A bird in hand, they say, is worth two in the bush. Sometimes we get distracted by our toils and concerns as we work towards that often-elusive “brighter future” that we fail to notice the things that would trip us up – neglecting our responsibilities, or failing to observe the schemes that may derail our grand plans – as we pursue even more.  Enforcing your property rights and maintaining the responsibilities created by your ownership of the same is an obligation placed on every property owner.

If you own a piece of land or some form of property, the onus is upon you to ensure that you meet the obligations that come with owning that property. Most land-owners, particularly those who invest primarily for capital gains, fail to consider the possible outcomes of leaving their land unattended or, otherwise maintained by the standards of the obligations placed upon them merely by owning it. The very real risk of losing your property ownership happens at every moment and instance you, the owner, fail to enforce your rights or meet your obligations.

Property ownership is secured and administered by law, which also clearly defines ownership, the rights and responsibilities that attach to it. Ownership rights bestow to the holder the discretion to deal with the property as they deem fit within the law. The single greatest threat to property owners rights might just be inaction on their part in securing those rights by duly exercising both the rights and the obligations created by the mere act of ownership. Sounds simplistic I know, but indulge me by reading on.

Enforcing Property Rights and Responsibilities: A Simple Comparison

Let’s draw a simple comparison, for the sake of understanding, of ownership rights and responsibilities with another asset which may be privately owned but largely operated in public, say a motor vehicle.

If you bought a car today (ok, even yesterday!), you would be obligated (by the laws of the land) to register it and operate it within certain rules. For example, you may only operate it, or cause it to be operated by a duly licensed driver. You would be obligated/duty-bound/responsible to insure it, ensure that it bears its designated registration marks, and ensure that it is operated safely and within the law. If it is involved in an accident, for example, or even say in the commission of a criminal act, you will become liable, as its owner, to the extent that the law deems. You will be required to pay any import duties and taxes before it is registered. If that vehicle is a public service vehicle, you may bear even heavier responsibility with the imposition of additional regulations as regards condition, operation of the vehicle. If you fail to meet your obligations, your rights of ownership over the vehicle may be interrupted. Your license may be revoked. Your vehicle may be impounded. It may be subjected to inspection to assess its road worthiness. You may have to pay fines and penalties for any other breaches and infractions of laws and regulations that govern the use and operation of motor vehicles that you may be subject to.

Would it be correct then, to assume any different with an asset such as land?

Enforcing Property Rights and Responsibilities: What Are Property Rights?

When you own real property, you have certain rights that go along with that ownership, including:

• Right to control and possession of your property
• The right to confer use of the property to others (i.e. the right to lease or license your property)
• Right to disposition (the right to transfer the property – by sale, by gifting or by succession/inheritance)
• Right to privacy, right to use and the right to quiet enjoyment. These include the right to exclude others or use the property to secure development finance, for example.

Complementary to these rights are several others which attach to the property on account of the ones above. For instance, the owner of a property has the right to subsurface rights meaning that they can mine valuable resources on the land (again, within the regulations permitting the mining of natural resources). If the property is adjacent to a natural water body, say a river or lake, then the owner has the right to use the water say to fish or irrigate their land or for such other permissible use. These rights are often referred to as riparian rights and may be governed by laws such as wetlands management, environmental and conservation laws. Equally, an owner has the right to use the surface of the land and may make improvements/developments to the property subject to say the zoning laws and local authority ordinances within the jurisdiction that the property falls (development rights). They have the right to use the space above the land subject to any preferential rights that may take precedence over this right. For example, a land owner situated close to an airport may be restricted from building a structure taller than a certain height, or number of floors.

You cannot protect that whose existence is unknown to you. Knowledge of your responsibilities is the surest way of securing your rights to ownership of the property. It is imperative to understand what responsibilities are created on the owner of the property because ownership is only secure if you exercise both your rights and responsibilities.

Enforcing Property Rights and Responsibilities: Some Practical Measures

So, you’ve gone ahead and purchased a property and had it duly registered in your name. What basic steps can you take to proactively secure your property rights? You own the property but are there any natural or unintended consequences of failing to enforce your property rights? Under what circumstances could you lose your ownership rights over their property? Why would it be necessary for you to understand any of this?

