NOTES ON CONVEYANCING LAW-PART II

CHECK OUT PART 1 HERE

OTHER FORMS OF DISPOSITION OF PROPERTY

Other than conventional contracts

1.    AUCTIONS

They could be private or public. In private auction, only a limited group of people are invited to buy the property. The bid given does not amount to a contract until it is accepted by the knocking down of the hammer. S.3 of the Law of Contract Act does not apply. The issue of bona fides applies i.e. seller under an obligation to fetch the highest price possible. Ss. 12 & 11 of the Restrictive Trade Practices & Monopolies Act prohibits bid rigging.

Sale is of land is usually by private treaty or public auction usually to the highest bidder at the fall of the hammer. This can be done in two ways:

·         Execution of a court order

·         Pursuant to a statutory power of sale.

Look at Auctioneers Act 1996 and rules there under, Civil Procedure Act (execution of decrees), (sale by chargee). Requirement of Cap 23, (Law of Contract Act) section 3(3) relating to execution of contracts for the sale of land does not apply since the contract is formed at the fall of the hammer.

The bid is merely an offer. It can be withdrawn or rescinded at any time and until acceptance, the bid is susceptible to challenge, especially where the bidder doesn’t meet the reserve price. Reserve price is the value of the property as at the time of the auction. In auction sales the seller is under duty to act in utmost good faith. If he sells the property at a value other than the mortgage debt, he must account to the mortgagor. The auctioneer is at liberty to reject a bid that doesn’t meet the reserve price. If no bid meets the reserve price the auction will be withdrawn.

The terms of the auction sale are in most cases pre-set. The auctioneers have already set the amount that they want to raise. There are no negotiations. If property is being sold pursuant to a court decree, the court will set the terms e.g. provision of the reserve terms.

Who may bid at the auction?

·         chargee and their agents

·         Owner of the property

·         Any person desirous of owning the property.

DUTIES OF ADVOCATE FOR PROSPECTIVE PURCHASER IN AUCTION SALE

·         Search: because of caveat emptor doctrine. Most auctioneers are quite secretive; an advocate must therefore raise the relevant requisitions and inquisitions discovered from the search.

·         Conduct enquiries whether there are any pending matters in court.

·         Engage surveyor – to advise you on a property (advice client on need for this).

·         Advise client that he is supposed to pay 30 to 40 percent at the fall of the hammer.

·         Advise client to be ready with the balance to be paid within 60 to 90 days. This is important because of risk of forfeiture of deposit which is higher than the usual 10%

·         Engage valuer- to advice on proper/real value of property.

DUTIES OF ADVOCATE FOR SELLER IN AUCTION SALE

·         Act in good faith; ensure property fetches the best price.

·         Ensure proper procedures are followed once bid is accepted.

·         After receiving 30-40% ensure that the appropriate documents are put in order.

Transfer may be by way of vesting order which is registered against title and then the title is transferred upon payment. Where auction sale is by virtue of executing decree, transfer may also be by way of transfer by mortgagee or chargee.

Considerations to note:

See Auctioneers Act

·         Auctioneers must be licensed by the Auctioneers board to conduct an auction sale.

·         The auctioneer must hold a valid practicing certificate.

·         The place, date and time of auction must be advertised in the local newspaper.

·         The sale must take place as advertised unless cancelled by notice.

·         The presence of a reserve price, if any, must be indicated in the advert.

If there’s no reserve price, the seller should not bid and the auctioneer knowing this fact should not allow such a bid. The property must be sold to the bonafide bidder at the price reserved by him.

The three landmark stages of a conveyancing transaction are:

• Making of the Contract
• Completion
• Registration

PROS AND CONS OF AUCTIONS

•       Bad root of title can be disposed of

•       Involves many interested parties- since sale is publicized

•       Costs- auctioneers, advertising etc

•       Purchaser has little time to consider terms in contract for sale and impose his conditions

•       Price may not reflect the market value

•       Prone to challenges by chargor/mortgagor

2.    PURCHASE OF NEW HOMES

•       For houses, flats and apartments

•       Letter of offer(prepared by vendor’s lawyer)

•       Usually an agreement for lease, Lease and maybe share purchase agreement.

–      Management Company, where purchaser is a shareholder

–      Reversionary interest to revert to the company

–      Interest sold is usually leasehold

–      Company applies for extension of head lease when the same expires

–      Ensure compliance with completion date

–      Defects liability- period is 6 months after completion, repair of any damage is at vendors/developer’s cost

–      Certificate of occupation- issued by local authority confirming compliance with approval and that property is fit for habitation. Completion date usually pegged to certificate of occupation e.g. completion date means 30 days after issuance of certificate of occupation

–      Share transfer from should be executed

–      Ensure there is a warranty and indemnities clause to rely on.

HOMES: DUTIES OF ADVOCATES

•       Purchaser-

–      Investigation of title

–      Site plan for identification of subdivisions, differs with the registry map(RLA) where the legal subdivisions are marked

–      Obtain planning permission and ensure building complies

–      Follow on the issuance of certificate of occupation

3.    PURCHASE BY WAY OF SHARES IN A CO-OPERATIVE MOVEMENT

·         An acquisition agreement for the shares is required and a share certificate is issued entitling one to own a property.

·         Share transfer form should be executed

·         Search- a thorough investigation of the movement’s affairs is required, including its actual and contingent liabilities

4.    PURCHASE OF A COMMERCIAL PROPERTY FOR DEVELOPMENT

·         Change of user acquisition should be a condition in the agreement

·         Scrutinize local development plans and ensure that your client’s development plan has been approved

·         If purchasing commercial premises look out for protected tenants, get vacant possession if possible.

5.    PURCHASE OF TENANT OFFICE BLOCK

·         Pre-contract investigations to include consideration of the existing covenants and conditions in lease

·         Ensure assignment has been consented to by the lessor. Make this a condition of sale contract.

·         If change of user is required, obtain consent from lessor

·         Was planning permission obtained?

·         If acting for vendor ensure there is a guarantee that the tenant will comply with the conditions of the lease

SECTIONAL PROPERTIES ACT

BACKGROUND

In the past, land for residential development in urban centres was readily and cheaply available. This led to emphasis on individual houses. In the recent past:

·         Escalating value of land

·         Diminishing stock of land

·         Increasing cost of building materials

This has prompted various jurisdictions to search for solutions such as registration of properties in strata. Under RLA, RTA and Registration of Documents Act-transfer of flats and other building portions (usually took the form of a lease) would be registered by using the architects plan which identified the units and was registered under the Registration of Documents Act. The undivided share of the land would also be made to the unit purchasers. The transfer was made between the developer, a management company and a purchaser of an individual unit.

Shortcomings

·         Content and form of plans to support issue of titles was not prescribed in legislation.

·         No law that described what was individual property and what was common property and this was left to the wording of the transfer.

·         Incorporation of a management company for the administration of the common services was not mandatory.

·         A corporation incorporated under the Companies Act had stringent provisions to be met and non-compliance could result in them being struck off leaving the unit owners with serious consequences.

·         Issuing titles to the flats led to a multiplicity of titles to the same land

SECTIONAL PROPERTIES ACT, NO 21OF 1987

PURPOSE:

·         Division of buildings into units owned by individual proprietors

·         Common property to be owned by unit owners as tenants in common

·         Use and management of units and common properties

The Act provides for:

·         Requirements for sectional plans intended to support unit titles

·         Registration of sectional plans under the Registered Lands Act (for freeholds and leaseholds with a reversion of 45 years and more). Unit must be 2 or more. A certificate of sectional property is issued for each unit.

·         Register for title in common property is closed

·         Substantive law governing the rights of the parties

·         A corporation whose members are the owners of the units is formed on registration of the plan. The provisions of the Companies Act do not apply.

·         Corporation has a management board which appoints a manager to manage the common property.

·         Applies to any land registered under any Act but titles of land registered under GLA and RTA would be deemed to be registered under RLA.

WHAT NEXT AFTER THE REPEAL OF THE RLA?

·         The LRA S 54 (3) recognises registration of interest in land under the SPA.

·         LRA S 54(5)-registrar shall register long term leases and issue certificates of lease over apartments, flats, maisonettes, townhouses or offices  as long they are properly geo-referenced and approved by the body charged with survey.

AGREEMENT FOR SALE

S 46 imposes duty on developer to deliver the following documents before selling or agreeing to sell:

·         Sale agreement

·         By-laws or proposed by-laws

·         Management agreement or proposed management agreement

·         Recreational agreement or proposed recreational agreement

·         Lease of property/title, certificate of sectional property

·         Any charge that affects the property

·         Sectional plan or proposed sectional plan

AGREEMENT FOR SALE CONTENTS

Format S 47:

A.   A notification that is at least as prominent as the rest of the contents of the purchase agreement and that is printed in red ink on the outside front cover or on the first page of the purchase agreement stating as follows

 “The purchaser may, without incurring any liability for doing so, rescind this agreement within ten days of its execution by the parties to it unless all of the documents required to be delivered to the purchaser under section 46 of the Sectional Properties Act, 1987 have been delivered to the purchaser not less than ten days prior to the execution of this agreement by the parties to it.”

