Leasing land; laying out the process

Leasing land is one among several ways that one can acquire land in Uganda. Following guidelines provided by Minstry of Lands, Housing and Urban Development, a land owner can formalise an agreement with an intending land user in exchange for rent under the Leasehold tenure system.

Access to land

Caleb Ssentongo wanted to grow pine but did not have enough land on which to grow the trees. A friend advised him to get into agreement with someone whom he would pay annually in order to kickstart his project.

“I had the startup capital in terms of cash but the land was unavailable. There is a rich man in our village (Kalungu) who owns about 20 acres of mailo land so I negotiated with him that I use five acres for the start and that I would be giving him a certain amount of money every year while I wait to harvest my pine after its maturity,” says Ssentongo.

This is the seventh year and Ssentongo still has about 13 years to the end of the lease agreement but he is hopeful that he will achieve his dream at the end of this time because the trees are growing well and he has a good relationship with the landlord.

Like Ssentongo, there are many other people who may have projects that they want to start and they have what is required in terms of liquid capital (cash) but do not have the land that is needed to start the actual project.

According to Noah Kiganda Ssonko, a real estate manager at Eco Land Property Service, one can utilise the lease land tenure system to fulfill their dream.

A lease is a land tenure system where someone owns and uses property for a given period of time based on an agreement between a land owner and the prospective tenant.  In Uganda, it can be 49 to 99 years but it can be in between or even less.

“If you plan to have a lease, you need guidance from a professional such as a real estate dealer or a lawyer to guide you through the verification process to identify the land before you start using it,” he says.

Getting a leasehold title

You can get a lease from the government through its units and agencies such as KCCA, municipality or local council if you intend to use the land to construct commercial buildings; National Forest Authority, if you plan to have a forestry project; Uganda Wildlife Authority, for safari lodges.

An institution such as Buganda Land Board, company, Church or an individual can also lease out their land for a specific period of time. It is however important to remember that a lease can only be given on mailo or freehold land systems. 

Ministry of Lands, Housing and Urban Development spokesperson Dennis Obbo says that all lease transactions are legally subject to titling and the document that is issued is called the leasehold title.

He advises that the person seeking to get a lease title must fill Forms 8, 10, 18, 23, a set of three authentic deed plans that should be accompanied with  three passport photographs, receipts of payment and a forwarding letter requesting for a leasehold title signed by the district land officer of the respective district where the land is located.

Obbo reveals that the applicant presents the full set of original documents and a photocopy of the same, to the department of land administration for perusal.

“If the photocopy is stamped ‘Received’ and returned to the applicant, The applicant checks with the Department of Land Administration after 10 working days to confirm their approval or rejection, and is given a letter of advice on the fees to be paid,” he explains

He adds that the person seeking to get the leasehold title has to pay stamp duty, which is one per cent of the premium and ground rent and thereafter,  documents fully signed and sealed by the  district land board chairperson and secretary are embossed by Uganda Revenue Authority (URA).

He says that the fees involved include one per cent of the premium and ground rent paid to URA; registration fees at Shs10,000; assurance of title at Shs20,000; issuance of title at Shs20,000 and preparation of lease at Shs20,000, all payabale at the ministry or district.

Terms and conditions of  lease

When you are getting into a lease agreement, besides the name of the landlord, tenant and occupants, there are terms and conditions necessary for the lease to be effected such as;

The purpose or what you will be using the land for (fuel station, agriculture, commercial building) should be defined, according to Ssentongo. “The landlord should know what you are using the land for and it should be outlined in the agreement,” he says.

For instance, you cannot have land leased to you by the National Forestry Authority and then you use it for construction of commercial buildings.

In the lease agreement, the period of time for which someone is going to use the land is the next important thing after knowing the purpose. If you are leasing land from an individual, you can agree to have the land depending on how long your project will last.

If you will be growing trees such as pine for instance, Ssentongo advises that you can ask for a time frame of 20 years because pine takes about 15 to 20 years to mature.

The terms of payment such as the premium and the annual payments should be stated clearly in the agreement. The amount of money you pay to the landlord is negotiable and depends on the nature of activity and type of business you are using the land for.

The amount of land to be used should also be indicated in the agreement. Even if the landlord has more than what you want, it does not give you authority to stretch your project beyond the space limitations you made.

Kiganda says, “The landlord should also have a right to inspect and monitor how his land is being used depending on what is in the agreement. There should be limitations to usage depending on the time. For instance, if you agreed to use the land for seasonal crops, you are not supposed to grow long term crops such as coffee or pine that stay long.”

Terms of termination

Leasing land is something that is built on mutual understanding. The agreement should state the terms of termination, says Kiganda, and both the tenant and landlord should be at liberty to terminate the agreement.

On the side of the tenant, in case you agreed to pay a certain annual payment but the project you planned for fails to workout, the agreement should give you the liberty to leave, just like it is with the monthly rental system.

He says, “If after some time, the landlord wants to sell the land, he should be free to terminate the agreement or even refuse to renew the agreement upon expiry. However, in both cases, the party that wants to terminate the agreement should give notice before the actual termination depending on the time stated therein.”

In the case where the landlord wants to arbitrarily terminate the agreement before expiry or the gestation period, you are protected by the courts of law. “This is more common with leasing from an individual who may want to terminate the agreement before expiry after realising that your project has picked up so well,” he notes.

“In the agreement, it should be stated that as long as it is not an issue of non-payment, the lease should carry on until expiry. When termination is the option from your landlord, you can go to court and after evaluation for the surface value of the items and property that are on the land, the time wasted and expected gains from the venture (damages), the tenant can be compensated,” Kiganda says.

Expiration

The lease agreement should spell out clearly the clause of automatic renewal but subject to terms and conditions of the time. For example, if you leased land 49 years ago, the value of the premium and rental fees may have been a bit low compared to the current money value. These should therefore be adjusted to fit the real time situation.

“Upon expiry of the lease time, you may have accumulated a lot of property and assets that are worth a lot of money and may not wish to lose them. Oftentimes, the landlord may claim their property after expiry so the clause of automatic renewal protects the tenant against discontinuity. If you do not have the clause in your agreement, all that is found on such land belongs to the landlord,” Kiganda remarks.

Also, if you got a lease from an individual, you can ask that the person allows you to buy the right to full ownership of the land after expiry to transfer ownership. In case of local authority or government body, you can apply to have the land as a freehold property so that you use it freely. However, you can never buy full ownership on Kabaka land but can always renew the lease.

Transfers and subleasing

Before the expiration of the lease time, a tenant may transfer their leasing right to another person by selling their lease right. The new tenant must be introduced to the landlord and will continue with the lease subject to the same terms and conditions until expiry.

The new tenant also has a right to have the lease renewed for continuity like the first tenant from whom he bought the lease right. The landlord (especially in individual ownership) can also sell the land and introduce you to a new landowner for continuity.

Kiganda says, “It is also possible that a tenant does not totally go out of the lease agreement but instead sub-leases the land to another person. In the situation where I do not want to sell my lease, the agreement should mention the freedom of subleasing to third users.”

The terms and conditions should not differ and they should be in line with those of the owner when it comes to usage, space and purpose.

The bottom line is that both parties; the tenant and the landlord, should be protected and therefore the agreement should include even the neglected detail of death. “If any of the parties dies along the way before the expiry of the lease, the other party should be able to continue uninterruptedly without changing anything. The heir to the property usually becomes the person in charge of the property after death,” he says.