public authority must act within the limits of the power conferred upon it is well established in Kenyan administrative law.

In Samuel Kamau Macharia & another v Kenya Commercial Bank Limited & 2 others [2012] eKLR, the Supreme Court affirmed the fundamental principle that jurisdiction is derived from the Constitution or statute and cannot simply be assumed.

Similarly, in Suchan Investment Limited v Ministry of National Heritage & Culture & 3 others [2016] eKLR, the Court of Appeal emphasised the importance of legality and lawful exercise of statutory powers by public bodies.

A County Revenue Authority therefore cannot impose or recover a charge merely because its internal records indicate that an amount is outstanding. The demand must have a lawful statutory foundation.

10. What should a public school do upon receiving a rates demand?

A public school that receives a rates demand should not simply ignore it.

A formal objection or response should be prepared identifying the statutory exemption and providing evidence of the school's status and use of the property.

The response should ordinarily attach, where available:

• the title or lease;
• evidence establishing that the institution is a public school;
• registration or establishment documents;
• evidence showing the actual use of the property;
• the school's physical development or site plan;
• relevant correspondence with the County;
• previous exemption correspondence, if any; and
• the County's rates demand and relevant valuation records.

The school should expressly invoke section 38(3)(d) of the National Rating Act, 2024 where the demand concerns the current rating regime.

For historical demands, the response should additionally invoke section 27(1)(d) of the former Valuation for Rating Act, Cap. 266, where applicable.

11. The position in summary

The legal position can therefore be summarised as follows:

First, public educational institutions are expressly recognised as exempt from valuation for rating purposes under section 38(3)(d) of the National Rating Act, 2024.

Second, land used exclusively for public purposes is protected under section 38(2).

Third, the exemption is subject to the statutory qualification concerning land used for profit or residential purposes.

Fourth, for periods governed by the previous rating regime, section 27(1)(d) of the Valuation for Rating Act, Cap. 266 expressly exempted land used directly and exclusively for educational institutions, including public schools.

Fifth, the decision in Republic v County Government of Machakos ex parte Victory Faith Ministries [2018] eKLR provides useful judicial authority on the application of the educational-institution exemption and demonstrates that the County must establish the factual basis for alleging that an educational institution is being operated for profit.

Sixth, the ownership and actual use of the land must be examined carefully, particularly where the property is public land or where only part of the property is used for educational purposes.

Conclusion

A County Revenue Authority cannot properly demand ordinary land rates from a public school without considering the statutory exemption applicable to public educational institutions.

Where the land is used for the public educational function, section 38 of the National Rating Act, 2024 provides a clear statutory basis for exemption from valuation and rating.

Where the demand relates to an earlier period, the corresponding exemption under section 27(1)(d) of the Valuation for Rating Act, Cap. 266 should be considered.

The strongest response to a rates demand should therefore not merely state that the school is “government property” or that it is a “public institution.” It should establish the ownership, statutory status and actual use of the land, identify the applicable rating legislation for each period claimed, and expressly invoke the statutory exemption.

Where the County alleges that the property is being used for profit, the school should require the County to identify the factual and legal basis for that allegation. The decision in Republic v County Government of Machakos ex parte Victory Faith Ministries [2018] eKLR demonstrates the importance of evidence on this issue.

Accordingly, where a public school has received a substantial rates demand, the matter should be formally challenged rather than the demand being accepted at face value.