Acquiring land usually requires significant financial resources and the consequences of failing to secure your property rights would, therefore, come at a high price. With the likelihood that you could lose your property, the less painful choice would naturally be to do all within your means to enforce your rights.

This list is far from exhaustive but here are some basic measures you can take to protect your property rights:

#1.  Enforcing Property Rights and Responsibilities: Visit your property regularly and be appraised of its condition.

Ensure that you regularly visit the property, or have an independent pair of eyes watching over your property. This will help you establish that your right to control and possession of your property is free and clear and is not being infringed upon. In the alternative, take measures to protect your interests. This will also ensure that you are appraised of new developments in the area and understand factors influencing property values.

#2.  Enforcing Property Rights and Responsibilities: Property Markers, Delineation of Boundaries, Fencing and Signage.

Ensure that you not only know the boundaries of your property, but that these are clearly delineated according to official property maps. This may require you to have your property beacons reestablished and for you to put in place physical measures, for example fencing and property signage warding off potential interference. If your property boundaries have been violated by a neighbor (encroachment) you might attempt to mutually arrive at a consensus on how to resolve the matter without undue or expensive litigation. This may take the form of hiring an independent property surveyor to delineate the boundaries afresh and to have the issue documented and recorded in the event it is required for future reference or resolution of further disputes. In the case of squatters, you will need to take more drastic measures such as reporting the matter to local authorities to have them removed. Depending on how long they have settled on your property, the period of illegal entry and occupation can allow squatters to counter your claim to ownership and might even give them access to apply to the courts to have your title extinguished. At the earliest moment, you should not only notify the authorities and the trespasser of their infringement on your property rights, but you must also demand that they immediately desist from the property forthwith. It is important that you have documentary evidence of whatever measures are taken to remove trespassers. You might also want to demand proof of any legal interest a trespasser has on your property and to document this so that they may not later rely on or adduce proof of legal interest beyond what they originally stated or provided.

#3.  Enforcing Property Rights and Responsibilities: Property searches.

Ensure that you regularly undertake a search on your own property. This will help you ascertain that there haven’t been any irregular actions performed on the property that you may be unaware of or uninformed about. What would the search reveal? It might reveal any changes to ownership and/or ownership rights, any registration of restrictions against the property or such other notable information relevant to you, the owner.

#4.  Enforcing Property Rights and Responsibilities: Keep up with your obligations

Ensure that you keep up with any obligations for land rent and rates, and these are maintained in your name as the title holder. This is only applicable for leasehold property. Certain rights, for instance the right to transfer property, will be impeded where you fail to meet these obligations. In the event of fraudulent transfer, you may also be able to support your claim by demonstrating that you were indeed the one who undertook maintenance over your property.

#5.  Enforcing Property Rights and Responsibilities: Keep and maintain records of obligations in owners name(s)

Ensure that any utilities or services connected to the property are made out or registered in your name. Where registered in the name of third parties, especially individuals who may be leasing or otherwise using your property, they could potentially use this as evidentiary proof of exercising ownership rights to your property.

#5.  Enforcing Property Rights and Responsibilities: Registration of restrictions

If you have encountered scenarios where you find people actively enquiring about your property as if it is on sale with the full knowledge that you never put the property up for sale, then you may even consider more austere approaches to protecting your property for instance registering a caution on your own property and keeping it in place as long as you hold the property.

Enforcing Property Rights and Responsibilities: Why Is This so Important?

There is an alarmingly high volume of land fraud cases and the fraud is becoming increasingly convoluted. Even more concerning for property investors, are the twin problems of squatters and illegal allocations which deprives many property owners of their rightful possession and control over their investments.

One of the more interesting cases reported in the media lately involves a case where a fraudster secured financing from a financing company which proceeded to register a charge on the property. The registered owner only discovered the fraud when he attempted to sell a portion of his property and his buyer discovered that there was a registered charge on the property after he had already paid a deposit on the agreed purchase price (which the seller then had to refund).

At issue is the contention that the financing company, which purported to issue the loan and proceed to charge the property on the basis of sound and proper due diligence, is now making a claim to dispose of the property on the grounds that the “owner” of the property had been in default since the loan was issued in 2016. The individual who had received the funds had somehow vanished into thin air and the actual, verifiable owner, now has to contend with the very real possibility of losing the property.

