Possibility and Mechanisms by which foreigners can own land for agriculture in Uganda.

By Timothy N. Akampurira

Since time immemorial, the agricultural sector in Uganda is and/or has been classified as the backbone of our economy by employing the majority section of the country’s population and contributing substantially to our GDP and export revenues as a country. Agriculture however is not carried out or practised in a vacuum but rather on land owned by persons (both citizens and non-citizens) under the various land tenure systems currently existing in Uganda.

This article is an examination of the practical steps and legal intricacies that foreigners can undertake to acquire land for agricultural purposes in Uganda as guided by the major enabling laws (as amended), to wit, the 1995 Constitution of the Republic of Uganda, Land Act Cap. 236, Uganda Citizenship and Immigration Control Act Cap. 313, Companies Act Cap. 106, Stamp Duty Act Cap. 339, Registration of Titles Act Cap. 240 and relevant case law.

Who is a foreigner under the laws of Uganda?

The term “foreigner” is not defined under the laws of Uganda for purposes of land ownership however the classification or distinction is based on citizenship, that is, whether one is a Ugandan citizen or a non-citizen. Consequently, a foreigner can be described as a non-citizen of Uganda or a foreign national. Section 1 of the Uganda Citizenship and Immigration Control Act describes a person who is a non-citizen of Uganda as an alien person.

Under the Section 40(7) of the Land Act, a “non-citizen” includes: a person who is not a citizen of Uganda as defined by the Constitution and the Uganda Citizenship and Immigration Control Act; a corporate body in which the controlling interest lies with non-citizens; a company in which the shares are held in trust for non-citizens; or a company incorporated in Uganda whose articles of association do not contain a provision restricting the transfer or issue of shares to non-citizens. “Controlling interest” is further interpreted under Section 40(8) of the Land Act to mean in the case of companies whose majority shares are held by persons who are not Ugandan citizens, and in the case of companies without shares, a company in which decisions are arrived at by the majority of members who are not citizens.

In the case of companies specifically, we must highlight that the key factor in determination of whether a company or body corporate is classified as a citizen or non-citizen of Uganda is by looking at the company’s memorandum and articles of association or corporate body’s constitution. In order to be considered as a citizen of Uganda and not a foreigner, a company’s documentation must clearly demonstrate the controlling interest in the company to be Ugandan and, must also restrict the transfer or issue of shares to non-citizens of Uganda. A foreigner should hence ensure compliance with the foregoing citizenship requirements to broaden such foreigner’s possibilities of the land tenure one may acquire in Uganda.

How can a foreigner acquire land in Uganda for agricultural purposes?

Generally, every person in Uganda has a right to own property or land either individually or in association with others as guaranteed by the Constitution in Article 26. It follows therefrom that no person shall be deprived of their land and or property or any interest in or right over their land or property of any description except compulsorily by the Government in the public interest subject to prompt payment of fair and adequate compensation being made to the landowner prior to the taking of possession or acquisition of the property.

If a non-citizen of Uganda and thereby a foreigner, intends to acquire land in Uganda for agricultural purposes it is imperative that one should understand the different tenure systems to ably choose the most appropriate and viable option therefrom available for such foreigner to legally acquire agricultural land in Uganda.

As a starting point, the position of the existing land laws in Uganda is that all land in Uganda belongs to and is vested in the citizens of Uganda and, shall be owned in accordance with the tenures prescribed under the laws of Uganda. The existing land tenure systems in Uganda are Customary tenure, Freehold tenure, Mailo tenure and Leasehold tenure. All the forms of land tenure in Uganda can be owned in perpetuity with the exception to leasehold tenure whose perpetual ownership is specifically limited to a maximum period of ninety-nine (99) years. It is also noteworthy to highlight that a lease or leasehold tenure can be created in respect of land under the other three tenures, namely; customary, freehold and mailo. This position is stated in Article 237 of the Constitution and reiterated in Section 2 of the Land Act.

Ownership of land in Uganda by non-citizens of Uganda is restricted. A non-citizen of Uganda can only own land in Uganda under the leasehold tenure by acquiring a lease over land as emphasized in the case of Lakeside City Ltd v Sam Engola & Others Civil Suit No. 281 of 2010. Additionally, the law permits renewal of a lease after expiry of its tenure provided such renewal does not exceed another period of 99 years as was emphasized by the court in the Lakeside City Ltd case (supra).

Basing on the foregoing, a foreigner can only obtain an interest in land in Uganda by way of lease for a period of up to 99 years. Such lease can be granted by an individual registered proprietor or a holder (PropCo.) of land under mailo tenure, or freehold tenure or customary tenure. It is recommended that foreigners consider to acquire land for agriculture in Uganda through a company as elaborated below.

