Ideas & Debate

New law on land a double-edged sword


President Mwai Kibaki signs the new constitution into law. Photo/FILE

The new Constitution has dealt a huge blow to non-Kenyans in as far as ownership of land is concerned.

Even though this may be of little concern to many Kenyan citizens — in fact, some citizens welcome the provisions — what many fail to realise is that these provisions are a double-edged sword since they, perhaps inadvertently, also apply to some Kenyan citizens.

Article 65(1) of the new Constitution provides that a person who is not a citizen may hold land on the basis of leasehold tenure only, and any such lease, however granted, shall not exceed 99 years.

Transitional provisions

The transitional provisions provide that on the effective date (which was August 27, 2010), any freehold interest in land in Kenya held by a person who is not a citizen shall revert to the Republic to be held on behalf of the people of Kenya, and the State shall grant to the person a 99 year lease.

Ordinarily, a leasehold interest is subject to terms and conditions such as the permitted use of the property, the requirement to obtain consent from the leaser prior to effecting any transfer or undertaking other dealings with the property.

What is not clear is whether there will be any terms and conditions to which such properties will be subject and if so, what they will be.

The new Constitution provides that the rent payable will be a peppercorn if the title being converted is freehold, but does not stipulate what the rent would be if the original title was a lease of more than 90 years.

With regard to existing long-term leasehold interests, such as 999 year leases, the new Constitution automatically shortens these to 99 year leases.

It says that if a provision of any agreement or confers on a person who is not a citizen an interest in land greater than a 99 years, it shall be regarded as providing for a 99 year leasehold and no more.

Some people have argued that the new Constitution is not clear as to when the term of 99 years commences so that for instance, if a 999 year lease was granted in 1954, can it be deemed that the 99 year lease also commenced in 1954?

In my view, this is an erroneous interpretation of the since it clearly states that its provisions on land take effect on the effective date.

As such, the term can only have commenced on August 27, 2010 and not earlier.

A number of material issues however remain ambiguous.

One of these is the procedural laws that will apply with respect to the land that has been converted from freehold to leasehold by the new Constitution.

There are over five different statutes governing land in Kenya and each law has its own set of substantive and procedural requirements.

Kenyan land statutes set out very precise procedures to be complied with when dealing with different types of interest in land.

There are specific forms to be completed and steps to be followed when transferring or creating a charge over freehold interests and these differ substantially from the forms to and steps that apply in relation to different types of leasehold interests in land.

With the automatic conversion of freehold interest to leasehold interests, it is not clear what forms and procedures are to be applied henceforth since the existing forms and procedures for both freehold and leasehold interests cannot be used.

Unless this is quickly clarified the effect on commercial activity particular with regard to dealings in property will be profound.

Even though the provisions of these provisions under the new Constitution were clearly targeted at non-Kenyan citizens, the effect extends to Kenyan too.

For example, say a public company owns freehold land.

If a majority of its shareholders are Kenyan citizens but there is even one shareholder who is a not a citizen, the company automatically loses the freehold interest which converts into a leasehold interest.

Likewise, if a husband and wife jointly own a piece of land under a freehold interest and one of them is not a Kenyan citizen, the land automatically converts into a leasehold interest.

This has the effect of penalizing the Kenyan citizen.

The same position would apply if parties carrying on business as a partnership or co-operative society, private members club or other form of joint venture own freehold land or interest in land exceeding 99 years as this would automatically convert to a ninety nine year lease if one of the parties is not a Kenyan citizen.

Bill of Rights

The question which arises is that Article 40 under the Bill of Rights provides protection of right to property.

Can a Kenyan citizen who has been deprived of a freehold interest in land as a result of co-owning the land with a non-Kenyan citizen argue that he has been deprived of his right to property?

Parliament is empowered to enact legislation to make further provisions for the operation of the Articles of the new Constitution relating to land.

However, until such laws are enacted and procedures clearing laying the ground for conversion of land from one category or interest to another are spelt out, a lot of anxiety will continue to surround the provisions relating to land.

Land being a very sensitive issue, it is important for Parliament to act fast to create certainty and put the existing fears to rest.

It is also important that these are quickly communicated to the various land registries and consistent, fair and transparent procedural mechanisms are implemented so that the intents of the New Constitution are put into effect in an organized manner, with minimum adverse impact on investment and commercial activity.

Kiunuhe is a Nairobi Advocate. [email protected]