B.    A description drawing or photograph showing:

·         the interior finishing of all major improvements to the common property located within a building

·         recreational facilities, equipment and other amenities to be used by the unit owner

·         location of roadways, walkway, fences, parking areas and recreational facilities

·         landscaping

·         exterior finishing

C. The amount or estimated amount of monthly unit contributions in respect of a residential unit

D.  The unit factor of the unit and the basis factor apportionment for all units comprised in the plan.

Points of Reflection

Do you need the management company for units held on freehold tenure?

Does the corporation incorporated under the SPA have legal force?

What if unit owners are more than 50 and you would wish to incorporate under the Companies Act?

COMPLETION AND TRANSFER

Completion is the process in a conveyancing transaction where necessary documents of title are handed over in exchange for the price.After investigation of titles and execution of the sale agreement, the next and final stage is the completion and transfer. The sale agreement is merely executory and it gives no interest. It will only give you an interest when you are able to complete as the purchaser (specific performance) and vendor (forfeiture). S.54 of the ITPA and s.3 of the RLA recognise that the Sale agreement is merely executory.

To get the interest one needs to register a transfer after paying the requisite stamp duty. The purchaser needs to also pass some consideration to the vendor. This process of exchanging of some consideration is called COMPLETION. The vendor completes by handing over possession while the purchaser completes by giving the balance of the consideration. This is the final chain of conveyancing. It is however bilateral, concessional and concurrent. Key phrases on completion are:

1. The date of completion
2. The venue of completion
3. The deliverables (completion documents)
4. The obligations of either parties at completion

The sale agreement is an executory document and interest in the land has to be formally transferred by stamping and registering a transfer or conveyance. Prior to registration, the vendor expects to be paid consideration, while the purchaser expects to be given all the registrable documents. The process of exchange of consideration is called ‘completion’.Prior to completion, the purchaser’s advocate will have prepared a transfer/conveyance document. In order to do this it is important that he identifies the document to be drawn based on the statute in which the property is registered.Transfer is drawn by the Purchaser’s advocate and forwarded to the Vendor for approval. The Transfer causes the disposition once registered.The form taken by a transfer or conveyance deed depends on:

o   Statute under which the property is registered

o   The interest being conveyed or transferred

Statute	Document of title	Transfer document
GLA	Title Deed	Conveyance, Re-conveyance (upon redemption of mortgage), Assent (transfer upon death of proprietor), Assignment or Reassignment (for leases). No prescribed forms, the practice has been to use documents   prescribed under the 1845 Real Property Act and the 1881 Conveyancing Act both applicable in Kenya as statutes of general application before 1897
LTA	Grant or Certificate of Title	Transfer
RTA	Grant or Certificate of Title	Transfer in prescribed form. One may amend without substantive departure from the prescribed form.
RLA	Land Certificate/Certificate of Lease or Title Deed	Transfer of Lease/Land or transmission in prescribed form or get consent of registrar

Following the investigation of title and approval/execution of the contract the parties now move to the final stage of the transaction where interest actually passes.  Remember a Sale Agreement is simply an executory document and gives you no interest (see S. 54 of the ITPA).  You have to formally now transfer the interest and as we had seen during the lectures on requirement for registration, no disposition is effective until a document passing the interest is actually stamped and registered.  Prior to the registration however the Vendor also expects his consideration and it is this process of “exchanging consideration” that is referred to as completion.  The Vendor completes by giving the Purchaser all the registrable documents plus possession whilst the Purchaser completes by giving the Vendor the balance of the purchase price.  It is the final settlement of business.  Note however that title will only vest upon registration.  It is however a bilateral and consensual act and both parties have their respective duties to discharge.  Needless to add before proceeding to complete the Purchaser should re-assure himself that the answers to requisition and the searches have not yet expired.  This can be done by re-affirming the requisition answers and or undertaking a pre-completion search.

DATE OF COMPLETION

The date may be agreed expressly by the parties and inserted in the contract.  When it is an open contract (one that only states parties, price and property) or the date is not stated in the agreement the completion ought to take place within a reasonable period of time.  The Law Society of Kenya Conditions of Sale, Condition 2 however had gone further to provide for a 42 day completion period where no date is provided.  If it’s a Controlled land then completion is 42 days after Vendor’s receipt of consent.   If not controlled then 42 days after date of contract.

The period before the date of completion is important to both parties as it is during this period that they satisfy their contractual obligations or prepare to satisfy the same.  For the Purchaser assemble the monies, for the Vendor obtain the consents and clear the encumbrances, for example.  As an Advocate it is thus your duty to ensure that you get a proper time frame estimated before you agree to or insert a completion date.  Otherwise you will always be held to your bargain and the repercussions can be disastrous.

It must be noted that the completion date or period if there is any delay may be mutually extended.  Where however the parties provide that the “time is of the essence” then the completion date must be strictly adhered to.  Failure to complete in such a case will be deemed a fundamental breach of contract both at law and in equity.   The party at fault will not enforce the contract specifically but the other party is free to pursue his remedies for breach of contract including specific performance.  He may elect to rescind the contract the very next date if he chooses.  Ordinarily time is only regarded as of the essence if the parties make it so expressly as a term in the contract.  Occasionally however the courts, at least in England have not hesitated to make time of the essence by necessary implication.  Thus in:

Barclay –vs- Messenger [1989] 3 All E.R. 492

A Contract provided that if the Purchaser should fail to pay the balance of the purchase price on a given date, the agreement would become null and void.  Sir George Jesse M. R. held that time was of the essence stating obiter that he did “not know how making time of the essence could have been more strongly expressed.”

In the Kenyan case of Sagoo Vs Dourado 1983 KLR 365   the Court of Appeal however held that  time will not be considered to be of the essence in any contract unless

i)              Parties expressly stipulate that conditions as to time must be strictly complied with

ii)             Nature of the subject matter show that time should be of the essence

iii)            A party subjected to unreasonable delay gives notice to the other making

Time of the essence

It is a matter of construction of the contract and one may as well argue that S. 3(3) of Cap 23 would bar such interpretation which invites implications.

When time is not of the essence failure to complete on the agreed completion date does not entitle the aggrieved party to decline to proceed with the contract.  But what of unreasonable delays despite requests to complete? See Madan J.A in NjamunyuVsNyaga 1983 KLR 282 where together with the other court of Appeal judges, the late Madan seemed to suggest that the provision as to time being made of the   essence can actually be implied. This should really allow rescission.  However it appears from the line of authorities that in the absence of undue or unreasonable delay one would still be entitled to specific performance even if he is the guilty party.

In such instances the aggrieved party needs to give a Completion Notice which must be proper and explicit.  The Law Society of Kenya Conditions provide for this (Condition 4).  Where the Notice is not needed then one is entitled to rescind as the Notice itself now imposes the “time is of the essence” condition.  A proper Completion Notice will constitute reason for the alleged breach and demand that it be made good within the notice period and further that in default Agreement will be rescinded forthwith upon expiry of the Notice.

To be effective too the Notice must limit a reasonable time for performance.  The Notice must also leave no room that the Server may still be willing to perform the contract if there is still a failure to complete.  Of course to be effective the Server must himself be ready able and willing to complete in which event the time is also of the essence for him. [Reflection: Will a notice given in anticipation of breach be good?]

FAILURE TO COMPLETE

•       Either the vendor or purchaser may fail to complete (i.e. on the completion date). Time should be of the essence.

•       Remedies

•       If offended party is vendor, he can go for specific performance thus precluded from forfeiting the deposit. He can also seek damages (usually calculated as the difference between market price and the contract price), rescind the contract, forfeit the deposit, treat the contract as repudiated, resell the property and recover his expenses and loss from the resale

•       If the offended party is the buyer, he may take out proceedings for specific performance or rescind the contract and sue for refund of deposit or seek damages for non-performance (difference in value between contract price and the market price), interest, costs including legal costs and expenses of searches etc.

Barclays –vs- Messenger [1989] 3 All E.R. 492

A Contract provided that if the Purchaser should fail to pay the balance of the purchase price on a given date, the agreement would become null and void.  Sir George Jessel M. R. held that time was of the essence stating obiter that he did “not know how making time of the essence could have been more strongly expressed.”

Sagoo vs. Dourado 1983 KLR 365   the Court of Appeal however held that time will not be considered to be of the essence in any contract unless

a)   Parties expressly stipulate that conditions as to time must be strictly complied with

b)   Nature of the subject matter show that time should be of the essence

c)   A party subjected to unreasonable delay gives notice to the other making time of the essence

Under S 3(3) Law of Contract Act and S38 Land Act- terms need to be in writing. Can the condition of time being of essence be implied? See Madan J.A in NjamunyuVsNyaga 1983 KLR 282 where together with the other court of Appeal judges, the late Madan seemed to suggest that the provision as to time being made of the   essence can actually be implied. 

NOTICE OF COMPLETION

Condition 4- The aggrieved party needs to give an unequivocal notice, the Notice should explain the alleged breach and demand that it be made good within the notice period as per the agreement and that in default; the agreement will be rescinded upon expiry of the notice.

