How Can a Foreigner Own Property in Kenya?

Understanding Property Ownership for Foreigners

As a foreigner interested in owning property in Kenya, it is essential to understand the legal framework governing land ownership. According to the Constitution of Kenya (2010), the Lands Act (2012), and the Land Registration Act (2012), foreigners can own land in Kenya, though with certain limitations. This article aims to clarify the conditions under which foreigners can own property and highlight common pitfalls to avoid.

Limitations on Property Ownership

Foreigners can hold land in Kenya only on a leasehold basis, with a maximum lease term of 99 years. This stipulation is set out in Article 65(1) of the Constitution. Any lease exceeding 99 years is considered a 99-year lease. Furthermore, a company is regarded as Kenyan only if it is wholly owned by Kenyan citizens. Thus, a company with foreign shareholders is considered foreign and cannot own freehold land. Trusts cannot be used to bypass these requirements. Any freehold interest held by a non-Kenyan will revert to the Republic of Kenya, with the state granting a 99-year leasehold at a peppercorn rent.

Agricultural Land

Transactions involving agricultural land, as well as other lands gazetted by the Minister of Lands, are classified as “controlled transactions” under the Land Control Act. These transactions require consent from the Land Control Board. The Board cannot grant consent for transactions involving the sale, transfer, lease, exchange, or partition of land to non-Kenyan citizens, or entities that do not meet specific criteria. However, foreign investors may apply for exemption through a notice in the Kenya Gazette by the President. Public companies with foreign members may also acquire agricultural land.

Avoiding Legal Disputes

Foreign investors sometimes attempt to circumvent ownership restrictions by incorporating companies with local shareholders or using nominees. These arrangements can lead to legal disputes. It is highly advisable to seek professional advice before engaging in such strategies to ensure compliance with Kenyan laws.

Types of Property Ownership in Kenya

Public Land: Defined by Article 62 of the Constitution, public land is owned by the government for public use, such as national parks, wildlife reserves, and public infrastructure.
Community Land: According to Article 63, community land is held by communities based on ethnicity, culture, or common interest. It is intended for communal use and benefit.
Private Land: Per Article 64, private land is owned by individuals or entities under freehold or leasehold tenure. Freehold land offers absolute ownership, while leasehold land is held for a specific period, typically up to 99 years.

It is important to ensure that any land you intend to purchase is not listed in the Ndung’u Land Report, which details illegally acquired land.

Who Can Sell Land in Kenya?

Land in Kenya can be sold by private developers, licensed estate agents, brokers on behalf of owners, Saccos, churches, Chamas, cooperatives, financial institutions, trusts, and companies, as well as individuals and communities.

Recent Changes in Land and Property Ownership Laws

The Sectional Properties Act 2020 aligns with the Constitution of Kenya 2010 and the land laws enacted in 2012. This Act allows for the division of buildings into units owned by individual proprietors, with common property owned by all unit owners as tenants in common. This regime simplifies sale transactions, saves costs, and enhances protection for unit owners.

Tax Implications of Acquiring or Selling Property in Kenya

Stamp Duty: The buyer pays stamp duty on the sale or lease agreement and transfer forms. The rate is 4% for properties in cities and municipalities, and 2% for properties outside these areas.
Capital Gains Tax (CGT): The seller pays CGT at a rate of 15%, effective January 1, 2023. This tax is imposed on the transfer of property, including land, buildings, securities, and shares.
Value Added Tax (VAT): VAT on the sale of commercial buildings remains payable at a rate of 16%.
Bank Fees and Miscellaneous Costs: These include loan-related fees, bank miscellaneous costs, and mobile money transfer charges.

Legal Assistance

At WKA Advocates, we have a dedicated Conveyancing and Real Estate department. If you are a foreigner interested in owning property in Kenya, please contact us for comprehensive legal assistance. We are here to help you navigate the legal landscape and ensure a smooth property ownership process.

Contact Us:

Email: info@wka.co.ke
Website: www.wka.co.ke
Phone: +254 798 03 580
Address: Nairobi Hub, Parklands, Valley View Business Park, 6th Floor, City Park Drive, Off Limuru Road

Authors: William Karoki, Founding Partner, WKA Advocates

Note: The contents of this newsletter provide a general guide to the subject matter and should not be relied upon without seeking legal advice.