Ways in Which a foreigner can own land in Kenya. A common concern for foreign investors looking to put down roots in Kenya is whether they can own and deal with property in the country. Non- Kenyans are allowed by law to legally purchase, convey, and own land in Kenya. The Constitution, however, restricts that ownership to the leasehold of a period of 99 years.
“The Constitution at Article 40 guarantees ownership of land in Kenya by any person. Granted, this provision is not absolute as it is subject to Article 65 thereof which restricts land to be held by noncitizens only as leasehold of a term of 99 years and no more.
“…The Constitution at Article 40 guarantees ownership of land in Kenya by any person. Granted, this provision is not absolute as it is subject to Article 65 thereof which restricts land to be held by noncitizens only as leasehold of a term of 99 years and no more. Article 65(2) of the Constitution, in my view, envisages a situation where non-citizens can enter into transactions for acquisition of interest in land that is freehold. Indeed there is no law that prohibits non-citizens from acquiring and owning freehold land, the Constitution however restricts that ownership to leasehold of a period of 99 years. It is therefore my finding that the transfer of the property in question, though the interest therein being freehold to the 1st Respondent being a non-citizen is not illegal as alleged. The bottom line is that the 1st Respondent has acquired 99 year leasehold interest…”
Constitution of Kenya
The Constitution provides at Article 65 that non-citizens may only own land on a leasehold basis for a term not exceeding 99 years. If a non-citizen currently owns freehold land or leasehold land of a term exceeding 99 years then the Constitution provides that their interest in the land will be reduced to a 99 year leasehold interest. Nonetheless, a non-citizen can apply for an extension or renewal of the lease at the expiry of the 99 year term.
So who is a citizen? One obtains Kenyan citizenship in one of two ways, either by birth or registration. One can become a citizen by registration through marriage to a citizen for a minimum of seven years, through lawful residency in the country for a minimum of seven years or through adoption. So far as companies are concerned they will only be regarded as citizens if all their shares are held by Kenyan citizens and if the shares are being held in trust, if the beneficial interest of the trust is held by Kenyan citizens.
Limitations on land ownership by non-citizen in Kenya
Kenya is a democracy, working in the confines of a written constitution that clearly dictates and gives legal right to foreigners to buy and hold land in Kenya. The ownership is however limited to a leasehold tenure not exceeding ninety-nine years, that can then be renewed after it expires.
As a foreigner, you need to know that when someone claims to offer land documents that purport to confer a tenure of more than 99 years, you are being duped, by law you will be deemed to hold them on a lease of only 99 years. Be smart.
When seeking to buy land with a company, those with more than one foreign shareholders are regarded as being a foreign company and cannot, therefore, own freehold land.
Foreign companies – those with more than one foreign shareholder- can, however, own the land on a leasehold and pay an extremely low rent (peppercorn rent) on it to the government.
The final limitation on foreigners owning land in Kenya is that they cannot own first-row beach plots and agricultural land unless explicitly allowed by the president through a notice in the Kenyan Gazette.
Requirements for buying land in Kenya as a foreigner
Foreigners can own property in Kenya in their name. The Constitution (2010), the Lands Act (6/2012) and the Land Registration Act (3/2012), subject to certain limitations, grant the right to any person, either individually or in association with others, to acquire and own land in Kenya.
Requirements for foreigners to legally buy land in Kenya are as follows:
Own as an Individual
A foreigner or a non –Kenyan citizen is defined by law as a person belonging to or owing allegiance to a different country.
Own with a trust
Trust on the other hand is a legal arrangement where a person known as a trustee holds property as his or her own for the benefit of another individual.
As is the case with foreign individual, the same limitation on ownership also applies to trusts whose beneficiaries are not Kenyan citizens.
Own with a company
By law, a company is a separate entity from those forming it. The Kenyan constitution provided for these legal entities to buy and own land in their name.
A foreign company – with more than one foreign shareholder – can only own land in Kenya on a leasehold of not more than 99 years.
Land Control Act
The Land Control Act (the Act) restricts the ownership by non-citizens of agricultural land or land within land control areas. This land, in general terms, is land that is situated outside a municipality, a township, or a market or land that the Minister of Lands designates as being controlled and subject to the protections in the act.
The Act in section 9 as read with section 6 provides that any dealing in agricultural land or controlled land the purported effect of which is to sell, transfer, lease, charge, partition or exchange land with a non-citizen is void for all intents and purposes. A non-citizen for the purposes of the Act is one who is not a citizen either by birth or registration, and if a private company or co-operative society, one whose shareholders or members are not all citizens. A non-citizen may however be exempted from the provisions of this Act by the President of Kenya.
The ramifications of the restrictions placed by the Land Control Act are more far reaching than those in the Constitution. Unless a foreign investor is exempted by the President of the Republic of Kenya, he or she is confined to owning land within or within the vicinity of Kenya’s cities and towns. A practice has however developed to try exploit a certain loophole in the Land Control Act to enable the sale, transfer, lease, charge, partition or exchange of agricultural land to non-citizens.