•       Once ready to complete, the parties sign the conveyance and deliver the completion documents at the completion meeting

•       Usually, completion documents comprise of:

–      The Original Title documents;

–      Transfer duly signed by the vendor

–      Land Rent Clearance Certificate; (For leasehold Titles only)

–      Land Rates Clearance Certificate; (For Municipal / urban properties of both a leasehold and freehold nature provided a local government authority has levied land rates on the property);

–      Relevant consents applicable to the Transfer. i.e

–      Consent of the Commissioner of Lands to leasehold interests;

–      Consent of the Land Control Boards for Agricultural land obtained in pursuance of the Land Control Act Cap 302 of the Laws of Kenya;

–      Consent of any chargee or Mortgagee having an interest in the land;

–      Consent of any statutory authority having an interest in neighbouring property (e.g KPC, KAA, KCAA,) etc;

–      Notice of withdrawal of caveat or caution if there are any third parties having an interest in the property;

–      Original Land Rent payment Receipts;

–      Original Land Rates payment Receipts;

–      PIN of the vendor;

–      3 coloured photographs of the vendor or vendor’s directors

–      Copy of the Vendor’s ID

INTERIM PERIOD

The interim period as already stated between the execution of the contract and completion is important for two reasons:

·         The performance of the various contractual obligations in preparation for completion

·         The risk of the property

Performance of Obligations

The Contract will have various obligations imposed on the parties.  We have witnessed that one of them is the payment of deposit which the Purchaser must effect.  The Purchaser must also put together his finances, visit and inspect the property.  The Vendor on the other hand must obtain the requisite consents, discharge and encumbrances (unless agreed it be discharged on completion).  Any other obligation under it must then be honoured.

RISK OF THE PROPERTY

In a Court of Equity once there is a valid Contract of Sale, the Vendor becomes a trustee for the Purchaser of the estate sold and the Vendor himself becomes owner of the purchase money.  This is so long as the Contract is not subject to a condition precedent e.g. the obtaining of a planning permission.

As a Vendor qua trustee, the Vendor has a personal and substantial interest in the property which he has to protect and actively so.  His interest includes obtaining the purchase money which he can only do if he also delivers the property “held in trust”.  He is thus under an obligation to ensure that the property’s condition does not deteriorate nor is the same wasted.  The Purchaser’s interest is however only in the property and not any income being derived there from.  As the Vendor is entitled to a lieu on the property as security of the purchase price, the Vendor will always retain possession.  He must however honour his duty to maintain the same.  He must treat property as a prudent owner and not willfully damage it.  He has to use reasonable care to maintain it but he is not obliged to improve it.  The Purchaser is entitled to lay claim in damages if he completes the contract even though the property has been wasted.  But if the property is completely wasted he is entitled to rescind and claim his deposit.  To avoid situations like the latter, the Vendor always takes insurance.  It is different if risk and possession is passed at date of contract.

ACTUAL COMPLETION

The parties once ready to complete the Conveyance (the Vendor ready to execute the Purchase Deed and deliver the other completion documents and the Purchaser ready with the purchase money), completion can be effected.  As a general rule it takes place at the Vendor’s or the Vendor’s Advocates offices, but the parties can agree otherwise.

Completion will take place on the date agreed at 2.00 p.m. (Law Society of Kenya Conditions).  The Vendor will deliver the keys (possession) and the Purchase Deed duly and properly executed and the other completion documents which will include:-

i)      Consents;

ii)     Clearances;

iii)    Title Deed in original form;

iv)   Photographs etc;

The Purchaser on the other hand will deliver the cheque for the balance of the purchase price and apportioned outgoings as well as the authority to release the deposit.[Reflection: What happens where the amount is or is in the excess of Kshs. 1,000,000/= ?]. At times an undertaking replaces this cheque especially if the purchase is being financed.

POST COMPLETION

What need you do?

-          Report to and account to client.

-          Stamp documents

-          Register documents together

-          Notify the world

COMPLETION UNDER THE GENERAL TERMS

(LSK CONDITIONS) cf. Condition 4.

TRANSFERS CONVEYANCES AND TRANSMISSIONS

INTRODUCTION

•       What is a transfer?

–      See S2 LA- The passing of land, lease or a charge from one party to another by an act of the parties and not by operation of the law. It also includes the instrument that effects the passing

•       What is a conveyance/assignment?

–      Not defined by statute. Deed by which the owner of a freehold/leasehold property whose title is subject to the deeds registry transfers ownership.

•       What is a transmission?

–      S2 LA-the passing of land, lease or charge from one person to another by operation of law on death or insolvency or otherwise.

Transfer

Conveyance

An instrument or statutory form which transfers the ownership of a freehold or a leasehold property (title) from one person to another. S2 of Land Act- the passing of land, a lease or a charge from one party to another by an act of the parties and not by operation of law and includes the instrument by which such passing is effected. Transfer of registered land under RTA and RLA(before their being repealed) only purported to effect the transfer as the actual transfer occurred on registration.

The deed by which the owner of a freehold property whose title is subject to the deeds registry transfers ownership. If interest is leasehold, the deed is called a deed of assignment. If freehold, it is called a deed of conveyance. Mainly under GLA and LTA Deed is a document that is signed sealed and delivered, as well as there must be an intention to be bound.

•       Inter vivos-also called voluntary transfers e.g. through sale, settlement or gift.

•       Both ITPA and RLA contemplated an immediate transfer- see S87RLA. S44 LA contingency and conditional transfers are prohibited.

•       Transfer is only effected by the estate owner- e.g. the legal owner, beneficial owner, personal representatives, trustee, chargee/mortgagee

General parts

Preliminary-date and parties: date is presumed to be correct until the contrary is proved. Date is important for purposes of stamp duty. S6 of the Stamp Duty Act- instruments must be stamped within 30 days of execution. To avoid this problem the instrument is left undated until when the parties are ready to perfect it.

Operative part

–      Recitals- explanation or background to the transaction. Two types- narrative (past history of how vendor became owner) and introductory-why the existing state of affairs is to be changed. They are not compulsory but are important.

–      Testatum- introduces a list of items

•       Consideration(states the whole purchase price)

•       Receipt clause (optional) shows the vendor acknowledges the receipt of the purchase price. Dispenses with requirement for formal receipt

•       Word of grant(assigns or conveys)/transfers

•       Parcel- description of property

•       Habendum- quontum of interest granted

Exception (withheld from the purchaser by the vendor especially in an assignment) and reservation (creation of new right for the vendor eg where the vendor retains part of the land-easement)

•       Miscellaneous provisions

–      Implied covenants especially under GLA

•       Final part

–      Testoimonium- links the deed with the parties seal and signature. Not mandatory. Its inclusion is proof that the deed was duly executed

–      Execution-signing and sealing.

–      Attestation-witnessing

–      Franking-providing of the name and address on the conveyance of the advocate who prepared it-s35 of Advocates Act. Noncompliance is an offence and Registrar may not register the instrument.

–      Memorandum-to which the instrument is subject to

GLA/LTA DEED

•       In the form of a Deed. Instead of being signed it is signed sealed and delivered.

•       Neither GLA nor ITPA prescribe statutory forms for transfer. The form is governed by English patterns in accordance with the Real Property Act 1845 and Conveyancing Act of 1881- these are statutes of General Application in Kenya.

•       Transfers under freeholds are effected using a conveyance, while for  a leasehold  uses an assignment

•       A deed under GLA or LTA still requires to be registered since no evidence will be received in a Court of a sale unless it is in writing and is registered. Registration also determines priority of interests.

•       The transfer is effected by the completed deed itself (when it is signed sealed and delivered).

•       A seal must be placed(paper disc next to the signature). It should also be delivered. There must be intention to be bound.

TRANSFER

•       Use of statutory forms prescribed by RLA and RTA or instruments in conformity with the Acts and approved by the Commissioner of Lands.

•       S20 RTA- all dealings in land subject to the Act must be in accordance with the Act. Execute transfer Form F in the first schedule (see S34). There was a requirement for the attestation of signatures under S58 but no sealing requirement.

•       S38(1) RLA- dealings in land subject to the Act must be in accordance with the Act. S108- use of prescribed form issued by the Registrar. Requirement of verification of execution under S109 was mandatory. No requirement of a seal. Schedule 3 of RLA

•       If an Advocate chose to use a form other than those prescribed, he must have them approved by the Commissioner

•       Legal Notices No. 143-146 both parties to sign transfer

•       NB: a transfer does not operate as a transfer of land until the transferee is actually registered in the registry. Registration doesn’t merely record the instrument but passes rights of ownership to the purchaser.

•       Statutory forms in RTA and RLA were varied by LN 146-153 to include further details of PIN no, ID, coloured passport photographs etc

•       Responsibility for drafting rests with the purchaser’s advocates and it is approved by the vendor’s advocates

•       RLA prescribed form can only be varied by the Registrar’s written approval.

•       RTA variations do not require Registrar’s approval. It is ordinarily prepared as a deed.

•       Both parties must execute- Law of Contract Act S3(3)

•       Upon registration:

–      RTA- issued with grant(for leasehold or freehold). If a portion of grant is transferred, a certificate of title is issued;

–         RLA-Land certificate- uses terminology of ‘absolute title’(applies to freeholds). For leaseholds one was issued with a certificate of lease (if leasehold was for a period of more than 25 years)

New Regime

•       The new legal regime introduces compulsory use of prescribed forms for dispositions in land. Since no forms have been prescribed as yet, we shall only delve into substantive law.

–      S43(2)LA- transfer to be effected by an instrument in the prescribed form

–      S43(3)LA- completion of transfer process only after registration

–      S36 (1) LRA dealings in land only in accordance with the Act

–      S37LRA- transfer by an instrument in prescribed form of from approved by Registrar. Filling the prescribed from and registration completes the transfer.

