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1. Property Rights
1.1 Legal Protection
1.2 Registries
1.3 Formal Owndership
In-Country Assessment Information

1. Property Rights

This is the weakest of the six elements and the top priority for improvement. Although there have been efforts to improve legal protection of property rights in Kenya, new laws have not been fully implemented and many challenges persist in practice. The major challenge to implementation is the fact that the existing land regime remains complex, leading to a lack of awareness of the legal provisions and rights involving land ownership and transactions – especially among small businesses.

Property registries are limited and flawed, with multiple allocations and registrations of single plots of land common. The keeping of cadastral information is inefficient resulting in rent seeking and numerous scandals involving the Ministry of Lands, especially under past political regimes. The lack of a single decentralized and reliable registry is a major hindrance as buyers and sellers still come to the Ministry of Lands headquarters in Nairobi to obtain cadastral information. Lack of an electronic, digitally searchable lands register has also impeded the pace of land transactions, presenting opportunities for extralegal payments.

Formal ownership is also constrained by land speculation, corruption, political interference, and the abuse of power. Consequently, ownership of urban property by MSEs is low because of the high costs of land driven by speculative pressures, leaving most of them dependent on frequently informal renting. Typical informal arrangements for leasing commercial property are conducted on per-day rental terms with subletting up to the fifth level within Nairobi’s Central Business District (CBD).

Even where formal lease contracts exist, small businesses are often not knowledgeable or confident enough to undertake meaningful negotiations of rental terms. The prevalence of legal jargon in lease documents inhibits full comprehension of leases and negotiation of terms by small businesses, leading to exploitation by property owners.

The abuse of tenant rights happens not only in illegal evictions but also through the negligence of property service obligations by landlords. For instance, maintenance of common areas is often not done and if it is provided additional fees are charged. As a result most tenants do not seek provision of basic services due to the high costs involved.

 

Goal – Property rights that are legally protected, secure, recorded in a single, accurate, widely accessible electronic registry and that lead to high levels of formal ownership for all citizens

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1.1 Legal Protection
Core Question: Does an effective and sufficient legal framework exist to protect property rights for all citizens? No – Weak – However, new Constitution and National Land Policy set out a comprehensive reform agenda.

Legal Framework
1.1.1 Are property rights clearly defined and protected by law? No – Weak – Ranking 102nd out of 142; Score 3.41 out of 7 Trend ↑

Security of Tenure
1.1.2 Can citizens challenge the legality of government takings? No – Weak – 76th out of 142; Score 3.4 out of 7 Trend ↑

Source:Global Competitiveness Report 2011-2012 – World Economic Forum

www.weforum.org/issues/global-competitiveness

Bundle of Rights
Survey Question
SQ1: What is the bundle of rights (group of rights such as occupancy, use and the right to sell or lease) associated with both residential and commercial property ownership? Weak – freehold (absolute proprietorship) and leasehold; government is implementing comprehensive reforms to correct former privatization acts at the expense of indigenous and communal land rights.

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1.2 Registries
Core Question: Does a reliable property registry exist
including cadastral, title and mortgage lien information? No – Very Weak, system has resulted in land speculation, corruption, political interference and the abuse of power. In addition, poor record keeping has allowed multiple allocations and registrations of single plots of land.

1.2.1 Cadastral Information
Status – Very Weak – Modernization program called for in National Land Policy adopted December 2009 but not yet fully implemented.

Survey Questions SQ2: Is cadastral information (information about the dimensions and location of land parcels) easily accessible to the public? No

SQ3: Is zoning/permitted use information included and are use regulations respected and enforced? No

SQ4: Are Geographic Information Systems (GIS) including Global Positioning Satellite (GPS) information used to create and update the registry? No

Source: Ministry of Lands – www.ardhi.go.ke/

Civil Society Resource: Institution of Surveyors of Kenya www.isk.or.ke

1.2.2 Title Registry
Status – Weak – Ranking – 133rd out of 183 Trend =– currently not central and in non-digital form, new Land Policy aims to digitize the title registry

1.2.2.1What is the number of procedures required to register the transfer of a property from one owner to another? 8

1.2.2.2 What is the duration of time in calendar days that it would take to complete the transfer? 64

1.2.2.3What is the total cost of the transfer including all fees, taxes, etc. expressed as a percentage of the value of the property? 4.3%

Source:Doing Business 2012 – Registering Property, World Bank
www.doingbusiness.org/data/exploreeconomies/kenya

1.2.3 Mortgage Registry, only held by individual commercial banks Status – Very Weak

Survey Questions
SQ5: The mandatory use of notaries or similar officials slows down and adds cost to the process. Does a notary need to be involved in the registration process? Yes

SQ6: Is information in the registry available electronically? No

SQ7: Title insurance is indemnity insurance against financial loss from defects in title and from the invalidity or unenforceability of mortgage liens. Is title insurance available to lenders? No

Source:Financing Homes 2008, World Bank and International Housing Finance Corporation

http://www.cipe.org/sites/default/files/publication-docs/Financing%20Homes%202008.pdf

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1.3 Formal Ownership

Core Question: Do citizens understand and trust property rights institutions and avoid the informal sector? No – Very Weak – the ineffectiveness of the current system has led to mass disinheritance of communities and individuals; inequitable distribution of land; and ineffective governmental regulation of private property rights.

