1.0 Introduction
People often say that they have an interest in land or that they wish to own, purchase or transfer an interest in land. But what are these interests?
It is important that people purchasing property understand the various interests under which land is held in Kenya. This has certain ramifications, including:
• the period for which land can be held by a particular owner;
• various terms and conditions under which land is held;
• due diligence to be conducted on acquisition of property;
• consent required in the transaction; and
• various title and security documents appurtenant to the various interests in land.
2.0 What is an interest in land?
Article 40 of the Constitution guarantees the right of every individual to acquire and own land in Kenya, either individually or in association with others. However, this right does not extend to property that is found to have been unlawfully acquired. The right is further subject to Article 65 of the Constitution.
In this regard, Kenyan citizens have the right to own land of any description in any part in Kenya.
Further, they cannot be deprived of their right over or interest in land, except under exceptional circumstances provided by the Constitution.
Interest in land can be either legal or beneficial. 'Legal interest' refers to formal ownership of an interest in or right over land. 'Beneficial interest' refers to the right to receive benefits resulting from the land (eg, sale proceeds or rental income). A beneficial interest can be held and transferred separately from the legal interest in land. It is important to confirm whether the interests are held legally or beneficially.
3.0 The classes of Interest in Land
Rights and interests can be divided into two classes: freehold and leasehold.
3.1 Freehold interest
Black's Law Dictionary defines 'freehold interest' as an estate in land held in fee simple, fee tail or for term of life. The word 'fee' means an estate of inheritance. It is an estate, which on the death of the owner, can descend to the heirs and the estate may continue forever. A fee simple generally descends to the heir and even to collaterals, while a fee tail descends only to lineal descendants and was originally designed to keep land in the family. On the other hand, an estate for a term of life is not an interest of inheritance and cannot continue forever.
In Kenya, freehold interest is recognised under the Registered Land Act (Cap 300, Laws of Kenya).
The title document is a title deed or land certificate and the concept of 'freehold' is referred to as absolute proprietorship. The Registration of Titles Act (Cap 281, Laws of Kenya) also recognises the concept. The title documents is typically a certificate of title or grant and the proprietor is often stated as holding the estate in fee simple. The Government Lands Act (Cap 280, Laws of Kenya) also confers freehold interests, usually in fee simple, and the title document is generally a conveyance.
These interests can descend to heirs and be transferred.
3.2 Leasehold interest
Unlike freehold interest, leasehold interest is granted for a fixed term. The terms can be 50 years, 99 years, 999 years or a period otherwise stated in the title document. Various types of leasehold interest exist. However, the common thread that runs through the terms is that a leasehold interest in land is an interest for exclusive possession and profit of land for a fixed period and usually in consideration of payment or rent (often nominal and referred to as a 'peppercorn rent'). It is a contract for the grant of time in land. When purchasing such properties, it is important to consider the term of the lease and the various conditions under which a proprietor holds it.
On expiry of a leasehold term, the property reverts to the government. Proprietors of leasehold titles should ensure that they adhere to the conditions under which the land is held and apply for renewal.
The process of application for renewal should commence at least two to three years before the term expires.
The leasehold interest is recognised under the Registered Land Act (Cap 300, Laws of Kenya), wherein the title document is a certificate of lease. The Registration of Titles Act (Cap 281, Laws of Kenya) also recognises leasehold interests, where title documents can be either a grant or certificate of title, with terms and annual rent indicated. The Government Lands Act (Cap 280, Laws of Kenya) also confers leasehold interests.
4.0 Foreigners and interest acquired in land
While the Constitution grants all persons the right to own land in Kenya, Article 65 states that foreigners can hold land in Kenya only under a leasehold tenure. Such a leasehold tenure cannot exceed a 99-year term. However, on expiry of the leasehold term, lease renewal may be sought.
Any document which purports to confer on a foreigner an interest in land greater than a 99-year lease is regarded as conferring a 99-year lease and no more. This means that foreigners can purchase freehold land and leasehold land for more than 99 years. Even so, the implication of the Constitution's provisions is that this is deemed as conferring a 99-year leasehold interest only on the foreigner.
It is important that persons purchasing land are aware of the type of interest that they are acquiring and the conditions under which the land is held. Some financiers will not accept titles for land with a leasehold term below a certain number of years as security. The issue of the various interests held in land can be ascertained by engaging qualified professionals in land transactions.
5.0 Does the Constitution of Kenya adequately protect the rights of foreigners on land ownership in Kenya?
The Constitution 2010 sort to heal the historical injustices that have ailed our country for a long time. It is the skeleton which the new land laws provide the necessary flesh to protect and secure the rights of Land owners in Kenya. The Law in clear as to the land ownership by foreigners and their rights are clearly spelt out and their interests secured. In my opinion this has brought about productivity in terms of utilization of Land by foreigners for development purposes which has led to economic growth in the country.
The Constitution 2010 and the new land law regime seeks to bring about a sense of equitable ownership of Land which has given a guarantee of the foreigner’s right being protected and secured.
As we celebrate the positive side which the laws have achieved we need not forget that the legal restrictions and limitations has also created room for corruption and fraud. In cases where consent is needed like the acquisition of Agricultural land, official will often make promises to foreign investors with intentions of defrauding them by giving them possession of land which the law prohibits them from having access to.
As much as the conversion was of Freeholds and Leaseholds of more than 99 years were automated by the use of the operative word “shall” there is need for some legislative or policy procedure by the National Land Commission and the Ministry of Land and Physical Planning.
When it comes to the renewal and extension of the Leasehold period for a foreigner, there is uncertainty which should be addressed by providing some guidelines for which foreigners can seek extension and renewal of Leases to enable sustainability of the investments they have made on their land.
Under the Land Control Act for a foreigner to own agricultural land, they need to seek exception by the president. This requirement was passed during postcolonial era when the president had powers and control over land but with the Constitution 201o and the new land regime this function should be transferred to the National Land Commission.
It is also important to note that there is a loophole under the Land Control Act whereby a foreigner can own agricultural land by being a shareholder in a Public company. Foreigners have taken advantage of this loophole and incorporated Public companies in which they are shareholders and through these companies they gain the capacity to own agricultural land. The act should therefore be review to include that a public company that has foreign shareholding can’t own agricultural land.
There is also a need for a test against which a non-citizen corporation seeking land for investments should be measured, in order to determine the scope and breadth of leasehold interests, up to the upper limit of 99 years.
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