–      S40 LRA-contingency or conditional transfers prohibited

–      S43(2)LRA- Transfer effective only upon registration

–      S44(4)LRA requirement for endorsement (in prescribed manner)of signatures of persons outside the country

•        Other requirements S44(5) LRA-

–      Copy of ID/passport

–      Copy of PIN

–      Passport size photographs

–      Marriage certificate where applicable

•       Verification of execution required.

Involuntary transfers (by operation of law)

Death

Court Attachment and Sale

Vesting Order

Bankruptcy or Insolvency

Adverse Possession

Compulsory Acquisition

Transmission: Company liquidation

•       Companies Act(cap 486), S 53 LA and S64 LRA

•       The Registrar is presented with a resolution or order appointing a liquidator which he shall enter in the register, any instrument will thereafter be sealed with the company’s seal but attested by the liquidator

Transmission: Bankruptcy

•       Read Bankruptcy Act cap 53

•       S52LA and S63 LRA-

•       When debtor commits an act of bankruptcy, he or creditors may file petition after which a receiving order is made(places control of property in the hands of official receiver appointed by Court).

•       A further order called an adjudication order is made and his property then passes to the trustee in bankruptcy for distribution among creditors. The transfer to the trustee in bankruptcy is effected through the registration of the adjudication order by the registrar.

•       If a debtor dies insolvent, the personal representatives can follow the same process

Transmission: vesting orders

•       A court order that creates or transfers legal ownership of a property in place of a legal conveyance.  See Trustees Act Cap 167 Ss 45-56

•       Instances

–      Court ordered purchases/sales of mortgaged land s48

–      Specific performance of contract where parties are trustees-s 49

–      Trustee has not exercised their duty in the disposition of interests in property s45

–      Interests in land subject to a contingent right of an unborn person, when born court may make an order-s 46

–      Infant mortgagees-S47

Transmission in other cases

•       S54 LA, S65 LRA- if one is entitled to property under any law by virtue of an order, certificate of sale, one needs to apply to Registrar with supporting documents for registration as proprietor.

Attachment for debt: Order 22 Rule 55

_          Land plus Judgement Debtor’s(JD) other personal effects may be seized in execution of a court decree for payment of JD’s debts.

–      Sale is by public auction-auctioneer= Court’s agent

–      Sale agreement is signed by purchaser. Proceeds of sale are deposited in Court and paid out to the Judgement Creditor(JC)

–      To complete the sale the purchaser applies for Court’s vesting order which the Registrar uses to register new owner.

–      JC may place a prohibitory order against the property while the process is ongoing.

–      The Court may on application by JC order that the transfer be executed by the Registrar of the High Court in lieu of the JD/vendor

Transmission: death

•       Transmission by succession

Transmission upon death

•       Sole proprietor or proprietor in common:

–      Testate/will- executor will prove the will in court and obtain probate, apply to Registrar in prescribed form and produce grant. He is then registered by transmission as proprietor or the registrar may register any transfer by him directly to third party without requiring his registration as proprietor (by assent)- S50 LA, S61 LRA.

•       Joint tenancy- S 49 LA, S60 LRA- the property passes to the surviving tenant under the doctrine of jus acrescendi. The Registrar is required to register the death certificate and delete the name of the deceased from the registrar on production of the death certificate.

•       Escheat-When the deceased has no heirs to his property. The property reverts to the state. It used to be covered by S 8A of GLA(now repealed)

Adverse Possession

•       S7 and 17 of the Limitation of Actions Act  provide for a 12 year limitation period for the recovery of land. S37 &S38 if land is registered then it is held in trust from the adverse possessor until he obtains a vesting order from the High Court.

•       Possession alone is not enough, there must be proof of adverse possession (Bwana V Ibrahim(1948)EACA 7, Volume 20 pg 699, Halsbury’s Laws of England

•       Basic requirements:

–      Open and notorious use;

–      Intention to possess;

–      Continuous use;

–      Exclusive use- to the exclusion of the owner;

–      Actual possession;

–      Non-permissive, hostile/adverse use-without owner’s permission and inconsistent with his rights

•       Point of Reflection-Does an adverse possessor need consent of the Land Control Board? If so by when? (see KaranjaMatheri V Kanji(1976)KLR 140, Gatimu V Kunguru(1976)KLR 253- The Court can order registration of one as a proprietor even though no consent has been obtained.

Compulsory Acquisition

•       State is the owner of radical title-eminent domain. The Constitution gives the State the power to compulsorily acquire land for public purposes. This was previously implemented through the Land Acquisition Act.

•       The Act empowered the Commissioner upon due notice in the Kenya Gazette and payment of full compensation to acquire land.

•       See Art. 40(3) right to own property limited- for public purpose/public interest, there is prompt payment in full of just compensation

•       Public interest see Mohammed v Commissioner of Lands and others(2006)KLR (E&L) 217

•       Compensation Courts have held that market value plus 15% should be paid.

Compulsory Acquisition- New Regime

•       S107- 133 LA

•       If public purpose or interest ceases to exist, the Commissioner may offer the original owner pre-emptive rights to reacquire the property.-S110 LA

•       Commission to make rules to ascertain just compensation S 111 LA. One can be given land in lieu of the award

•       S 132 LA- transactions are exempt from stamp duty

What have we learnt?

Definitions of Transfer and Transmission

Parts of a transfer document

Instances of transmission

Various transfer documents in the old regime still transiting to the new regime

What we are going to learn

Interests capable of transfer

Transfers without consideration

Issuance, loss and replacement of title documents

Subdivisions and surveys

LEGAL INTERESTS CAPABLE OF BEING TRANSFERRED

TRANSFER- S 2 of LA & S 37 (1) LRA

Freehold

                                                           

Charge

S37(2) deals with the transfer of all the 3 types of interests.

PROCESS

• Filling of the prescribed instrument
• Registration of transferee as proprietor of land, lease or charge

S32 LRA-produce original& duplicate lease or charge for registration of any disposition in the document including transfer.

TRANSFER OF LEASE

• S45 LA- implied warranty that rent, agreements and conditions in lease have been met by transferor as at the transfer date and that these obligations shall be met by transferee from the said date
• S 71 LA has similar provision
• S72-transferee becomes the lessee

TRANSFER OF CHARGE

• S86(1) LA
• Chargor (or anyone with an interest in land that is charged, any surety for the payment of an amount secured by a charge, any creditor of the chargor who has obtained a decree for sale-with the consent of the chargor) may request the chargee to transfer the charge to a person named in the request.
• Chargor’s consent to transfer charge required if the charge instrument expressly or impliedly says so(S87)

FREEDOM TO TRANSFER?

• Bill of Rights in the Constitution
• Article 40(1): Subject to Art. 65, every person has the right to acquire an own property, of any description and in any part of Kenya
• Article 65-You can only transfer freehold property or leaseholds of over 99 years to Kenyan citizens any such transfers to non-citizens are deemed to be leasehold for 99 years.

WHAT OF CONSIDERATION?

• S43(2)LA, S27(1) LRA- one can transfer land, lease or charge to any person including himself with or without consideration
• What of the requirement of consideration for a contract to be valid?
• There is an exception to this rule where consideration is not valuable i.e. no money is paid. In this case the transfer documents indicate that the consideration is “love and affection”.  How does this fit in with the phrase ‘without consideration’ above? S27(2) LRA same effect as transfer with consideration

TRANSFER ‘WITHOUT CONSIDERATION’

• To oneself - Change of name
• To spouse
• To beneficiaries
• Gift

GIFTS

·         What is a gift?  Something given voluntarily without payment in return to show favour, honour, assistance or a present

·         Land as a gift- no consideration?

·         Giver= donor, Recipient= done

·         The gift must be accepted by donee during the lifetime of donor

·         It must be effected by a registered instrument and the donor must comply with all the statutory requirements relating to the transfer eg LCB consent where necessary etc

·         See the Registered Trustees of the Anglican Church, Mbeere Diocese Vs. Rev. David Waweru (2007)eKLR Civil Appeal 108 of 2002. The Respondent(Rev. Waweru), had donated his land to the church. He obtianed LCB consent and executed the transfer but it was not registered due to a court matter over the property. He later sought to reclaim it from the church through court action after he resigned from the church service. The suprior court held in his favour. The Court of Appeal held in favour of the Church using the above principle that where the donor has fulfilled all legal requirements of a transferor, the property belongs to the donee.

·         S49 LRA- donee with legal incapacity may transfer back property within 6 months after the end of incapacity

DISSOLUTION OF MARRIAGE

We haven’t embraced pre-nuptual agreements. Are they of any force especially if they are in conflict with written law? MWPA of 1888 is applicable in Kenya as a statute of general application(S3 of Judicature Act). S17 of the Act entrenched the right of women to own property in their names if acquired before marriage. Also provided that the High Court can adjudicate over disputes concerning matrimonial property

MATRIMONIAL PROPERTY

Petit V Petit, 1969 All ER 385, Wife bought property in her name, husband only painted. The court held that he was not entitled to the propety

Gissing V Gissing 1970 2AllER 780, wife was considered to have directly contributed

I v I 1971 EA 278, established the applicability of MWPA in Kenya

Karanja v Karanja 1976 KLR 307- The couple were both salaried, it was held that the wife was entitled to the property and her part was held by the husband in trust for her

Njuguna v Njuguna 1986 LLR 823(HCK)- The Court recognized non-direct contribution

Kivuitu v Kivuitu 1991 KLR 248- Purchase price paid by the husband (deposited by the wife while he was abroad). It was registered in joint names. The wife sought to sell it and have her equal share. The Court established that indirect contribution can lead to equal distribution of the property. But this was overruled in Echaria v. Echaria.

