5 important things to do before you lease land in Kenya

Are you looking to lease land in Kenya? Before you agree to lease land in Kenya, it is essential that you have a clear understanding of the nature of the undertaking you are committing to get into. Private leases for land are invariably for long periods, some even as long as twenty years or longer.

Because of the commercial interests you would be creating around the land you intend to lease, you would naturally want to be assured that you will enjoy unfettered land use for the duration of time that you have agreed to contract it out on lease from its owner(s).

You would want reasonable assurance that the arrangement is rock-solid and will not be interrupted over the tenure you have agreed on. The dispensation of leases is largely the subject of The Registered Land Act.

Why lease land in Kenya?

So, why would someone lease land in Kenya rather than buying outright? Though not a common or traditional practice in Kenya, leasing land is becoming increasingly popular as the availability of agricultural land close to the erstwhile urban centres in the country continues to wane.

Kenyans are still interested in outright land ownership, but the rules and price of prime land have contributed to more people being open to land leasing.

Due to the high capital outlays for outright purchasing commercial land with good access to surfaced roads and public transport networks.

People and businesses lease land for various reasons, usually with an underlying commercial reason or benefit, which ensures the sustainability and profitability of the respective enterprise they wish to undertake.

Need for land leasing in Kenya

One of the motivators of leasing land in Kenya is the tax-reducing nature of lease costs over business revenues and profits. This makes land leasing attractive to small or informal business enterprises looking to operate in areas where you cannot buy land. A good example is roadside eateries like food vibandas and mama mboga stalls, fuel stations, garages, carwash businesses, churches, roadside car dealers, and so many more.

An increasingly popular venture on leased land is container malls or parks. These semi-permanent structures are established to provide affordable small business premises. The premises can also be easily relocated upon the expiry of the lease.

5 important things to do before you lease land in Kenya

Leasing land for agricultural purposes is far more common. The types of agri-business that lease land range from commercial-scale green housing operations, which produce a wide range of horticultural produce like wheat, flowers, and even herbs, to animal-rearing enterprises which lease land for breeding and rearing stock for sale to markets within proximity of the leased land.

The purposes are as varied as the commercial interests may be. Some entrepreneurs have leased land to grow artificial forests or for commercial agriculture.

Consideration before leasing land in Kenya

A lease is a commercial interest in property granted by the owner of the property that confers on the person granted that interest exclusive possession of the property for the period and under the terms and conditions defined under their agreement.

Before entering into a land lease, the following steps are crucial for both parties;

1. Do a land search of the property

Now that you have established that you want to lease land for commercial reasons do a proper land search. Once you decide to go to the market to find potential lessors willing to lease land suitable for your purposes, this is done. 

You will have identified the why (usually the reason you want to lease, like, say, an agri-business) and the when (when you wish to commence operations and for how long you want to run the lease). 

And once you find potential lessors, you will negotiate some basic terms (I hear people using the phrase “irreducible minimums”) before hashing out a final agreement.  

You can source information from various sources, including the internet, newspapers and other publications, property agents, lawyers, local administrators, and many others.

2. Undertake proper due diligence

The general legal principle of nemo dat quod non habet applies here, which loosely translates to “one cannot give what does not have.” Undertaking due diligence can therefore be loosely said to be the process of establishing whether the person giving you the “thing” has the capacity to do so. 

While the principle largely relates to contracts of sale, it is relevant in the case of leases.

This process should help you clarify and ascertain the following:

  • The Who: Who exactly owns the land you intend to lease
  • The What: What are you leasing, and exactly how much acreage are you receiving?
  • The Where: Where exactly is the land you are leasing situated?

A lessor cannot purport to issue or confer the rights of ownership of land such as exclusive possession unless they truly are the owner of the land, unencumbered. 

Due diligence should identify the actual land owner and the parcel of land in question.

Furthermore, ascertain that there are no competing third parties with rights to the land as such rights could supersede or interfere with yours.

3. Have a written agreement

While certain oral agreements can be recognized by law in a dispute, there may be finer points within the agreement that can only be clarified by having a written agreement. It is, therefore, good practice to always have a written lease agreement.

The preference for a written agreement would be to ensure strict adherence to both parties’ discussions and conclusions. Still, it also favors you taking on the lease by ensuring that your rights are recognizable in defense against an owner who may seek to renege on your agreement.

A written agreement also precludes messy oral arguments outside of what was agreed upon and recorded. The law only recognizes oral leases that do not exceed a two-year, non-renewable term. 

The agreement will cover much wider terms other than price and duration to include issues such as the assignment of responsibility for government levies (ground rent and rates in the case of leasehold land), maintenance, removals as well as any other responsibilities, termination of the agreement, assignment of costs for restoration of the property, payment of registration fees and much more.

4. Register your lease agreement

If you are entering a lease agreement that is, at the minimum, a two-year renewable lease agreement, it is important to have the lease registered under the relevant land registry. 

Get professional assistance to resolve the terms and conditions of the agreement with the lessor. 

If you want to exercise the option of renewing the lease at the end of the term or to have the first right of purchase if the lessor wants to sell the land at the end of the lease period, it is important to ensure that the lease is registered.

Registering your lease offers legal protection for both the parties’ rights, including implied rights, duties, and obligations.

5. Create an exit plan

A lease exit plan is rarely considered at the beginning of such agreements. Having one could be helpful, however, and is a smart practice for parties looking to have a clear end to the lease agreement.

One of the implied conditions on the expiry of a lease is that the lessee will hand over possession of the land in the condition in which it was delivered to him by the lessor. 

While this may be provided for in the registered lease agreement, it is important to consider and plan for the exit. 

Your exit plan provides for the period immediately before disengagement with the lessor.

So, Leasing land in Kenya?

All lease agreements should be in writing and registered properly. You can also register restrictive instruments to provide an additional safety net in case of broken agreements.

About the author

Staff news writer for The Venture Brat

VB Reporter

Staff news writer for The Venture Brat