Freehold vs Leasehold Land in Kenya: What's the Difference?

When buying land in Kenya, one of the important things to understand is the type of tenure attached to the property. You may come across terms such as freehold and leasehold, but what do they actually mean?

The type of tenure can affect how you use the land, the obligations that come with it and how the property can be transferred or dealt with in the future.

Understanding the difference before buying can help you make a more informed decision.

What Is Freehold Land?

Freehold tenure generally gives the registered owner ownership of the land for an indefinite period, subject to the applicable laws and any restrictions registered against the property.

In simple terms, there is no fixed expiry date on the ownership period in the same way there is with a lease.

However, owning freehold land does not mean that the owner can use the property without following government regulations. Land use, planning requirements, environmental rules and other applicable laws still need to be observed.

What Is Leasehold Land?

Leasehold tenure gives a person the right to use and occupy land for a specified period under the terms of a lease.

The lease will state the period for which the interest is granted. Depending on the property, the lease period may be several decades or another specified term.

For example, a property may have a lease with a remaining term of 50 years or 70 years.

This means that when buying leasehold property, you should not only look at the purchase price. You should also understand how much time remains on the lease and the conditions attached to it.

Freehold vs Leasehold: Key Differences

The main difference is the nature and duration of the interest in the land.

The exact rights and obligations depend on the individual title, lease and applicable laws.

What Should You Check Before Buying Freehold Land?

If you are considering freehold land, do not assume that the word "freehold" means there are no issues to investigate.

Before making a purchase, you should still check:

·         The registered owner

·         The title details

·         Existing charges, cautions or restrictions

·         The property’s boundaries

·         The approved use of the land

·         Access to the property

·         Any disputes affecting the land

·         Whether there are outstanding obligations associated with the property

A land search and other due diligence can help you establish the current position before proceeding with the purchase.

What Should You Check Before Buying Leasehold Land?

With leasehold property, there are additional details that deserve attention.

One of the most important is the remaining lease term.

For example, if a property was originally granted on a 99-year lease but only 45 years remain, that is important information to consider before buying.

You should also check:

·         The original lease term

·         The remaining years on the lease

·         The registered owner

·         Any restrictions or conditions in the lease

·         Rent or other obligations, where applicable

·         Existing charges, cautions or restrictions

·         Whether there are requirements that must be met before transfer

·         The process and requirements for renewal, where applicable

Understanding these details can help you avoid surprises after purchasing the property.

Does Freehold Mean You Pay Nothing After Buying?

Not necessarily.

Buying freehold land does not mean that there will never be other costs or obligations associated with the property.

Depending on the property and its location, there may be applicable land rates, taxes, service charges or other obligations.

It is therefore important to confirm the property's outstanding obligations before completing the purchase.

Can Leasehold Land Be Sold?

Yes. A leasehold interest can generally be transferred, subject to the applicable law and the conditions attached to the lease.

However, the process may involve checking whether there are outstanding obligations or whether any consent or other requirements apply to the particular transaction.

This is why buyers should review the lease and title documents carefully rather than assuming every leasehold property follows exactly the same process.

Which One Is Better: Freehold or Leasehold?

There is no single answer.

The better option depends on the property, its location, your intended use and the terms attached to the particular title or lease.

For some buyers, freehold ownership may be attractive because there is no fixed lease expiry. For others, a leasehold property may be suitable because of its location, price or the type of property being purchased.

Instead of choosing based only on the words "freehold" or "leasehold", look at the specific property and the terms attached to it.

Why the Remaining Lease Term Matters

If you are buying leasehold property, the remaining term can be particularly important.

A shorter remaining lease may affect the property's future value, financing options and the decisions you make about the property.

If you are considering a leasehold property, find out exactly how many years remain and understand the applicable renewal requirements before committing to the purchase.

Get the Documents Checked Before Buying

Whether you are buying freehold or leasehold property, the documents should be carefully reviewed before making a major payment.

This may include checking the title, conducting an official search and reviewing any relevant agreements, restrictions or encumbrances.

For a significant property purchase, working with qualified professionals such as an advocate and, where necessary, a surveyor can help you carry out proper due diligence.

Know What You Are Buying

Understanding land tenure is an important part of buying property in Kenya.

Freehold and leasehold land are not simply two different names for the same thing. They come with different ownership structures, time considerations and obligations.

Before buying, take time to understand the type of tenure, check the relevant documents and confirm any conditions or obligations attached to the property.

Knowing exactly what you are buying can help you make a more informed property decision and avoid problems later.