A Guide to Renewal and Extension of Leasehold Interests in Kenya

Leasehold is a standard form of property ownership in Kenya, providing individuals and businesses with the right to use and occupy land for a specific period, usually 33, 50, or 99 years. Please read this article to learn more about leaseholds and freeholds and the differences. As the lease term approaches its end, lessees often seek to either renew or extend their leases. Understanding the differences between lease renewal and extension, the governing laws, and the procedures involved is crucial for both lessees and lessors. 

Differences Between Lease Renewal and Extension

1. Lease Renewal:

Lease renewal involves creating a new lease agreement for the same property after the expiration of the original lease. It essentially starts a new lease term with potentially new terms and conditions. Although the terms of the new lease may closely resemble the old lease, it is legally considered a separate and independent agreement.

Key features of lease renewal

• Renewals occur either before or after the original lease has expired.
• Requires negotiating new terms and conditions and executing a new lease agreement.
• The commencement date of the new lease is typically after the expiry of the previous one.

2. Lease Extension:

Lease extension refers to prolonging the duration of the existing lease without creating a new lease agreement. The original lease terms and conditions generally remain unchanged.

The extension is done during the subsistence of the original lease before it expires.

Key features of lease extension

• The original lease remains in force.
• The parties agree to extend the duration of the existing lease without substantive changes to other terms.
• No need for a fresh lease agreement, but an addendum or memorandum is often executed.

Key Difference: Renewal of leases creates a new contractual relationship, while extension maintains the existing lease relationship but prolongs its term. 

Governing Law

The Land Act, of 2012, is the primary legislation governing lease renewal and extension in Kenya. It provides the overarching framework for land administration and management in the country.

Additionally, the Land (Extension and Renewal of Leases) Rules, 2017 provide detailed procedures and timelines for renewal and extension processes. These laws provide the framework for lease extensions and renewal procedures, requirements, and considerations.

Procedure for Lease Renewal

1. Notice of Impending Expiry:
   • The National Land Commission (NLC) is required to notify the lessee within five years before the expiry of the lease about the impending expiration and the lessee’s pre-emptive right to apply for renewal.
2. Renewal application:
   • The lessee must apply for renewal by submitting Form LA 23 to the NLC.
   • The application should include necessary documents such as ID/Passport, letters of administration (if applicable), current official search over the property, certificate of incorporation (for companies), and clearance certificates.
3. Review/Evaluation of the Application:
   • The NLC, after 7 days of receipt of the application, forwards an application to the relevant authority (Cabinet Secretary or County Executive Committee Member related to matters of land) for lands owned by the National or the respective County government for review.
   • To determine whether to grant or not grant renewal, the national government or county government shall require—
     • in the case of a company, the names of the directors and their citizenship status, including a search from the Registrar of Companies showing the shares of each director;
     • clearance certificate from the relevant authority in relation to all land rates and rents; and,
     • evidence that the lessee has complied with the terms and conditions of the existing lease to the satisfaction of the lessor.
4. Decision and grant of new lease:
   • The national or county government, within ninety days of receipt of the application, can either approve the renewal of the lease for a specified term with such terms and conditions as may be specified or not approve the renewal of the lease and give the reasons thereof.
   • The decision of the national government or county government under above is forwarded to the Commission for implementation.
   • If approved, the lessee may need to surrender the existing lease and be issued a new certificate.
   • Where approval of renewal of the lease is granted, the Commission shall—
     • require the lessee to have the land revalued to determine the payable land rent and other requisite fees;
     • require the lessee to have the land re-surveyed and geo-referenced; and;
     • issue a new letter of allotment in Form LA 5 set out in the Schedule for the parcel, and a new lease is issued per the provisions of the Act and the Rules.

Procedure for Lease Extension

1. Application for extension:
   • The lessee can apply for an extension at any time before the expiry of the lease.
   • The application is made to the National Land Commission (NLC) through the office of the Commission in the respective county by submitting Form LA 22.
   • The application should include:
     • A copy of the existing lease
     • A justification for the extension, such as development plans or business needs
     • Any other relevant documents
2. Review of Application:
   • Upon receipt of the application, the NLC, within seven (7) days, forwards it to the Cabinet Secretary (for leases granted by the National Government) or the County Executive Committee Member responsible for land (for leases granted by the County Government).
   • The application is reviewed within ninety days of receipt. It can be approved for a specified term with such terms and conditions as may be specified or be declined with reasons provided.
3. Factors Considered for Extension:
   • Citizenship status of the lessee (for companies, the citizenship status of directors).
   • Clearance certificates for land rates and rents.
   • Information on existing encumbrances on the title.
   • Compliance with the terms and conditions of the existing lease.
   • For non-citizens, ensuring the cumulative lease term does not exceed ninety-nine years.
4. Decision:
   • The extension is either approved for a specified term with conditions or declined with reasons provided.
   • If approved, the lessee may need to:-
     • require the lessee to have the land revalued to determine the land rent and other requisite fees payable;
     • require the lessee to have the land re-surveyed and geo-referenced, where applicable;
     • prepare a lease for the extended period, stating the terms and conditions of the extension;
     • have the lease executed; and,
     • forward the executed lease to the Registrar for registration and note the extended term in the register.
   • Where either the County or national government declines to extend the lease, the Commission shall communicate the decision to the lessee within seven days of receipt of the decision and advise the lessee of the right of appeal.

Please Note: The grant of an extension of the lease shall not extinguish the unexpired term and shall take effect from the last day of the unexpired term.

Key Considerations

1. Compliance with Existing Lease Terms – The respective government, County or national, will only consider renewal or extension applications if the lessee has fully complied with the terms of the existing lease.
2. Government Revaluation – Lease renewal or extension often triggers revaluation of the land, which may increase the annual land rent or land rate.
3. Time Sensitivity – It’s crucial to initiate the renewal or extension process well in advance of the lease’s expiry to avoid potential delays and complications.
4. Public Interest – The government, county or national, may refuse renewal or extension if the land is required for public purposes. Demonstrating how the proposed land use aligns with public interest can be beneficial.
5. Legal Counsel – Engaging qualified lawyers can provide expert guidance throughout the process, ensuring compliance with all legal requirements and maximizing the chances of a favorable outcome.
6. Appeals – If the application for renewal or extension is denied, the lessee may appeal the decision through the appropriate legal channels.

Conclusion

Understanding the differences between lease renewal and extension, the governing laws, and the procedures involved is essential for lessees and lessors in Kenya. By following the outlined procedures and ensuring compliance with the relevant regulations, parties can secure their property rights and avoid potential delays and legal disputes.

How Njaga & Co Advocates Can Help

At Njaga & Co Advocates, we pride ourselves on providing comprehensive and client-centric legal solutions in real estate and conveyancing. Whether you are a landlord, tenant, investor, or developer navigating the complexities of lease negotiations, lease drafting, renewal, or extension, our team of talented and experienced legal professionals is here to offer expert guidance every step of the way.

Contact us today for professional and efficient legal support for your real estate and conveyancing needs!