ISSUANCE, LOSS AND REPLACEMENT OF TITLE DOCUMENTS

S24 LRA- registration vests interest of absolute ownership or leasehold interest in transferee. S25 LRA -registered proprietors rights, for valuable consideration or by court order shall not be defeated except under the Act. S26 LRA- issuance of certificate of title or lease is conclusive evidence of proprietorship. S33 LRA- one can be issued with a duplicate certificate of lease or title if it is lost or destroyed. Proof of loss or destruction required and statutory declaration shall be required by registrar.

SUBDIVISION AND SURVEY/ DEVELOPMENT CONVEYANCING

There has been increasing subdivision of land in the property market. Many subdivisions and amalgamations are managed by private surveyors but under the Director of Surveys see S 22 of the Survey Act (cap 299). S22LRA, proprietor applies to registrar to subdivide and registrar closes the register of the main parcel then opens new registers in respect of the new parcels. S 42LRA prohibits part transfers before formal subdivision.

SUBDIVISIONS AND AMALGAMATION

The proprietor hires a physical planner and land surveyor to develop a subdivision/amalgamation report. Report presented to council meeting and discussed by technical committee who may make suggestions on plot sizes, roads etc. Report amended, Council planner issues a letter approving the subdivision as per the report and sets out conditions to be met before MoL can issue titles eg infrastructural development(roads, water, storm drainage, sewer, electricity. The Council can recommend issuance of 30% of titles for sale to support these infrastructural developments. The Land owner takes the approval letter to MoL to process titles. The Commissioner of Lands (CoL) circulates the application for approval to Director of Physical Planning and Director of Survey.If approved CoL issues conditional approval and sets out fees payable and conditions to be complied with.Application sent for valuation, to ascertain new land rent. CoL grants final approval after council gives final approval.Compare this with sectional properties. Which one is less complicated? Which one is more economical for the developer?

THE MINISTRY OF LANDS

• Departments of MoL
• Administration & Planning
• Surveys
• Physical Planning
• Lands
• Land Adjudication

1.     LANDS

Lands

1.       Land policy formulation 2.       Management and custody of land resource records 3.       Administration of Government and Trust lands 4.       Registration of titles and various transactions 5.       Land valuation for various purposes 6.       Resolution of land and boundary disputes 7.       Generation of revenue and collection of allocation in aid

3. DIVISIONS

REGISTRATION PROCESS

Stamping

·         Documents presented for assessment of stamp duty at banking hall

·         Assessor of Stamp Duty confirms whether duty is payable and then issues KRA stamp duty assessment form to be completed

·         Assessor assesses the amount of stamp duty payable. Applicant pays at KCB or NBK

·         Applicant brings back document and form together with proof of payment

·         Bank makes reconciliation of payments received and gives collector of stamp duty statements of payments(takes 2 days)

·         Documents are stamped and given to accountant to countercheck payments and then to auditors to audit

·         Documents picked for registration

Registration

Previously we had several registries

§  RTA-2 registries (Nairobi Central Registry and Mombasa Central Registry)

§  GLA, Nairobi Central Registry

§  LTA, Mombasa Central Registry

§  RLA, various District Registries

§  RDA, Principle Registry in Nairobi, for all matters outside Coast & Coast Registry for matters within the Coastal region.

New Regime

Registries to be constituted by the Commission- see S6 &7 LRA. A land Registry in each registration unit.

Procedure

• Present document plus completed application for registration form in quadruplicate to booking counter. They are stamped with received stamp
• Day book number is indicated on both the documents and forms for follow up
• Auditor checks documents to ensure payment in terms of stamp duty
• Strong room officer retrieves relevant files and matches the documents
• Investigation officer checks whether they are properly drawn and that there are no encumbrances, may make recommendation for registration
• The documents are given to the registry superintendent who assigns them to assistant registrars to make entries
• Assistant registrars enter the transaction on original title(RTA) and indicate the time and date of registration which is the date of booking documents. RLA new certificate of Lease/Title Deed is prepared
• Documents are passed the Registrar who will sign if found to be in order
• Documents sealed and photocopied( no need for photocopying of RLA as original title is retained)

Where There Is Subdivision or Amalgamation

The investigating officer refer the deed plans to the Department of Surveys for confirmation and they in turn refer the documents to the valuation division for rent apportionment and assessment.

ADDITIONAL NOTES ON TRANSFER

TRANSFERS

They are what gives the purchaser the right and interest conveyed/purchased. The sale agreement of itself does not convey an interest in land. See S.54 ITPA & s.3 RLA

Openda v Khan

Sale agreement creates no interest over the property

The transfer is always drawn by the plaintiff’s advocate save in very exceptional circumstances e.g. in mortgages and subleases

Salim v Okongo [1976] KLR 42

LSK Condition 24 – Transfer can be drawn by the purchaser’s advocate. The drafting responsibility is then in a way passed to the vendor’s advocate when his approval is so sought. Purchaser’s advocate ensures the purchaser really obtains the interest in land sold.

Forms of transfer

This depends on:

a)   statute applicable

b)   interest to be transferred

For RLA land, forms are prescribed which are mandatory under s.108 and schedule 3 of the Act. You must use these forms unless you prepare your own form, pay the requisite fee and obtain consent from Registrar.Under RTA, s.34 provides the form which is NOT mandatory and you can adjust it mutates mutandis. It is in the form of a deed. It does not matter that the interest is a leasehold or freehold, neither does it matter that the person transferring is not the registered owner.

Under RLA if a leasehold prepare a transfer of lease – Form RL2 .If freehold prepare a transfer of land-use RL 1. Under the GLA and LTA, these are simple deeds in the form “conveyances or assignments”.A conveyance refers to a document used to transfer an interest registered under GLA or LTA which interest is a freehold.An assignment refers to a document used for purposes of transferring an interest registered under the GLA or LTA which is a leasehold interest.In drawing the deed of conveyance or transfer you can convey different properties. Under the RLA the transfer of lease forms allow one to transfer 1-5 and 6-10 properties respectively.

You may also include properties registered in RTA and RLA in one deed as long as you obtain permission from the Registrar of Lands. You ought to be careful with the use of precedents. Do not use them blindly.

Under the GLA, one talks about;

a)   A deed of conveyance – transfer of freehold

b)   A deed of assignment – transfer of conveyance

c)   An indenture of conveyance was common during the regime of no requirement for registration. No need to refer to indenture now.

Specimen Deed of Conveyance

See Handout

Commencement – Refers to the title of the deed itself.

Date – The execution date is the most appropriate to insert to the document.

·                     Date stamp duty

·                     Ideally put the date of execution by the vendor i.e. when the interest is conferred (practice)

·                     Ensure you get the right date to avoid conflict.

Parties – those interested in the transaction

• Get their names, descriptions and personal details right
• Their addresses also need to be correct as it is through this address that any notice will be forwarded to them e.g. rates demand, land rent demand
• The vendor’s address ought to be the same as the address in the last purchase deed and perhaps even similar signature to curb fraudulent transactions

Recitals – these are two-fold:

a)   Narrative recital i.e. the recital of the title

b)   Introductory recital i.e. the recital of the contract

It begins with the word WHEREAS.

The narrative recital sets out the vendors title. It makes it easily understood for purposes of the conveyance. The introductory recital explains the purpose or the intended operation of the deed of conveyance/transfer.It put into effect the agreement that the parties had.

Testatum – This where the deed begins:

“NOW THIS CONVEYANCE WITNESSESTH…”

It is a declaration that what follows in the body of the deed contains details of the operation of the deed.

Consideration – This refers to the exchange given by the purchaser for the interest in land that he is receiving. It could be monetary or otherwise i.e. another parcel of land therefore a deed of exchange.

Consideration is important because:

a)   It is not a voluntary deed and as demanded by the law of contract, one is suffering to part with something for what they are receiving. Matters as between the Government and parties.

b)   It avails:

• The remedy of specific performance
• It helps the government to determine how to charge
• Particular transactions by the parties i.e. stamp duty, income tax

Receipt clause – this is necessary in the body of the deed or in the transfer deed as it enables the purchaser and the purchasers successors in title if any (heir, legal representatives) to avail themselves of various statutory and legal provisions. It is an acknowledgement by the vendor that he has received the consideration (operates as a discharge for the purchase moneys). It avails to the purchaser and its successors in title, the protection of a bona fide purchaser for value without notice especially as against third parties.

Operative words – these are words of the grant (transfer) and capacity of the parties to issue that grant. It is the statement by the vendor of what he is doing by virtue of the deed e.g. “the vendor as the beneficial owner doth hereby grant and convey”

NOTE:

If transferring a:

a)   Freehold GLA – convey and grant

b)   Leasehold GLA – convey and assign

c)   Freehold and leasehold RTA – Simply transfer

d)   Charge document – Charge expressly

e)   Lease  - Issue a demise

f)     Discharge GLA – Release and reconvey

Note: the capacity of parties really matters e.g.