Practical steps that a foreigner can undertake to acquire land for agriculture in Uganda?

1. Identify the specific parcel of land for purposes of carrying out agricultural business thereon and confirm whether the specified parcel is registered land or unregistered land, that is, whether or not it has a certificate of title thereto. If the specified parcel is registered land, proceed to conduct a search with the respective Ministry of Lands, Housing and Urban Development Zonal Office.

• If the specified parcel is unregistered land, confirm whether that land is communally owned. usually is categorized as land owned by a specific tribe, community or related group of people and commonly falls within the Customary land tenure. Please note that when dealing in communally owned land or land under customary land tenure foreigner(s) will be required to conduct thorough and high levels of due diligence to establish and determine the correct and exact person(s), family or community with authority to deal with the interest(s) in such land.

• A foreigner as intended purchaser ought to only deal with the rightful landowners to legally acquire such land under customary land tenure. This is because although the law provides for registration of land under customary tenure and acquisition of a certificate of customary ownership thereafter, such customary ownership certificates over communally owned parcels of land are rarely obtained and, in most cases, will not be available.

• A foreigner can acquire an identified parcel of unregistered land directly as a non-citizen and apply for a lease to be created in their favour, as Lessee. The lessors may either be the landowners from whom the land is purchased or the district land board in which the land is situated. It is preferrable that the lessor should be the District Land Board as it may be quite problematic dealing with the different customary owners (on the assumption that they are several) over a long period of time

• As recommended above, a foreigner can acquire an identified parcel of registered land indirectly through a nominee company land or property holding company incorporated with 51% Ugandan ownership and 49% foreign ownership by such foreigner. The nominee company will be created purposefully to acquire and hold the land or property in trust for the foreigner to allow for acquisition of the identified parcel of land as a Ugandan citizen. It also allows for creation of a freehold land title over the identified parcel of land and thereafter can allow for creation of a lease directly in favour of the foreigner as an individual/company by the nominee company for purposes of agricultural business thereon under leasehold tenure. (We view this is as the most viable option that can be pursued as opposed to acquiring the identified parcel of land directly as a non-citizen and apply for a lease to be created in their favour, as Lessee)

• Preparation of a lease agreement between the foreigner and the nominee company. The lease agreement will clearly stipulate the terms of the lease, including inter alia, the term/tenor, the rent payable, the usage rights, terms of renewal and right to sub-lease among other rights as agreed between the Lessor and Lessee.  

• Preparation of proper company documentation in the case that the acquisition is done through a nominee company. Although the Companies Act does not limit the number of shareholders in a company, we earlier highlighted the express restrictions to relating to land ownership by a non-citizen or foreign body corporate in Uganda that will still apply to the nominee company. The nominee company’s constitution must clearly demonstrate that the controlling interest in the nominee company is Ugandan and, must also restrict the transfer or issue of shares to non-citizens of Uganda to fall within the ambit of consideration as a citizen company and not a foreigner.

• The foreigner would therefore have to first undertake and conclude negotiations on an agreed purchase price with the rightful landowner(s) in compliance with the requirement for payment of fair and adequate compensation. The negotiations should be conducted on a willing-buyer willing-seller basis following which the final agreement between the foreigner and the rightful landowner(s) must be reduced into a written land sale or purchase agreement properly executed by persons who can lawfully bind both parties.

• Upon conclusion of the land sale or purchase agreement by the Firm’s client, the foreigner can conclude the registration processes and acquire a certificate of title to their land through a nominee company or directly whereby, the foreigner may either apply to the District Land Board of the area where the identified parcel of land is located for grant of a lease (if the purchase was undertaken directly by the non-citizen client) or apply for a freehold certificate of title if the purchase was undertaken through a nominee company.

Conclusion

As detailed in this article, although ownership of land in Uganda by non-citizens of Uganda is restricted, foreigners can legally acquire an interest in land in Uganda for purposes of agriculture and/or business. It is distinctly clear that foreigners or non-citizens of Uganda should always contact and seek professional advice from an advocate of the High Court of Uganda and all courts subordinate thereto to protect their interest while acquiring land in Uganda.

Limitations

This article has been prepared for general information purposes and may not be relied upon in any way as circumstance specific advice by any party who may gain access to it. In case of any specific queries or if you require legal advice in this respect, please do not hesitate to contact the author to addresses your concerns and provide clear guidance.

PierPoint Law Advocates LLP will not be responsible to, or accept any liability, or responsibility to any party of any nature, whether in contract, tort or otherwise, for any losses, damages, costs, or expenses whatsoever and howsoever caused arising from or in any way connected with this article.

Unless expressly stated otherwise, this article states the law as of its date. Further, it is strictly on matters arising from a Ugandan law perspective and we do not purport to provide any opinion on matters arising from the law in any other jurisdiction.