THE
NEW LAND ACTS
Pursuant
to the Constitution of Kenya, three Acts of Parliament have been enacted and
came into force on 2nd May, 2012:
ü Land
Act, 2012
ü Land
Registration Act, 2012
ü National
Land Commission Act, 2012
THE
REPEALED ACTS
The
following Acts have been repealed:
ü The
Indian Transfer of Property Act, 1882
ü The
Government Lands Act
ü The
Registration of Titles Act
ü The
Land Titles Act
ü The
Registered Land Act
ü The
Wayleaves Act; and
ü The
Land Acquisition Act
HIGHLIGHTS
Highlights
of the changes brought by the new Land Acts:
Ø To
have one registration system and one Land Registry - Note: this has not yet
been implemented.
Ø Titles
to be called certificates of lease or certificates of title - Note: this has
not yet been implemented.
Ø 3
categories of land have been created – public land, community land and private
land
Ø New
laws have been introduced dealing with ownership of land by non-Kenyan
citizens.
Ø Consent
of spouse to certain transactions is a key change.
Ø Land
and Environment Court
Ø Several
changes have been brought to laws on leases and the laws on charges.
Ø Format
of documents have changed
Ø National
Land Commission
Changes have been put in
place but a lot remains to be done in terms of implementation thereby causing
uncertainty.
Under the new laws, land has
been classified into (a) Public Land; (b) Private Land; and (c) Community Land.
Public land is
defined pursuant to Article 62 of the Constitution and includes unalienated
land, land occupied by a State organ, land transferred to the State, land to
which no heir can be identified, minerals, forests, reserves, national parks,
water catchment areas, sea, lakes, rivers, land between high water mark and low
water mark, any land not classified as private land or community land. The
National Land Commission is responsible for administration of public land.
Community land is
defined pursuant to Article 63 of the Constitution and includes land lawfully
registered in the name of group representatives, land lawfully transferred to a
specific community and any land declared to be community land by an Act of Parliament.
Community land shall be managed in accordance with the law enacted pursuant to
the Constitution. However, the law has not yet been enacted and the
Constitution provides for a 5 year period within which legislation has to be
enacted.
Private land
includes registered land held by any person under freehold tenure, land held by
any person under leasehold tenure and any other land declared private land
under any Act of Parliament.
Land
can be converted from one category to another.
OWNERSHIP
OF LAND BY NON-KENYAN CITIZENS
A
significant change under the new laws is that:
ü freehold
land cannot be owned by a non-Kenyan citizen; and
ü a
leasehold interest of over 99 years cannot be held by a non-Kenyan citizen.
Therefore
any freehold land owned by a non-Kenyan citizen is deemed to have been
converted into a 99 year leasehold interest commencing from 27/8/2010 and any
leasehold interest with an unexpired term of over 99 years is deemed to be
converted into a 99 year leasehold interest commencing from 27/8/2010.
As
yet there is no procedure in place for conversion of freehold title to
leasehold so, for example, if prior to the coming into effect of the new
Constitution a non-Kenyan citizen owned freehold land and you conduct a land
registry search today the result will still show the non-Kenyan citizen as
owning the land on freehold tenure.
The
Constitution states that a body corporate/company is deemed to be a Kenyan
citizen only if it is 100% owned by Kenyan citizens. Therefore a company with
even one shareholder who is a non-Kenyan citizen would only be entitled to own
a leasehold interest of 99 years or less.
It is unclear whether a
freehold title or title with an unexpired term of over 99 years that is owned
jointly by a Kenyan citizen and a non-Kenyan citizen would be converted to a
lease of 99 years or whether the tenure would remain intact.
REVERSION OF TITLE – EXPIRY
OF LEASEHOLD TERM
Section 13(1) of the Land Act
provides: “Where any land reverts to the national or county government after
expiry of the leasehold tenure the Commission shall offer to the immediate past
holder of the leasehold interest pre-emptive rights to allocation of the land
provided that such lessee is a Kenyan citizen and that the land is not required
by the national or the county government for public purposes.”
