Getting the Structure Right Isn’t Enough: A Land Lesson From a Kenya Tourism Deal

Land Structuring Tourism Investment Kenya is the practical starting point for anyone facing this situation, and it is where this article begins.

A foreign hospitality investor came to us this year wanting to build a small lodge on private land near one of Kenya’s wildlife areas. The corporate side was straightforward. The land side taught us something worth writing down, because the trap here isn’t obvious even to a well-advised buyer.

Land Structuring Tourism Investment Kenya: What the Rules Actually Require

The rules that decide land structuring tourism investment Kenya deals sit in the Constitution, the Land Control Act and the Land Registration Act, and the official texts are on Kenya Law. The sections below apply them to a real situation.

The first idea, and why it doesn’t work

The initial plan was simple enough on paper: have a trusted Kenyan individual buy the land, then grant the foreign company a long lease. It’s a structure we hear proposed often, usually with good intentions and no idea it’s legally hollow.

Article 65 of the Constitution limits non-citizens to leasehold land, capped at 99 years. That much is well known. Less well known is Article 65(3)(b), which addresses exactly this workaround: property held in trust counts as held by a citizen only if all of the beneficial interest belongs to citizens. If the real economic benefit of the land, the rent, the right to develop it, the value if it’s ever sold, actually flows to the foreign company, the arrangement is treated in law as non-citizen ownership regardless of whose name sits on the title. The nominee structure doesn’t evade Article 65. It just adds a person between the investor and the land who can mortgage it, die and pass it into an estate dispute, or have creditors attach it, for no legal benefit at all.

The better idea

Our client’s next proposal was more sophisticated, and it’s a structure we generally recommend: a Kenyan-owned company holds the freehold, and leases it to the foreign-owned operating company for up to 99 years. Two separate entities, one holding the asset, one running the business.

This works, provided it’s genuine. Article 65(3)(a) makes a company a citizen only if it’s wholly owned by citizens, so a properly constituted, wholly Kenyan-owned land company can hold freehold outright. The lease to the operating company sits exactly at the constitutional ceiling. Done properly, with the lease registered, this is a clean, standard way to separate land risk from operating risk, and it has a useful side benefit: a claim against the hotel business can’t reach the land underneath it. See also our guide to family land, succession, and land-holding companies in Kenya.

The catch that neither structure escapes

Here’s the part that took us back to the statute books. Kenya’s Land Control Act, a much older piece of legislation than the current Constitution, imposes its own separate regime on top of Article 65, and it applies specifically to agricultural land in a declared land control area. See our guide to controlled versus uncontrolled land in Kenya.

Section 6 of the Act makes the sale, transfer, or lease of such land void unless a Land Control Board consents. Section 9 tells the board how to decide, and one part of it isn’t discretionary: the board must refuse consent where the land, or a lease of it, is going to anyone who isn’t a citizen, a wholly citizen-owned company, group representatives incorporated under the Land (Group Representatives) Act, or a state corporation. A foreign-owned operating company doesn’t qualify. If the parcel in question turns out to be agricultural land within a land control area, which describes much rural land outside Kenya’s towns, that mandatory refusal applies to the lease from the Kenyan land company to the foreign operating company just as much as it would to a straight sale to a foreigner. The improved structure doesn’t sidestep this. Article 65 and the Land Control Act are simply answering different questions, and a deal can satisfy one while failing the other.

Section 107(3) of the Land Registration Act, 2012 says the same from a different angle: for the avoidance of doubt, any lease granted to a non-citizen shall not exceed ninety-nine years. A structure that satisfies one statute but not another still fails as a whole.

There is a real argument that this sits awkwardly against a Constitution that permits 99-year leases to non-citizens, but to our knowledge it has not been settled in court, so a deal should not be built on it. What can be relied on is the Act’s own definition of agricultural land, which excludes land whose title carries a covenant restricting it to non-agricultural use, tourism development being the obvious example. Land without that restriction needs either a different site or a Presidential exemption under section 24 of the Act, which is discretionary and should not be assumed.

One more wrinkle specific to this kind of deal

Investors looking at land near a conservancy hit a second, more practical trap: some of what tourism marketing calls a “private conservancy” is group-ranch or community land leased to an operator, not privately titled land. Community land carries its own disposal rules under the Community Land Act, 2016, entirely separate from everything above; we go through those rules in detail in Community Land in Kenya: The Community Land Act 2016 Explained. The two issues compound each other.

What this means in practice

The lesson for land structuring tourism investment Kenya projects is not that foreign investment in Kenyan land is impossible; plenty of it happens successfully. It’s that the corporate structure and the land’s own legal classification are two separate questions, and getting the first one right tells you nothing about the second. Before negotiating price, before commissioning designs, the two things worth confirming on any candidate parcel are whether the title is individually registered private land (not an undivided community or group-ranch interest), and whether that land counts as agricultural land in a land control area, and if so, whether its title already carries a non-agricultural use restriction. Both are checkable at the land registry before any money changes hands.