The Key Factors Considered Before Granting Renewal/extension Of Leasehold Titles In Kenya

 Introduction  

When a landowner submits an application for the extension or renewal of a lease term, several factors come into consideration before the application is either approved or declined. These factors include:

1. The citizenship of the applicant 

Consideration of the applicant's citizenship is important, as it influences the duration for which the lease term can be extended and, in the case of renewal, whether the applicant has the preemptive right to renew the lease. It should be noted that non-citizens are limited to a maximum leasehold tenure of 99 years and they do not possess the pre-emptive right for lease renewal. It is important to note that if the lessee is a corporate body the determination of its citizenship is stipulated under Article 65 (3) of the Constitution of Kenya, which provides that a corporate body shall be regarded as a citizen if it is wholly owned by a Kenyan Citizen.   

 2. Compliance with the terms and conditions of the existing lease 

Evidence of the Lessee having complied with the terms and conditions of the existing lease should be provided e.g. maintaining the prescribed use of the land and not using the Land in a manner that may be considered dangerous/offensive by the National/County Government. This is to ensure should the lease be extended or renewed, the owner will not breach the terms and conditions of the lease. 

 3. Confirmation of payment of land rates and land rents 

All the outstanding land rates and land rents should have been settled and the applicant should provide land rates and land rent clearance certificates or the respective payment receipts.   

 4. The existing encumbrances on the leasehold title 

Copies of all existing encumbrances registered against the leasehold title, including charges, sub-leases, easements, wayleaves, etc., must be submitted. It's important to note that registered encumbrances will not adversely affect the application for the extension of the lease term or the renewal of the lease. However, where there is an existing charge, the applicant should liaise with the lender and make the requisite arrangements for either discharging the property entirely or registering a replacement charge against the new Leasehold Title.  In instances where there are long-term subleases registered against the Title, surrender of the lease in respect to all sub-leases should be registered first against the old Title to facilitate the replacement of the sub-leases upon grant of the new leasehold Title. The purpose of notifying and submitting these encumbrances is to ensure that if there is a valid encumbrance registered against the title, it is appropriately reflected in the new lease to be issued, hence protecting the rights and interests of such third parties. Therefore, in cases where there are no encumbrances registered against the title, or if an encumbrance in the expired lease has ceased to exist (i.e, if there is a discharge of a charge), the new lease will be issued without the presence of any encumbrances. 

 5. Recommendation from Relevant Government Authorities  

During the application process for both the extension of a lease or the renewal of a lease, the guidelines/rules on extension and renewal of leases require that representations be sought from relevant government authorities by way of letters, that is the circulation letters.  For instance, if the Director of Physical Planning or the Director of Survey receives a circulation letter from the NLC and raises an objection to the proposed extension or renewal of the lease, the extension or renewal may not be granted until the objection has been fully addressed. 

 6. Substantial transaction requirements 

The Land (Extension and Renewal of Leases) Rules, 2017 provide for additional factors to be considered for applications relating to “substantial transactions”. Section 2 of the Land Act, 2012 defines a “substantial transaction" to include a transaction that involves the transfer, leasing or licensing of land to a local or foreign investor either alone or in a joint venture to carry out developments in agriculture and other approved ventures with direct developmental benefits for Kenya through (i) commitment for improving food security;  (ii) infrastructural developments which benefits the public; or iii) strong linkages to other industries in Kenya and generates substantial foreign exchange through import substitution and exports. 

The factors to be considered for substantial transactions include the following: 

1. whether the renewal is beneficial to the economy and the country as a whole; 
2. whether the investment is in accordance with national or regional or county policies; and 
3. whether the renewal is in the public interest, public order, public safety, public health, public morality, and land use planning. 

What happens if an application for extension or renewal is declined? 

If an application for the renewal or extension of a lease is rejected, the landowner must be provided with justifiable reasons for the refusal. One of the reasons that could be provided for the rejection of the application is that the land is required for a public purpose such as the construction of public roads, railways, or public utilities. In such cases, the National Land Commission must satisfy itself that the land is already included in the County or National Spatial Plans, in relation to county and national governments respectively. Additionally, the Commission must provide a justification for the use of the land for public purposes. 

Conclusion  

It is important to mention that if a lessee is aggrieved by the decision not to extend or renew their lease, he/she has the right to appeal the decision within 30 days to the National Land Commission (NLC) through its office in the respective county. Within Thirty (30) days of receipt of the appeal, it is referred to an ad hoc Independent Appeals Committee which will hear and determine the appeal within 60 days. If the lessee is still dissatisfied with the decision granted, the party may further appeal the decision to the Environment and Land Court.