-          Beneficial owner

-          Trustee

-          Administrator

-          Attorney

-          This will show existence of power to transfer the property

Parcels clause – Technical term denoting the description in words of the property being transferred, conveyed or assigned. It should be strictly accurate and includes sketchmaps, deed files etc. Includes acreage of land. If the descriptions are too many you can describe them in the schedule and make reference in the parcels clause. A misdescription of the property can be corrected by variation. Avoid misdescriptions because vendor can play dirty making your right of rectification useless.

Habendum – maps out or defines the interest or the quantum of the estate that is being taken by the purchaser. If it is a freehold being transferred or conveyed, you should state that you are giving it to be held in fee simple. If it is a leasehold, there are limitations state expressly “to hold for a specific term e.g. 99 years, remainder of the term”

If it is an assignment, state whether you are assigning the balance of your leasehold tenure e.g. the residue of your time, fifty years less the last 20 years etc (esp in GLA). Also put any limitations and restrictions e.g. subject to easements, subject to payment of land rates

Covenants – A covenant is that agreement which not only binds the vendor but also binds his predecessor. It details and declares all the covenants of the parties.Testimonium – This is the part that now links the execution or the affirmation of the deed with the rest of the document “IN WITNESS WHEREOF…”

Attestation/verification – the place where the parties sign or cause the common seal to be embedded. It signifies the intention of the parties that the deed ought to become operative and it is consequently so deemed when the parties execute the document. Legal Notices No.146 – 153 of 2005 require that when you prepare a deed of assignment or transfer, you attach photographs of the parties

Note: The schedule strictly and ideally speaking out to be inserted between the testimonium and the execution clauses to avoid fraudulent changes thereunder.

Under the RLA, the forms are very simple i.e.

1. Commencement clause
2. Parties clause
3. Consideration/operative clause

Note: No parcels clause as this found in the commencement clause

If there are covenants, one has to seek permission to vary the form from the Land Registrar.

OTHER DEEDS OF TRANSFER

a)   Vesting Order – order by the court for the purpose of conveyance. Does not exist under the RTA, GLA, RLA or LTA. It is an order by the court for the purpose of conveyancing/creating a legal estate and it operates to vest the estate/interest in the same manner as if it had been a transfer or a conveyance executed by the estate owner. Only in this case, the vesting order is executed by a high court judge.

The Trustees Act Cap 167 grants this jurisdiction to the High Court puisne judges (S.5-56 sets out the various instances when a vesting order can be issued e.g. s.48 where the High Court has ordered the sale of the property. Also applies where the court sells the property in execution of a decree. Also where the court orders specific performance. It is applied for by way of an originating Motion or Summons.

The person acquiring that interest prepares a vesting order and sends it to court for approval and execution by a High Court judge. A vesting order is a transfer which is supposed to fetch stamp duty. Also issued where the trustees are not acting e.g. refusing to subdivide.

b)   Transmissions

These are transfers save that the interest in land/lease from one person to another is by an act of or operation of the law. This will happen when:

·         Somebody dies

·         Somebody is declared bankrupt

The form that the transmission dictates is either an assent or a basic transfer of interest in an estate by an administrator form. Assent applies when dealing with the estate of a deceased person where the land is registered under the GLA, LTA or RTA. In the document, one’s title is only as far as one is an administrator. RLA has a specific form for it.

c)   Sub-leases

These are transfers or conveyances in their own rights. A sublease is basically a lease by a lessee to a third party conveying some or all of the leased property for a shorter term than that of the lessee himself. It is occasionally referred to as an underlease or even a lease. In the latter case, it will happen when dealing with freehold property e.g. 999 years lease and given for 900 years. Subleases have been in existence in Kenya since the late 1970s.

Characteristics of a Sublease

-          The term to be granted in the sublease will depend on the headlease i.e. must be less than the head lease.

-          There is a management company that owns the property (land) where the sublease is created. This company is registered under the Companies Act Cap 486. Its purpose includes inter alia:

(i)            managing the estate where this sublease exists

(ii)           acquiring the reversionary interest where the subleases lie. It is the management company that will then negotiate an extension of the lease.

-          The owners of the sub-leases are entitled to a share of the management company. Therefore, the sub-lessees own the reversionary interest itself by getting a share certificate of the management company.

-          The reversionary interest will vest in the management company.

-          The building/architectural or site plans will be annexed to the sub-lease, properly marked

-          Insist that the sub-lease has a clause/covenant that upon expiry of the term, the management company or whoever is holding a reversionary interest will also give a similar term automatically.

SUBLEASES & SECTIONAL PROPERTIES

1)    They are dependant on the headlease

2)    They depend on a management company

Under the sectional title, the format of the transfer takes the form of prescribed instruments under RLA. Rationale: The substantive law recognised in Kenya is RLA

The Sectional Properties Act was enacted in 1990 to facilitate transfer of flats through mortgage finance. The lenders objected to subleases as security because:-

d)   The titles were dependent on the head lease by the Government or Head Lessor. Therefore, there was some uncertainty as to whether the lease would be extended, if someone defaulted and the Bank had to sell, it would be hard to get a buyer and extension wasn’t guaranteed.

e)   Even where extension was guaranteed, the terms of extension were unknown and uncertain therefore not good security

f)     There was a distinct possibility that the head lessor would fail to apply for extension of the lease

g)   Also argued that subsistence of the sublease dependent on head lessor serving his obligations.

Nevertheless, a grant was essentially the same as a lease, so this argument did not hold much weight. The misconception was based on looking at a sublease (not as title but) as a lease!

These arguments led to the adoption of the Australian condominium legislation on subleases. The effects were:

1. The RLA became the substantive law and a sectional title could be issued to an owner of a flat which was registered under the Sectional Properties Act. If property not under RLA, you would have to convert it to RLA. Flats owned under the Sectional Properties Act have titles issued which are equivalent to grants. They are issued to each owner of a unit.
2. Corporate bodies are also established under the Sectional Properties Act similar to a company recognised under the Companies Act BUT with no registration formalities. It is a corporate body and has some liability. The moment a sectional plan is registered corporate bodies are constituted. A sectional plan is the document prepared by a qualified architect or surveyor which defines or describes in a graphic form the units constituting the sectional property. S.4 of the Sectional Properties Act provides for the process of preparing a title which commences with the registration of the plan. Upon such registration the parcel of land register on which the property lies is closed and a separate register for each unit opened. The corporate entity established upon registration is identified by the name which name refers to the number of the sectional plan e.g. Sectional Plan No.22

The main difference between subleases and sectional properties is ownership of property.Termination of the corporate body is unanimously by all the members of the body or through the court (by members unanimously agreeing)

Distinctive features of Sectional Properties v Subleases

1)    Operative law in sectional properties is RLA while in subleases it could be RLA, RTA or GLA

2)    Under the Sectional Properties Act the title is a certificate of Sectional Title issued under RLA in other subleases, the title is the lease itself

3)    The corporate entity is registered automatically under s.17 of the Sectional Properties Act, while in subleases, the corporate entity is incorporated under the Companies Act as a limited liability company.

4)    The statutory framework regarding conveyancing in the Sectional Properties Act is the same as those under the RLA as well as the applicable legislation under Sectional Properties Act. For subleases, the form will either take the general form under RTA, GLA/LTA e.g. if GLA - assignment, if RTA – transfer

5)    The generally accepted minimum term of subleases is 50 years. In the case of sectional properties, the property will only be converted to RLA from RTA, GLA or LTA if it is more than 45 years.

TRANSFERS AND PARTS OF A CONVEYANCE (ONGUTO’S)

TRANSFERS

Whilst Sale Agreements are always drawn by the Vendor and forwarded to the Purchaser for approval,it is the converse with transfers. Transfers are drawn by the Purchaser’s Advocates and forwarded forapproval by the Vendor. It is the Transfer that actually causes the disposition of an interest in land onceit’s registered. (See Section 54 of the ITPA, Section 3 of the RLA as to definition of “disposition” and alsoLSK Condition 24). (cf. use of precedents. What are the dangers?)

PARTS OF A CONVEYANCE

Most conveyancing documents (e.g. conveyance, assignment, transfer, mortgage, charge) will besides theadministrative information i.e. the relevant registry, contain the following parts:

1. Commencement clause

This clause will comprise of details concerning the nature of the document, date and a briefdescription of the parties. It ordinarily commences “THIS CONVEYANCE” or “THISTRANSFER”. The date is always the date of execution by the vendor or assignor of interest.

2. Recitals

Constitute the descriptive parts of the document. There are two types of recitals: theintroductory recitals and the narrative recitals. The introductory recital for a sale agreement willfor instance read as follows: “the vendor has agreed to sell and the purchaser has agreed to buy all thatparcel of land known as Title Number Nyahururu Municipality Block 15/896…” Narrative recitals willfor instance read as follows “The purchaser admits that he has inspected the property and purchases asa result of that inspection and not in reliance of anything warranted by the vendor either orally or in2writing….”. The recitals’ clause starts with the word “WHEREAS” and whilst narrative recitalsare designed to make the title more intelligible as they provide a history of the property from theroot to present day, introductory recitals are intended to explain the intention of both thedocument itself and of the parties.

3. Operative Clause

Comprises of the testatum, consideration clause, receipt clause, the operative words, parcelsclause, habendum and the reddendum for leases.

