Understanding the “Residue of the Lease” in Kenyan Property Transactions
By: Jane Lynette Muthoni Nyutu
“The sale of the Property to the Purchaser shall be by way of transfer of a lease for the residue of
the term…”
If you are purchasing a leasehold property in Kenya, you have likely come across the
phrase “transfer of the residue of the lease” in an Agreement for Sale. While it may appear
to be standard legal wording, it answers one of the most important questions every
purchaser should ask before signing a sale agreement:
What exactly am I buying?
One of the most common misconceptions among property buyers is that purchasing a
leasehold property means acquiring a brand-new lease for the period stated in the
agreement. In reality, you are purchasing the unexpired portion or residue of an existing
lease, and not necessarily a fresh lease. To illustrate this, picture a scenario where the
Government granted a 99-year lease over a property in the year 2000. If the owner decides
to sell the property in 2026, the purchaser does not receive a new 99-year lease. Instead,
they acquire 73 years which is equivalent to the number of years remaining under the
original lease. This is because a lease is a diminishing legal interest once time has elapsed,
it cannot be recreated or transferred.
Why does this matter?
The remaining lease term can significantly influence the value of the property, its
marketability and, in some cases, a lender’s willingness to accept it as security. A property
with 90 years remaining on its lease presents a different investment proposition from one
with only 20 years left, even if both properties are in the same location and appear
identical.
Before purchasing any leasehold property, it is prudent to ask:
i. How many years remain on the lease?
ii. Has the process of lease renewal or extension been initiated, where applicable?
iii. Are there any outstanding obligations under the lease that may affect future
renewal?
After all, in any property transaction, the most important question is not simply “Do I
own it?” it is “What exactly do I own, and for how long?”