No such right is available
for a non-Kenyan citizen; non-Kenyan citizens need to check their titles and be
aware of the above change. On expiry or termination of a leasehold term held by
a non-Kenyan citizen, the land will vest in the national or county government
pursuant to section 12(6) of the Land Act. The land then can be allocated in
accordance with criteria prescribed by the National Land Commission. The
Commission has not yet been constituted and therefore there are no criteria in
place.
CONTRACTS
OVER LAND
A contract for disposition of
an interest in land has to be in writing, signed by all parties and witnessed.
Otherwise, neither party can bring a suit in relation to the contract. However,
this does not apply to a contract made in course of public auction.
It is not recommended to give
early possession on a sale of property as, if the purchaser is in breach, then
an elaborate procedure needs to be followed to regain possession which involves
service of a notice detailing the breach, applying to court to seek an order
for possession and defending any claim brought by the purchaser for relief
against rescission of the contract.
PREJUDICIAL
DISPOSITIONS
Laws relating to prejudicial
dispositions have been introduced under the Land Registration Act. If land is
disposed by a person who is unable to pay his creditors in an attempt to delay
or defeat the exercise by his creditors of any right to recourse to the land or
any interest therein, the creditor may apply to court to set aside the
prejudicial disposition. For example, John owns a plot of land and is in debt
and is worried his creditor may obtain a court order to attach his land to
recover the debt, John may decide to transfer his land to a good friend or
grant a long lease of his land to a relative so as to prevent the creditor from
attaching his land. If the creditor can prove that John’s intention was to
defeat his claim to John’s property (for example, by proving that John sold his
plot at an undervalue price) then the transfer may be set aside. A transfer
would not be set aside against a bona fide purchaser for valuable consideration
who has no knowledge of the creditor’s claim.
There is no time frame within
which a prejudicial disposition may be set aside. Banks would need to be
careful and include as part of their due diligence procedure a check that the
registered owner proposing to charge his land to the bank did not acquire the
land under a circumstance which could fall under a prejudicial disposition.
RIGHTS
OF SPOUSE TO LAND
Under
the Land Registration Act, a spouse will acquire an interest in his/her
spouse’s land if the spouse contributes by labour or other means to the
productivity, upkeep and improvement of the land. The spouse’s interest shall
be recognized as if it is registered against the title to the land. Under the
Land Registration Act, marriage includes a civil, customary or religious
marriage.
CONSENT
OF SPOUSE REQUIRED FOR DISPOSITION OF LAND
Where
a spouse who holds land or a dwelling house in his/her name individually and
undertakes a sale of that land or dwelling house, the purchaser shall be under
duty to inquire whether the spouse has consented to the sale. If consent has
not been obtained and the non-consenting spouse challenges the sale, then the
transfer to the purchaser is void. This could create very serious repercussions
for the purchaser.
No
timeframe has been specified within which a non-consenting spouse can bring an
action to challenge the sale on the basis that his/her consent was not sought.
If the vendor’s spouse refuses to consent, then this would stop the vendor from
being able to sell the vendor’s property.
This
would also be applicable when a person wishes to lease his/her land.
The requirement for spouse’s
consent extends to all land and is not limited to matrimonial property.
KEY CHANGES IN THE LAWS OF
LEASES
Long-term leases
Section 54(5) of Land
Registration Act provides that the Registrar shall register long-term leases
and issue certificates of lease over apartments, flats, maisonettes, townhouses
or offices having the effect of conferring ownership, if the property is
properly geo-referenced and approved by the statutory body responsible for the survey
of land.
Geo-referencing is defined as
“the reference of an object using a specific location either on, above or below
the earth’s surface”. In lay terms this means a survey of a property and the
preparation of a survey plan. The Commissioner of Lands has issued a Practice
Instruction to all Land Registrars to the effect that until such a time that
the Director of Surveys shall have put in place the process of geo-referencing
and approvals by the relevant statutory body the registration of long term
leases shall continue without the requirement of geo-referencing and in line
with the previous procedures.