(a) The Testatum is the clause that begins with words such as “NOW THIS DEEDWITNESSETH…” or “NOW THIS LEASE WITNESSETH…..”. It is basically a declarationthat what follows contains details of the operation of the deed.

(b) Consideration clause will ordinarily read “In consideration of the sum of KShs.10,000,000/=the Transferor hereby transfers to the Transferee all title, right and interest in all the abovereferenced parcel of land.” Besides being necessary for purposes of the Stamp Duty Act it isalso necessary to avail the purchaser the remedy of specific performance.

(c) The receipt clause will read something like “Receipt whereof the transferor herebyacknowledges…”. The clause avails to the purchaser or transferee the protection under thenorm of the bona fide purchaser for value without notice in the event of any claim by athird party.

(d) The operative words basically contain the words of the grant and capacity of the vendor.

Words of the grant are a statement as to what the vendor does by virtue of the deed orthe transfer. They include “Grant” for conveying freeholds under the GLA, “Assign” forassigning leaseholds under the GLA and “Transfer” for transferring leaseholds andfreeholds under the RTA.

(e) The parcels clause contains in concise terms the physical description or property.

Description of the L. R., Title or I. R., or C. R. Numbers is paramount. E.g. “All that parcelof land known as I. R. No. 94453….” or “all the parcel of land known as Title NumberNairobi/Block 74/41”. Note however that a false description or misdescription does notvitiate the deed.

(f) The Habendum clause describes the interest created. It defines the estate conveyed to thetransferee or purchaser. It defines the quantum of interest created. E.g. “The transferortransfers unto the transferee all his title, right and interest in L. R. No. 209/15432 TO HOLDabsolutely …” The reddendum clause appears in leases only. It begins with words

“YIELDING AND PAYING…” . This part explains the amount of rental payable by thetenant and when it is to be paid.

4. Covenants

These are the express agreements and obligations of the parties. For instance in a lease documentcovenants will constitute the agreements of the parties such as the agreement to yield back on thepart of the tenants upon expiry, the obligation/agreement on the part of the tenant to pay rent onthe date agreed, the agreement/obligation on the part of the landlord to insure and repair theexternals of the structure leased etc.

5. Testimonium

It begins with words such as “IN WITNESS WHEREOF…” This is the part of the document thatlinks the preceding parts of the document with the seal and signature part.

6. Execution

This is where the parties affix their seals and signatures as the case may be. This is also a key partof the document.

7. Attestation Clause

This is where the witnesses to the signature sign. It will contain words such as “In the presenceof”. Normally attestation will be by the parties’ advocate in whose presence the document wassigned.

8. Verification Clause

This is the clause that provides that a party appeared before an advocate and was propertyidentified by his I/D or was personally known to the advocate and that he understood the importor contents of a document and that he signed voluntarily. It was previously a requirement ofcertain documents under the RLA but with recent amendments to the law in November 2005 isnow a requirement of practically most conveyancing documents because of the requirement ofpassport size photos, PIN and identity card numbers.

CONSTRUCTION OF DOCUMENTS

There are 8 fundamental rules of construction. These rules are enumerated and expounded on hereinbelow:

1. Express intention of the parties

Courts of law will look at the exact words used by parties in construing a document. The generalrule is that a court of law will not presume the parties’ intention in construing a document.

Clarity and simplicity are paramount in discerning the parties express intention. The use of plain, simple language and short words and brief sentences is advisable. This is the best way to draft contracts. It is also the modern way. Complex language can cloud people’s minds.

2. In construing a document a court will read the whole document. For instance where the whole document includes a lease and Further lease a court of law will read both the lease and the Further lease in-order to discern the intention of the parties. The document too is to be read in its entirety and not selectively.

3. Words must be given their ordinary meaning

Ordinary meaning is the accepted grammatical meaning of the words. There are however two exceptions to this rule. Courts of law will sometimes give words their special, technical or customary meaning. For instance in a contract the words person will also include company, singular in many cases can be taken to include the feminine. Further, where the court is of the opinion that the ordinary meaning would lead to some absurdity, repugnancy or inconsistency with the rest of the document it will modify the meaning of that word to avoid such a result.

4. Extrinsic evidence will not be allowed to vary or contradict the term of a document.

The only exceptions are:

(i) Extrinsic evidence can be admissible to explain the meaning of word used or to resolve latent ambiguity.

(ii) Surrounding circumstances existing at the time of the time of executing the document may be looked at to place the court in the position of the parties.

(iii) Extrinsic evidence is admissible to show that a document is not binding on grounds of fraud or mutual mistake.

5.    Clerical errors will be corrected in accordance with proper grammatical spelling of the words but the correction must be so as to give effect to a parties’ true intention as appearing in the whole of the documents. Self-explanatory.

6.     

6. “Contra-Preferentum Rule” where the document has been drafted in a language chosen by one of the parties the document must be construed against the person who drafted it in the event of any ambiguity.

7. “Ejusdem Generis Rule”

Where general words follow words of a peculiar class the general words must be construed as limited to the same kind as the particular words. E.g. in the phrase “cows” “goat” “sheep” and other animals the general words and any other animals will be interpreted to refer to domestic animals.

8. “Expessio Unius exclusion alterius” Rule

The general rule in law is that an express provision will automatically oust an implied provision. Implied terms in a lease as are contained in Sections 53, 54 of the RLA and Section 108 of the ITPA will be ousted by express provisions contained in the lease document executed by the parties. Alongside this rule too is the rule that “falsademonstratio non nocet”. This latter rule is to the effect that a false description in a document does not prejudice or vitiate its effect. This latter rule is particularly applicable when interpreting the parcel’s clause.

REMEDIES

Remedies are applicable in Conveyancing when the transaction for whatever reason is not completed or when it is completed but one party still feels aggrieved. The remedies are either statutory, equitable or obtainable under common law.

COMMON LAW

These fall into two categories

1. Damages

The whole purport is to ensure that the aggrieved party is compensated and thus restituted as if the contract or transaction had actually been properly performed and completed. For this reason damages will be compensatory. The injured party seeks compensation for the loss occasioned by the breach which may lead to non-completion or completion but with some loss. In the case of non completion due to breach on the part of the Vendor, the Purchaser shall be entitled to damages for loss of bargain. Substantial damage may also be sought by the Purchaser where though the contract is performed there has been delay in completion or the Vendor fails to give vacant possession. To succeed however the Purchaser must establish his own ability to perform the contract. (cf. when assessment of damages made is: at date of breach or date of judgment?)Damages may also be sought as a collateral remedy to any other remedy available to the aggrieved party.

2. Rescission

This is basically the undoing of the contract by the court or the party aggrieved. It may berescission ab initio which describes the effect of the relief that is normally available when the formation of a contract is affected by some vitiating factor such as fraud. The contract is here annulled and parties restored to the position they occupied before the contract was made. i.e.restitution in integrum. Rescission may also be rescission for breach. This connotes the consequence of an innocent party’s acceptance of the repudiation of the contract by the other party’s breach of an essential term. This acceptance however does not result in rescission ab initio and the innocent party’s entitlement to damages for breach remains intact. Rescission for breach will arise where there is a misdescription or misrepresentation by one party or presentation of a defective title or even for failure to complete on the completion date and or after a notice to complete has been given.

EQUITABLE REMEDIES

The special character of land has led equity to ensure that a Purchaser or Vendor for that matter is not left content simply with the common law remedy of damages for breach of contract. Damages may never constitute adequate compensation for him. Two main equitable remedies exist in equity to parties to a conveyancing transaction:

Specific Performance

This is a remedy available to and peculiar to land transactions. The Plaintiff (Purchaser or Vendor) seeks a decree from the court ordering the other party to perform the contract specifically. There is no need for breach of the contract itself to be entitled to specific performance.(see: Hasham –vs- Zenab 1960 AC 316). The remedy is however discretionary and the principles of equity will be applicable. E.g. Equality is equity: thus it is available to both Vendor an Purchaser. Equity does not act in vain: thus if property has been disposed of by the Vendor the remedy of specific performance will not lie.

Injunctions

This is also another equitable remedy. Breach or threatened breach must however be proven.

STATUTORY REMEDIES

A number of remedies are also available under statute to aggrieved parties.

Rectification available under the RLA (S.142), RTA(S.59), LTA (S.81), GLA (S.120)

Mortgagee’s/Chargee’s statutory powers of sale/appointment of receiver. RLA (S.74), TPA (S.69)

Damages available to Mortgagors and Chargors under S. 69 of the ITPA.

Forfeiture by lessors under S. 56RLA and S.112 ITPA.