Did the owner lose the property you ask? Sadly yes. In this and other similar instances, there is no way to determine how the case might play out in the end. I would hate to be in the owner’s shoes being dragged into a legal tussle over a huge debt that I never benefited from and being unable, in the intermittent period, to do anything with the property as it remains the subject of a legal dispute, or as in this case, losing your property due to fraudulent act.

The court noted that the owner’s conduct showed “the image of a man who dealt with the issue in a casual manner”, that despite having reported the alleged forgery to police, he never gave samples of his signature for verification, never followed up the issue with the police, when confronted with the information that the property had been charged he still tried to sell the property and never did anything to protect his ownership rights. The owner only sought the protection of courts when statutory notices were issued and didn’t even bother to enjoin the borrower (the company that charged the property) in the proceedings, or attempt to press any criminal charges against the individual who committed the fraud. The property was valued at approximately KES 80 million and the matter is under appeal.

Can you imagine walking in his shoes?

Conclusion

Before you find yourself in the middle of legal entanglement, consider how much simpler, better it would be to just enforce your property rights. Land tends to elicit a lot of emotion because of its intimate connection to human aspirations, historical injustices and cultural roots. It doesn’t help that it is also regarded as a significant measure of one’s success. Taking the steps to enforce your rights can make the difference between a long and protracted legal battle which could culminate in significant losses or the peaceful, quiet enjoyment of your labours.

The practice of enforcing your rights starts at the point of engaging to acquire the property (due diligence). But it doesn’t end there. It extends to keeping up with the obligations that ownership places on you, and a culture of maintaining your interest beyond the transaction to acquire the property or merely acquiring it for speculative purposes.

One of the simplest ways to ensure that your land is secure is to ensure that the land is under productive use, even if it is just a simple project that can generate some income.

Don’t be one of those people that tend to forget their obligations and only remember their rights. There cannot be one without the other! If you require assistance securing your property and don’t know where to start, drop us an email on info[at]realestateguru.co.ke – let’s have a conversation to see how we can help you.

Before you enter into an agreement for leasing 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 of time, 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 use of land 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 to a large extent the subject of The Registered Land Act, Chapter 300 of the Laws of Kenya

Leasing Land In Kenya: Why Lease & Not Just Buy?

Leasing Land in Kenya has not been a common or traditional practice associated with the proprietorship of land. However, it is becoming an increasingly popular enterprise as the availability of agricultural land close to the erstwhile urban centres in the country continues to wane and also due to the high capital outlays for outright purchase of commercial land which has good access to surfaced roads and public transport networks.

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

It is notable that one of the many benefits (motivators?) of leasing land in Kenya is the tax-reducing nature of lease costs over business revenues and profits. In urban areas, some of the most common enterprises leasing land include roadside eateries (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/parks – semi-permanent structures established for business premises which can be easily relocated upon expiry of the lease.

Leasing of 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 the purposes of 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. Personally, I even know entrepreneurs who have leased land for the purpose of growing commercial forests.

Leasing Land in Kenya: What is a Lease?

A lease is a commercial interest in property granted by the owner of the property (proprietor/lessor) that confers on the person granted that interest exclusive possession of the property (lessee/tenant) for the period of time and under the terms and conditions defined under their agreement.

Basically, the agreement to lease defines the individuals making the agreement, the period of the lease, the rental/lease fee and all other terms and conditions under which the agreement has been made.

Under Section 56 ( a) of the Land Act no. 6 of 2012, the proprietor (owner) of land may lease it, or part of it, to any person for a definite term (or if for an undefined period either party may terminate the contract of lease). 

Are you considering leasing land to promote or develop a commercial interest? What then are the five most critical things you need to do before you make the arrangement to lease land from its owner(s)?

# 1. Search For The Property

Now that you have established that you want to lease land for commercial reasons you will go to the market to find potential lessors willing to lease to you land suitable for your purposes. You will have identified the why (usually the reason for which 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 for information from a wide variety of sources including the internet, newspapers and other publications, property agents, lawyers, local administrators and many others.

#2. Undertake Due Diligence

In law, there is a general principle which loosely translated from its Latin maxim, nemo dat quod non habet means that “one cannot give what does not have”. Undertaking due diligence can therefore be loosely said to 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, in the case of leases, it is relevant.