A close reading of the Act reveals that it does not restrict dealings in shares in public companies which own agricultural land. A foreign investor may therefore own agricultural land indirectly through owning shares in a public company that owns agricultural land. A foreign investor may therefore own agricultural land indirectly through owning shares in a public company that owns agricultural land.
Knight Frank’s step-by-step guide to buying property in Kenya.
Buying Process
The purchaser begins with identifying a suitable property for purchase. One needs to enlist the services of a reputable real estate agency/firm to assist in identifying a suitable property.
The buyer then should endeavour to visit the site and satisfy themselves that it meets the desired criteria including its physical location and boundaries, and thereafter make a formal offer or expression of interest.
After an offer has been accepted, buyers should conduct due diligence to verify the ownership and other material aspects pertaining to the property and documentation etc.
The vendor also conducts due diligence on the buyer. If the due diligence process is successful, both parties then instruct their advocates to proceed to the contract stage.
The procedure may vary slightly depending on whether one is buying a completed property (ready for occupation), land or an off-plan property.
In the former, after paying the deposit, the transaction is completed within a defined closure period, normally 90 days from date of signing the sale agreement (although parties can mutually agree on any closure period that suits them). In the latter, after paying the requisite deposit, buyers normally pay a percentage of the purchase price in equal instalments until the project is completed.
Sale Agreement
Once the sale agreement is signed by both parties, the deal becomes legally binding and enforceable under the law of contract. The buyer is required to pay a deposit of at least 10% of the purchase price (or such other amount as may be agreed by both parties) upon signing the sale agreement.
The deposit is held by the seller’s advocates as stakeholders pending completion of the transaction in accordance with the terms of the sale agreement.
Alternatively, the buyer and seller can mutually agree to open a joint escrow account mandating both advocates to oversee the purchase funds until completion of the sale.
Buyers will normally then forfeit a percentage, or all, of the deposit if they default or are refunded the said deposit if the seller is unable to complete the transaction. It is important that every instrument effecting a disposition in land is executed by each of the partiesconsenting to it.
Execution under the relevant Kenyan law consists of the person appending his/ her signature or affixing his/ her thumbprint or other mark as evidence of personal acceptance of the instrument. Execution by a corporate body, association or any other organisation should be done in the presence of an Advocate of the High Court of Kenya, a magistrate, a judge or a notary public.
Completion
On the completion date, buyers are required to pay the full balance of the purchase price in exchange for the completion documents from the seller.
Once the buyer’s advocates are in receipt of the completion documents, they make arrangements for the property to be assessed for Stamp Duty by a Government Valuer and subsequently stamping of transfer documents. Thereafter, they proceed to lodge the property for registration in favour of the buyer.
After the registration process, the seller’s advocate is legally permitted to release the full proceeds of the sale to the seller.
Consequently, the buyer is officially handed over possession of the property and becomes the new legal owner.
The certificate of title issued by the Registrar upon registration, or to a purchaser of land upon a Transfer by the seller is taken by all courts as prima facie (at first appearance) evidence that the person named as the proprietor of the land is the absolute and indefeasible owner.
It is also possible to purchase land in Kenya without being in the country. One can assign a lawyer to go through the whole process on their behalf through the power of attorney.
Property Transactional
Costs
Buyers will incur certain transactional costs when buying either residential or commercial property in Kenya.
Buying Residential Property
Stamp Duty/Land Tax:
This levy is centred on the property value and the State relies on the amount returned by the Government Valuer or the purchase price agreed upon; whichever is higher:
• 4% for land/property within a municipality
• 2% for agricultural land or property outside a municipality
• 1% if a property is registered as a company and transfer is by way of shares rather than title
Legal fees:
Each party pays for their own legal fees based on a percentage of the purchase price on a scale stipulated in the Advocates Remuneration v Amendment Order, 2014. Thevonly exception which appears to be a common practice, is where buyers are required to pay legal fees for both parties when buying an apartment.
The argument for this is based on the fact that the seller’s lawyer is the one who does registration for all the leases onvbehalf of the buyer.
Agency fees:
The agent is paid by the party who instructs them either by the seller who instructs the agent to market the property or the buyer who instructs the agent for a property acquisition. The fee is on a scale capped at a maximum of 3% of the property’s value.
Registration and disbursement fees: Buyers are generally responsible for the cost of registration of titles in their name(s) together with other disbursement costs as may be advised by the seller’s advocate.
Foreigners’ Purchasing Regulations
Just like Kenyan citizens, foreigners are permitted to buy commercial and residential properties/land located within a town or municipality without any restrictions whatsoever, provided that they comply with the laid down procedures. The only restrictions are on owning agricultural land, freehold titles and first row beach plots along the Kenyan Coast.
Article 65 of the Kenyan Constitution limits foreigners to holding only leasehold titles for a maximum of 99 years but permits future renewals on condition that the subject property held under that title is economically active and it is not required for public use purposes. This therefore means that if a foreigner purchases a property held under a freehold title, it will revert to a long term leasehold tenure.
The restriction also applies to companies that are not wholly owned by citizens or property held in trust whose beneficiary is not a citizen.
This note is meant to give a very basic indication of the purchasing process and no liability is assumed as each interested person should seek local professional advice.
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