Survey Questions
Land
SQ8: What is the status of land ownership? Very Weak – Land is either government land, community land (trust land) or private land. Over time there has been a systematic breakdown of land rights and land administration. The new Land Policy seeks to address these issues.

Source: Ministry of Lands – www.ardhi.go.ke/

Home Ownership
SQ9: What is the percentage of formal home ownership? Very Weak – 16%

Source: National Housing Corporation – www.nhckenya.co.ke/

Informal Sector
1.3.3 What is the percentage of service firms that report competition with unregistered or Informal firms? 80% – Very Weak Formal Sector (2007)

Source: Enterprise Surveys

www.enterprisesurveys.org/ExploreEconomies/?economyid=101&year=2007

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In-Country Assessment Information Field Question (FQ) 1: Even if legal provisions exist, what is the actual status of property rights and ownership for small businesses?

Citizens lack information on the Constitution and related land policies and laws, hence they cannot demand accountability. Inadequacies in implementation of property rights laws and lack of political will, especially at the local council level, hinder their enforcement. This lack of enforcement of the regulatory framework leads to exploitation by property owners with many cases of collusion with the Ministry of Lands officials.

FQ 2: Are standard purchase contracts used for commercial properties? If not, how are property purchases usually completed?

While regulatory frameworks, purchase contracts and statutes are in place, many purchase contracts are completed through – or in many cases supplanted by – informal arrangements. Such arrangements are based on trust but have no legal enforceability.

FQ 3: Do separate contracts or other means exist to hide value from authorities when registering property transactions?

Different property valuation methodologies are used often leading to conflicting valuation reports especially between government valuers and private sector valuers. However, it is difficult to ascertain whether these cases are deliberately used to hide property values from the authorities.

FQ 4: Are standard leases used for commercial space? If not, what is a typical arrangement for rental?

Informal markets exist and operate on per day terms. Informal arrangements are characterized by subletting of up to the fifth level and subdivision of premises into tiny stalls in the city center (Nairobi). Most formal leases are not negotiated by both parties, leading to exploitation of the tenants by the landlord. Legal jargon prohibits comprehension by users, i.e. leases are not prepared in simple language that is easy to understand by a lay person.

FQ 5: What are the typical rates, terms and availability of office, retail, manufacturing and logistics facilities in both cities?

Rental prices in Nairobi range from USD 10 to USD 22 per square meter depending on office space or retail in the city center with provisions for rent escalation ranging from 7 to 10 per cent every year. In Mombasa, rental costs are about USD 5 per square meter. There is more availability for office and retail space than for manufacturing in both cities. The term periods for renting begin from a minimum of one year upwards.

FQ 6: What are the processes for government expropriation of property especially notice and due process for owners? Are those laws followed or do expropriations happen by collusion between officials and connected elites?

The country has an enabling law, a good land tenure system, and laws protecting private property rights. There are examples of acts governing expropriation being aptly followed; e.g. due compensation has been made in the case of takings for the Thika Highway expansion from four lanes to eight. However, lawful government expropriation is complicated by the existence of multiple title deeds for the same land parcel making it difficult to identify real owners to determine compensation.

FQ 7: Are business owners compensated fairly when their property is taken for public use?

Delays in the processing of compensation are common. Cases of non-consensus in property values and conflicting valuation reports are also common. Members of the public do not have sufficient information on the procedures to be followed when faced with expropriation.

FQ 8: What protections do businesses who lease space have from arbitrary eviction by owners?

The lack of formal contracts between landlords and tenants means that there is no recourse for tenants when landlords forcefully evict them. Landlords frequently involve agents in evicting tenants from their property. Most of these agents do not follow the legal procedures. Some landlords involve vigilante groups to help them carry out evictions.

FQ 9: What services are typically provided to tenants (common areas, public access, security) and what means of redress are available if services are not provided?

Tenants lack awareness of their rights and as a result there are numerous cases of tenants’ rights violations, e.g. some landlords withhold maintenance of the premises. Tenants rarely ask for basic services due to the high fees charged when services are rendered.

FQ10: What is the actual experience of transferring a property, accessing the registry and dealing with registry officials?

The lack of single, accessible, electronic registry means that land issues and services cannot be completely decentralized. Cases of misplacement of paper files are common and issues of multiple allocations of title deeds still exist. Doing searches on property is bureaucratic, expensive, and a long and tedious process.