THE DIFFERENCE BETWEEN LEASEHOLD AND FREEHOLD TITLES IN KENYA.Jan 10, 2024 Land
The colonialists and their cronies had it all dandy in matters of land ownership. Leasehold tenures were 999 years long in what was indeed a foreigner’s paradise. This holiday ended in 2010 upon the promulgation of the current constitution. Leaseholds were capped at 99 years, and any 999-year-long lease that surpassed the new set period at enactment was to revert to the state. Today, foreign nationals can own land on leasehold, but not for longer than 99 years. The lease could be shorter, too, depending on the intended use, where some agricultural land enjoys longer lease tenures than its commercial counterparts.
Kenya has two land tenure systems: freehold and leasehold, and we’ll expound on each in this article.
Freehold Tenure System
This tenure system bestows upon the owner the rights to do with the land all that is within its zoning limits. The rightful owner can transfer the land to heirs, and it could remain in the family indefinitely. Under this tenure, you are not required to pay annual land rent since you hold all the rights to the property. For as long as the property remains in the family, you will never need to renew ownership. Currently, foreigners are not legally allowed to own freehold land titles, as that right is only bestowed on Kenyan citizens. Most agricultural land is held on a freehold basis.
The main benefits of this system are:
- You own the land absolutely and have all the rights to use it as you please as long as they are within the zoning land-use limits.
- No annual rent is due since it’s your land.
- All the rights hold for all the generations that occupy that land.
- Note: Freehold title holders are liable for land rates, as are leaseholders.
This tenure system is where the landlord – lessor - grants the tenant – lessee – exclusive possession of a title for a period subject to stipulated terms and conditions. The cap on leaseholds in Kenya is 99 years, and most urban land is held under this tenure. One cannot convert a leasehold into a freehold, but freehold and leasehold titles of over 99 years occupied by non-Kenyans are now converted to leaseholds of no longer than 99 years. Leases for agricultural purposes such as ranching are capped at 33 years, while urban development gets the maximum period. Commercial leaseholds are subject to strict regulations that align with the government’s urban development plans.
At the lapse of a lease, the lessee chooses to renew it, or the land reverts to the state. You can transfer or develop this type of property without notifying the government or worrying too much about the period left until expiry since you can seek an extension that will (almost) automatically be granted to Kenyan citizens unless the land is required for public use.
The main qualities of leasehold tenure are:
- One owns the land for the stipulated period and will need to renew or extend it accordingly. After the lease period, the land reverts to the title holder.
- Holders of these titles owe the state annual land rent and rates.
- One can sell or develop leasehold property as they are rightful owners for the 99 years granted by the state.
Renewal and Extension of Leaseholds
One can renew or extend their leasehold titles at the end of the granted period. Renewal means seeking a new term before or after the current one expires. Upon application, the Commission will look at some underlying conditions when deciding whether to grant the renewal. Kenyan citizens have pre-emptive rights to land, so the government will usually offer the land back to the immediate last owner unless it is required for public purpose.
A lease extension is when the lessee requests to prolong the existing leasehold before it expires. The National Land Commission (NLC) is expected to notify the lessee of the expiration five years before it happens so they can take the necessary steps. If the lessee does not respond to the notice, the Commission can rightfully gazette the land and eventually physically examine whether anyone lives on it anymore. Non-citizens have no pre-emptive rights to land in Kenya, and ownership is restricted to 99 years, after which the land reverts to the state.
Ordinarily, one is only required to start extension once they are 5 years to expiry, but there are exemptions. If one’s putting up high-cost investments, such as commercial complexes that require heavy funding, financiers feel more secure when the leasehold title has at least 45 years left.
Let’s summarize the differences between these two tenures:
- Leaseholds are capped at 99 years – renewable – while freeholds are owned to perpetuity until transferred to another entity.
- Leaseholders are liable to annual rent that freeholders aren’t. Depending on location and land use, county authorities may require freeholders to pay land rates.
- Foreigners cannot hold freehold land titles even if they partner with Kenyan citizens. They can only hold leases capped at 99 years.
Freeholders get a Title Deed with no details of rent due or term, while leaseholders get a Certificate of Lease that indicates the lease’s term. Both titles grant you the right to use your land as you deem fit per land-use regulations, and you, as a Kenyan citizen, can renew or extend your lease as it suits you. It helps to proactively check the status of your land rent and rates from the Ministry of Lands and to pay them as they fall due. Though the ministry is obligated to notify lessees when their terms are up for renewal, it might not always happen, so it’s wise to track this information for your knowledge and action.
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