Lease
Rules
Obligations, payment rules, and financial policies for urban land lease holders in the Harari Region.
Land Use Rules
Each land use category has specific usage periods, payment periods, and payment durations. All periods are counted in Ethiopian years.
| Land Use | Usage Period | Payment Period | Total Payment Years |
|---|---|---|---|
| Commercial | 60 years | 50 years | 50 years |
| Residential | 50 years | 40 years | 40 years |
| Service | 60 years | 50 years | 50 years |
| Industrial | 80 years | 60 years | 60 years |
| Urban Farm | 70 years | 30 years | 30 years |
Note: All usage periods and payment periods are counted in Ethiopian years. Payment periods are shorter than usage periods to ensure the lease value is fully paid before the use period ends.
Financial Rules
Lease payments are calculated using the official formula. The total lease amount is calculated as follows:
Calculation Formula
Step 1
Land Area × Rate per m²
Step 2
× Premium Multiplier (Grade 1: 1.0, Grade 2: 0.8, Grade 3: 0.6)
Step 3
× Payment Duration (years)
Step 4
= Total Lease Value (Gross)
Step 5
Calculations support partial payments, multiple-year payments, and full settlement.
Step 6
All calculations use the Ethiopian Calendar and financial precision.
How to Calculate the Unpaid Amount
When lease amounts are not fully paid, the unpaid amount forms the principal on which interest and penalties are applied.
Down Payment Rules
The down payment is required at the start of the lease. The standard rate is:
Default Down Payment
10%
The default down payment rate is 10% of the total lease amount. This rate is applied when creating a new lease file.
Example Calculation
Grace Period
A grace period of one year is provided before annual payments begin:
Default Grace Period: 1 year
e.g. 2
Formula: Payment Start = Lease Start Year + Grace Period (1 year)
Payment Rules
Annual payments cover both principal and interest. Additional rules apply for partial and multiple-year payments.
Current-Year Obligation Rule
Only unpaid obligations through the current year are due. Future years remain separate.
Example:
A lease started 5 years ago has unpaid obligations for all 5 years.
Obligations for year 6 and beyond are not yet due.
No early overdue warnings are shown for future years.
Partial Payment Rule
Payments are applied to the earliest unpaid year first.
Example:
A payment of 100,000 ETB covers the oldest unpaid obligation first.
Multiple-Year Payment Rule
Payers can pay multiple years at once. The payment is allocated year by year.
Overpayment Rule
Amounts paid beyond the unpaid obligation are applied to the next year's obligation.
Interest Rules
Annual interest is 6% of the remaining principal:
Default Interest Rate
16.5%
The default annual interest rate is 6% of the remaining principal.
Full Settlement Exception
If the full lease amount is paid within the first year, the interest rate is removed entirely.
Penalty Rules
Late payments incur a penalty on every unpaid year:
5%
The default penalty rate is 5% of the unpaid amount.
How the Penalty Works
Penalty Amount: Penalty = 5% × Total Unpaid Amount
Total Due: Total Due = Unpaid Amount + Penalty
Full Settlement Discount
A full settlement within the first year receives a configurable discount (up to 5%) and removes the interest rate:
Up to 5%
The default discount rate is 5% when the full lease amount is paid within the first year.
Conditions for the Discount
- The full lease amount is paid within the first year.
- A discount (up to 5%, configured per lease) is applied to the total lease amount.
- The interest rate is removed entirely.
- The remaining balance after the discount must be paid in full.
Example:
Total Lease Amount
Discount (5%): -25,000 ETB
Interest Removed: 0 ETB
Final Payable Amount
Payment Allocation
Payments are allocated to obligations in a specific order to ensure fairness and transparency:
Earliest Unpaid First
Payments are applied to the oldest unpaid obligation first.
Partial Payments
Partial payments are held against the earliest unpaid year until it is fully covered.
Overpayment Handling
Payments exceeding an unpaid obligation are applied to the next year's obligation.
No Future Overdue
Future years are marked overdue only once they become due and unpaid.
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