Unlawful
eviction
A
new provision dealing with unlawful eviction is part of the new land laws. A
tenant who is evicted contrary to the terms of his lease is immediately
relieved of the obligation to pay rent or other monies due under the lease or
from performance of any covenants of the lease. A tenant is considered as
having been evicted if on the commencement of the lease the tenant is unable to
obtain possession of the land or buildings or part thereof as a result of any
action or non action of the landlord contrary to the express or implied terms
of the lease.
This
would arise, for example, when a landlord has entered into a lease with a
tenant in respect of premises to be comprised within a new development but at
the time of the commencement date expressed in the lease the development is not
ready such that the tenant cannot obtain possession of the premises at the
commencement date expressed in the lease.
A
tenant who is aggrieved as a result of unlawful eviction may commence an action
against the landlord for remedies.
Landlords of new developments
need to be careful of this provision.
KEY
CHANGES IN THE LAWS RELATING TO CHARGES
The
Land Act applies to all charges including those created before the commencement
of the Land Act.
Types
of Charges
There
are currently only two types of charges that are now capable of being created
under the new land regime. These are:
Ø Informal
charges
The
New Laws now recognize a form of charge known as an informal charge that can be
created quite simply. The charge can take 2 forms:
ü a
written and witnessed undertaking, the clear intention of which is to charge
the chargor’s land, for example, a letter of offer requiring a charge to be
created which is consented to by the borrower may now be construed to be an
informal charge; and
ü a
chargor depositing documents of title to the land, for example, a certificate
of title or a certificate of lease.
It
is possible to register an informal charge so banks are likely, in the interest
of time, to take this type of charge as they await the formalities of
preparation of a formal charge. However it is not likely to be a popular
security as a chargee holding an informal charge may only take possession of or
sell the land on obtaining a court order to that effect.
Ø Formal
charges
Formal
charges only take effect on registration and a chargee cannot exercise any of
its remedies under the charge unless it is so registered.
Titles
issued under Government Lands Act and Land Titles Act
Titles
to GLA and LTA property are not deemed to be titles under the new Act and will
need to be examined and re-issued. In addition, unlike the registers for RTA
and RLA land that will continue to be maintained, the register of GLA and LTA
land will need to be prepared afresh. Accordingly, until this process is done,
it will not be possible for a bank to take security over GLA and LTA land. This
means that if the land you are holding has a GLA or LTA title, it will not be
possible to offer this land as security until new titles are issued.
Transfer
of charges
The Act recognises transfers
of charges at the request of the chargor in writing at any time other than when
a chargee has taken possession.
ü
A
similar request may be made by the following persons, subject to the consent of
the chargor:
ü
any
person who has an interest in the land that has been charged;
ü
any
surety for payment of the amount secured by the charge; and
ü
any
creditor of the chargor who has obtained a decree for sale of the charged land
(it is not clear though why a creditor would need the chargor’s consent if he
has a decree).
The chargee on receiving
written request and on payment of the amount secured by the person(s) making
the request and the performance of all obligations secured by the charge shall
transfer the charge to the person named in the written request.
There is a section under the
Finance Act amending the Stamp Duty Act to the effect that stamp duty will not
be charged when a person transfers a charge from one bank to another. This
section came into effect on 2nd May, 2012.
Fetter
to Right to Discharge
A chargor is entitled to
discharge a charge at any time prior to the sale of charged land. Any provision
that seeks to deprive the chargor of the right to discharge or fetter the
exercise of this right or stipulates a collateral advantage that is unfair or
unconscionable or inconsistent with the right to discharge is void.
A chargee may provide in a
charge that a chargor may exercise its right to terminate a charge before
expiry of its term and such chargor, (i) shall give one month’s notice; or (ii)
shall pay one month’s interest at the prevailing interest rate or a lesser rate
as may be agreed and all other monies secured by the charge.
Reopening
of charges
The Land Act has now vested
on the court the power to re-open a charge. This essentially means that even
though all the formalities and approvals were in place at the time of entering
into a charge and a valid security is created, the court may “re-open” the
charge or a chargor, chargee or the Land Registrar may apply to court to reopen
a charge.
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