Interests under which land can be held in Kenya

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.

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.

Rights and interests can be divided into two classes: freehold and leasehold.

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.

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.

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.