Regulatory and legal conditions can promote or curtail cross-border investments in real estate. According to African Law and Business, below are some of the key aspects of laws in Kenya that investors (especially foreigners) may need to know. The report gives investors a snapshot of legal requirements in different African countries including Kenya.

  1. On restrictions; Are there restrictions on foreign entities holding interests in land, and if so, how are they expressed?

Non-citizens are prohibited from owning freehold land in Kenya, or having a long lease in excess of 99 years, as set out in Article 65 of the Constitution and section 107(3) of the Land Registration Act.

For a corporate entity to be considered a “citizen” under this law, it needs to be wholly and exclusively owned by one or more Kenyan citizens; i.e. 100% of its shareholders must be Kenyan.

In addition, non-Kenyans are restricted when it comes to owning agricultural land. Section 9 of the Land Control Act says that any dealings with agricultural land (including dealings with a company holding agricultural land) need application for consent from the relevant Land Control Board in the area the agricultural land is situated. The Land Control Board must refuse to grant this consent whenever the sale, transfer, lease, exchange or partition is made to a non-Kenyan or a private company whose shareholders are not Kenyans.

If this law is not complied with, then any title to the land and any subsequent dealings on it can be declared void.

There are no restrictions on the granting of securities to foreign investors. Although, as mentioned above, it should be noted that foreigners are restricted from owning agricultural land or shares in a private company which owns agricultural land.

  1. On financing; Are there any restrictions on the purposes for which money may be lent?

If the aggregate amount of any loans or advances for the purchase, improvement or alteration of land exceeds 25% of the amount of its total deposit liabilities, then the Banking Act says that this can only be done by a mortgage finance company.

Furthermore, a borrower from such mortgage finance company can only use the money for the acquisition, construction, improvement, development, adaptation for a particular purpose, or alteration of land.

3. On collateral; How does the law work in relation to security interests in this jurisdiction, and over which classes of assets may security be granted?

Security may be taken as collateral over various assets. These include immovable property (land buildings and the rights or interests that go with the land), and movable property (such as Treasury Bills, bonds, shares, chattels, commercial paper, book debts, negotiable instruments, and intellectual property).

4. On trusts; Does the jurisdiction recognize the concept of a trust and the role of a Security Trustee?

Kenyan law recognizes the concept of a trust and the role of a Security Trustee. In a trust, the trustee administers and manages the assets for the benefit of a third-party known as the beneficiary. A security trust may include a deed of trust, mortgage, bond or other instrument entered into between the parties to the trust.

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