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last updated on November 23, 2018 / reading time approx. 4 minutes
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. The simple answer is yes, non-citizens can own property in Kenya and enjoy all legal rights and protections that Kenyan citizens enjoy, however they are subject to restrictions with regard to the kind of tenure they can hold in land and are also prevented from owning or dealing with agricultural land. In Kunde Road Residents' Welfare Association Versus Deshun Properties Company Limited & Four Others (ELC PETITION NO. 1433 OF 2013) Justice Gacheru observed that,
“...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...”
The restrictions on ownership of land by foreigners are contained in Kenya's Constitution and in the Land Control Act. We explore the restrictions contained in these two laws below.
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.
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.
In practice, the restrictions above do not hinder non-citizens ability to invest in land in Kenya. Those non-citizens currently in ownership of freehold land or leasehold land for a term greater than 99 years will have the tenure of their properties converted and will have new 99 year leasehold titles issued to them in an exercise to be conducted by the National Land Commission set to be completed in the year 2022. As has been mentioned earlier in this article, at the expiry of the leasehold terms, non-citizens may apply for renewal or extension of their leases.
So far as agricultural land is concerned, a foreign investor may apply for an exemption from the President and if they lack the access, then an investor may obtain ownership or other rights through ownership of a public company.
For legal advice on matters related to the conversion of land tenures and purchasing of agricultural land, please do not hesitate to contact us.
published on April 23, 2018
Penninah Munyaka
Associate Partner
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