Shaggar Homeowners In Uproar Over Administration’s Retroactive Lease Demands

Developers and thousands of homeowners in Shaggar City face demands for substantial, retroactive property lease payments from officials they accuse of making the demands without a legal basis.

Shaggar City, established in 2020 by the Oromia regional administration through a merger of six satellite towns surrounding the outskirts of Addis Ababa, is home to several large real estate properties, manufacturing industries, export processing plants, warehouses, and other noteworthy investments.

Despite many of these having existed in Shaggar for years or even decades, city officials have recently notified residents and proprietors of new lease rates. The new rates, 6,000 times higher than the original in some cases, apply retroactively and individuals who spoke to The Reporter argue they are being pressed to pay up despite opacity in the legal foundation of the demands.

An attorney representing a real estate developer in Lege Tafo told The Reporter his client was asked to pay 150 million Birr immediately.

“Company managers notified federal officials. Now Shaggar City officials are asking the company managers to come in and negotiate,” he said.

Country Club Developers (CCD), a large real estate project in Lege Tafo, is also among those grappling with the new lease demands. Local officials are demanding large sums from homeowners in the compound, arguing that the rates specified in their title deeds, which were transferred over to them as far back as 20 years ago, are “rent” and not lease rates.

A notice issued to homeowners by Dejene Hailu, head of land administration in Lege Tafo-Lege Dadi, states the rates cited in the lease agreements are “mistaken.”

“The city administration has now found out that the lease rate you have been paying was a rent rate, not a lease rate. Shaggar City has conducted a study and set a new lease rate,” reads the notice, instructing homeowners to enter into new lease agreements under the updated rate.

Gugsa Dejene, deputy mayor of Shaggar, told Ethiopian Reporter two weeks ago that the decision to “change from rent to lease” was made based on the federal Lease Proclamation 721/2011.

“The proclamation dictates that all land that was granted and administered under rent agreements be changed to lease,” said the Deputy Mayor.

He also claimed the developers of CCD initially rented land from the government before transferring plots to homeowners.

“The home owners should have entered the agreements based on lease. But this did not happen. Therefore, now, we are working to convert the agreements from rent to lease,” said Gugsa, who also stated that homeowners, not the developer, are expected to make the new payments.

A legal expert who spoke to The Reporter anonymously explained that the argument presented by Gugsa and other Shaggar officials does not stand up to legal scrutiny.

“The homeowners have title deeds in their hands. Under Ethiopian law, title deeds cannot be transferred for rented properties. Land is owned by the government, and investors like real estate developers can access the land through lease agreements, not rent,” said the expert.

A look at the title deeds held by homeowners also confirms they entered into lease agreements, not rent, with the local administration. The deeds clearly state the agreements were made based on Lease Proclamation 721/2011, which grants a 99-year lease on land for residential purposes.

According to the law, the lease rate is to be calculated for the entire 99-year period, of which 10 percent must be paid upfront and the remainder paid over 40 years from the time the developer was granted the land.

The title deeds given to the CCD homeowners clearly state the same provisions.

Under the original agreement, homeowners were liable for a lease rate of 0.79 Birr per square meter, which they say they have been paying.

Shaggar administrators, however, now demand 4,541 Birr per square meter.

“When we bought the houses 20 years ago, Lege Tafo was underdeveloped, with no infrastructure provisions. We entered into agreements at 0.79 Birr per square meter, which was very high at the time. Now, Shaggar wants us to pay 4,500 per square meter. It’s illogical,” said a member of the CCD homeowners’ committee. “They are forcing us to enter into a new agreement.”

The committee estimates the updated rates could translate into five billion Birr in payments from CCD homeowners to the city administration. This is in addition to regular requests for contributions to school feeding  programs, sports initiatives, security, disaster risk management, property tax, and others.

Committee members say they have been unable to sit down with city officials to discuss the matter, and claim their efforts to take it to court are also being hindered.

“Most residents are pensioners. Even if we could afford to pay, this is immoral, unjust, and illegal. This is residential property and we are not generating income from it. So why is the government levying huge rates on us just because it needs revenue? This is also very discouraging for investment,” said a retiree living in CCD.

The ‘Regulation to Amend Oromia Regional state Urban land Leasehold Administration’, which is introduced by Oromia Regional Council based on the federal Lease Proclamation (721/2004); stipulates that new lease rates can be introduced based on studies that consider “present and future growth possibilities, and the condition of land use and its grade.”

However, the regional regulation does not specify whether new rates can apply retroactively.