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 really, truly are the owner of the land, unencumbered. It will be important to not only clearly identify the owner but also to identify the parcel of land you are leasing including its boundaries.

You will also want to ascertain that there are no other third parties that have rights to the land that may supersede or interfere with the right to exclusive possession being granted to you by the owner. These can be revealed by a simple search and may show up as registered interests such us encumbrances.

Why is any of this necessary? Let’s take a simple example where a landowner seeking to lease out the land does so to an unsuspecting tenant without disclosing the fact that the property is under a bank charge. Here are a few challenges that will arise in this scenario:

• What happens to the lessee/tenant in the instance where the owner defaults on their loan repayments during the tenure of the lease?
• Would the tenant have made the same decision to lease the land were they aware of this fact and would they have opted for an alternative commercial engagement that would have completely avoided the risk of a legal entanglement?

These are just some of the possible complications that could arise. Now perhaps you may be perceiving the reasons why it is important to ensure that you are fully appraised on the ownership and status of the land you want to lease before you proceed.

Due diligence is often thought of as merely a formal search exercise. However, one can also take a broader view by asking probing questions about the veracity of ownership and by going as far as visiting the local administration offices to ascertain the status of the land.

Sometimes, an informal enquiry can yield much more than a formal one, providing many unexpected answers. It is usually a sign of bad faith when certain revelations on paper are markedly different from what is stated as knowledge on the ground, especially if the owner fails to disclose a material fact or makes misstatement of facts.

If you are going to have commercial interests established on a piece of land, it behooves you, the investor, to ensure that that interest is protected. It starts with a keen undertaking of due diligence measures.

#3. Have a Written Agreement

While certain oral agreements can be recognized by law in the event of 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 really be to ensure strict adherence to what was discussed and concluded by both parties but it also favors you who is 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 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.

A written agreement helps the parties to go over and beyond the legally implied rights and responsibilities. The debate as to whether to have an oral or written agreement can be solved by the following question – do you want to be crystal clear as to where both parties stand, and in particular, in the event of a dispute regarding the land?

#4. Register Your Lease Agreement

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

Get professional assistance to have the terms and conditions of the agreement brought into resolution 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 in the event that the lessor wants to sell the land at the end of the lease period, it is important to ensure that the lease is registered.

The reason for registration of leases is for the protection of both the lessor and lessee’s rights to be duly noted with the implied rights, duties and obligations of both parties taking precedence. In the event, for example, that a landowner is declared bankrupt or dies, a registered lease may serve the purpose of recognizing and protecting the rights of the lessee when a trustee to the bankrupt person or administrators to the estate of the deceased lessor are appointed.

For the purpose of registration, leases that have a duration of for 25+ years are treated in much the same way as transfers, with stamp duty payable at the applicable rates for transfers.

Ultimately, however, even with a registered lease, the rights of ownership still vests with the lessor so that, for example, the lessees may not sublet the land without the authority of the lessor

#5. Create an Exit Plan

It is rarely considered at the beginning of a venture to have an exit plan or to plan too many steps ahead of all the details that need to be sorted out at the time you are entering into the lease agreement. However, it is smart practice to have a clear sense of the end from the beginning, especially for commercial reasons.

One of the implied conditions on 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 clearly and plan ahead for the exit, which will include planning for what happens to any improvements you may have added on to the land in the time you were leasing it, and the costs associated with returning the land back to the condition in which it was originally handed to you, the lessee.

Your exit plan simply provides for the period immediately prior to disengagement with the lessor.

Leasing Land in Kenya: Conclusion

After signing a new lease agreement, be sure to have it registered. Some lessees go as far as to even register restrictive instruments. It may seem like “overkill” but in the age of broken agreements, it may eventually prove to be wisdom.

By recording your interest in a property you are leasing, you will secure your right to be notified of any changes in the status of the property, thereby avoiding the misfortune of later learning that the property was perhaps sold by the owner to a third party or that the property has been encumbered during the tenure of your lease to a third party with rights that supersede your own and which may later interfere with your tenure over the property, even when you are keeping up with your obligations to the owner.

If you would like to understand more about leasing land in Kenya, a good place to start is to understand some of the jurisprudence established on the same. Here is another resource that can help to clarify issues like the difference between a licence and a lease, rights, obligations and other implied conditions of a lease on both the lessor and lessee and much more.