JLO-AUGUST, 2008

louis@swiftkenya.com

CHARGES

• Definitions
• Distinctions
• Terminologies
• Further and Second Charges
• Duties and Responsibilities of Lender/Borrowers Advocate
• Form of charges
• Remedies of the Chargee/Chargor
• Reconveyances/Reassignments and Discharges

DEFINITION CHARGE

• S2 LA, S 3 RLA- an interest in land securing the payment of money or money’s worth or the fulfilment of any condition and includes a sub-charge and the instrument creating a charge.
• Simply put- security for loan with an undertaking for repayment. It confers certain rights to the Chargee from the Chargor
• S46 RTA advance of security by lender against a registered charge. The substantive law- s100 A of ITPA which equates a legal charge under s 46 to the English legal mortgage
• S65 &84 RLA- charge operates as security but not a transfer S65(4). It was the only form of security.
• S 80(1) LA- Charge to operate as security only and not as a transfer of any interest or rights in land

DEFINITION: MORTGAGE

ITPA defines a mortgage as

 “The transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt or the performance of an engagement which may give rise to a pecuniary liability”

Deals with transfer of interest as security for loan advanced. Transferor of interest= mortgagor while transferee= mortgagee. The sum of money over which interest is advanced is known as the mortgage sum. Though the transaction is between two parties- mortgagor and mortgagee, a 3^rd party called a guarantor or a head lessor may be involved, the latter to give consent to assignment or sublease of a leasehold interest as security for loan.

NATURE OF MORTGAGE

• Conveyance or transfer of interest in land or other properties; this could be legal or equitable interest depending on the mode of creating the mortgage or the nature of the interest that the mortgagor has in the property
• Consideration from the mortgagee to mortgagor in terms of loan
• Conveyance or transfer is not absolute- i.e. subject to cesser or redemption upon payment of loan
• Both mortgagor and mortgagee have a mutual rights of action

DISTINCTION

• Mortgage- conveyance or assignment of land with proviso for reconveyance or reassignment
• Charge-confers rights to chargee to enable him recover money plus interest. See RLA S 3, LA S2 No transfer but security exists.  It is only an encumbrance on the title
• Mortgagor says “take my land until I pay you”
• Chargor says “give me the money if I fail to pay, take my land”
• S 65(4) RLA a charge shall not operate as a transfer but shall have the effect as security only.
• Charge is regarded as a species of a mortgage
• S46 RTA, S100 ITPA- Create charge

TYPES

- S 58 ITPA

• Simple mortgage: no delivery of possession but mortgagor binds himself to pay or the property will be sold
• Mortgage by conditional sale: the mortgagor sells the property to the mortgagee on condition that the sale will become absolute upon default
• Usufructuary mortgage: possession is delivered with authority to retain it until payment, the mortgagee also obtains rights to secure rent and profits to repay.
• English(legal):mortgagor transfers property to the mortgagee with a proviso that upon payment of the mortgage money the latter returns it.( the best form and most popular)

EQUITABLE

Ø  Creature of Equity. Traditionally there are 4 ways of creation of equitable mortgages

·         By deposit of title

·         Where money has been advanced and the mortgagee agrees to execute a legal mortgage

·         If the estate or interest is equitable

·         Written memorandum identifying the property and indicates intention to charge property.

Ø  Equitable Mortgages Act(cap 291) recognizes the creation of mortgage by delivery of title

Ø  S100(2)(g) of ITPA also recognizes them

Ø  S66 of RTA also allows for equitable  charges by deposit of title 

Ø  No equitable charges in RLA since it is the register that is prima facie evidence of the matters therein (s32(2) RLA, RTA S23 certificate of Title is conclusive evidence of ownership(s23(1)RTA)

Ø  Barclays Bank DCO V Gulu Millers (1959)EA 540

Ø  Samuel Kenneth Ondendaal & the official receiver V Richard Gray (1960)EA 263

LEGAL OR ENGLISH MORTGAGE

Ø  Based on pre 1926 English Mortgage. S 58(c) ITPA the mortgagor bound himself to repay the mortgage money on a certain date and transfers the mortgage property absolutely  subject to the proviso that the mortgagee will retransfer it back to him on the repayment of the mortgage money.

Ø  Form of security under GLA and LTA whose substa

LEGAL VS EQUITABLE MORTGAGE

Legal- transfers legal interest in land whether leasehold or freehold from mortgagor to mortgagee. It must be created by deed or statutory form

Importance

• It is easier to enforce
• Priority-a legal mortgage without prior notice of an equitable mortgage takes priority over the equitable mortgage
• Less prone to fraud than equitable mortgage where a borrower can obtain a provisional title and deal with the property.

Equitable- transfers an equitable interest in land or other properties. It is an agreement to enter into a mortgage agreement, created on the rules of equity. A mere deposit of a title deed in exchange for a loan without a written agreement is an equitable mortgage;

Advantages-

• Small amounts
• Short repayment periods
• Urgency

EQUITABLE

• S 2 of Equitable Mortgages Act (cap 291) nothing shall invalidate charges made by delivery of title to person with intention to create a mortgage
• Proof of intention- signing a memorandum
• This kind of mortgage emanates from the doctrine, equity considers done that which ought to be done
• Reflection? How does this doctrine sit with S (3) of the Law of Contract Act?
• What about the requirement of registration of dispositions in land?

LEGAL MORTGAGE

• Based on pre 1926 English Mortgage. S 58(c) ITPA the mortgagor bound himself to repay the mortgage money on a certain date and transfers the mortgage property absolutely  subject to the proviso that the mortgagee will retransfer it back to him on the repayment of the mortgage money.
• Form of security under GLA and LTA whose substantive law was ITPA

TYPES UNDER THE NEW REGIME

LA recognizes

a)   Formal charge: S79 (5) LA, prescribed instrument in prescribed register

b)   Informal charge:S79(6) LA:

§  written or witnessed undertaking from chargor accepted  by chargee with intention to charge

§  Deposit of certificate of title or lease document or any evidence of ownership or any undertaking observed by custom

S26 LRA certificate of title is conclusive evidence of proprietorship (this was the position with RTA)

Further V Second Charge S57LRA

• Further- additional facility by the same lender to the same borrower on the security of the same property
• Second –a separate charge over the same property to a different lender.

S 2 LA defines a charge to include a sub charge

A chargee may charge the rights it has under the charge therefore create a charge out of a charge in order to raise money as an alternative to assiging the debt. The subchargee has the double security of the original chargor and the original chargee.

Basic Requirements of a Charge

S 46 RTA forms J (1) and J (2)

a)   There must be a chargor

b)   Name and description of lender

c)   Description of property

d)   Amount advanced

e)   Acknowledgement of receipt of loan

f)     Covenant to repay principal & interest

g)   Special conditions (if any)

h)    A charging clause

S 80(3) LA every charge instrument to contain:-

a)   The terms and conditions of sale

b)   An explanation of the consequences of default

c)   The reliefs that the chargee is entitled to including the right of sale.

MORTGAGE INSTITUTIONS

• Central Bank?- licences banks and acts as a banker of the banks. Regulation is under the Central Bank Act (Cap 491)
• Banks, financial institutions and mortgage institutions
• National Housing Corporation eg the tenant purchase scheme.
• Employees housing scheme

DUTIES OF ADVOCATES

Process of securitization starts with application by borrower for a loan. Lender will ensure that due diligence is carried out- ie credit assessment of borrower and evaluation of property (this is an internal process, if approached advise the bank to seek help of other professionals such as valuers etc).

Duties of Chargee’s Advocates

1. The bank will then involve its advocates once it has prepared and secured the execution of the offer letter by both parties
2. The following details are contained in the offer letter

a)   Details of the parties- full names and addresses(borrower, lender, guarantor)

b)   Amount  to be lent/borrowed and amount to be secured by the property

c)   Repayment period and repayment mode(monthly, quarterly

d)   Particulars of property to be charged(title no or land reference no.

e)   Details of intended security(informal or formal charge)

3. Advise the bank On

·         The appropriate security, Informal(equitable) vs formal(legal) charge

4. Proper investigation of title
5. Confirm the capacity of chargor

a)   Company- confirm if memorandum and articles allow for borrowing and charging

b)   If Trustees-confirm if trust deed allows for borrowing and charging

6. Draft charge and send to borrower’s advocates for approval(mostly take it or leave it)
7. Confirm execution and attestation- Is Advocate qualified? Ndolo Ayah case
8. Engross the charge and send it for execution and attestation
9. Ensure execution and attestation is done in accordance with the law
10. Dispatch document to the lender for execution and attestation
11. Pay stamp duty (obtain from the borrower)
12. Lodge for registration at lands registry and companies registry (if it is a company within 42 of registration of charge S 96, 97, 99 of Companies Act, void against liquidator), Cooperative Societies- See Cooperative Societies Act
13. Forward the perfected documents to your client with a report on the title confirming the registration
14. Obtain loan proceeds from chargee for onward transmission to the chargor
15. Follow up on fee payment

DUTIES OF BORROWER’S ADVOCATE

·         Discuss offer letter with borrower and advise on effect of security

·         Obtain all requisite consents, clearances from seller (usually upon a professional undertaking for payment upon registration)

·         Obtain original title from seller (usually upon a professional undertaking for payment upon registration)

·         Obtain a professional undertaking from the lender’s advocates that they will not use the title document for any other purpose than for the transaction

·         Approve the charge

·         Explain the contents of the charge to your client and its effect

·         Obtain adequate funds for stamp duty

·         Conflicts of interests

Ethical and professional responsibility issues may arise. Remember the general principle that unless you cannot avoid it, you should refrain from acting for both parties

King Woolen Mills Ltd &Anor vs. M/S Kaplan & Stratton [1993] LLR 2170 (CAK), (C.A 55/93).Uhuru Highway Development Ltd & others vs Central Bank of Kenya Ltd & others (2), [2002] 2 EA 654.

In Mortgage Express Limited V Bowerman& Partners (1996) 2 ALL ER 836, It was held that when you act for both borrower and lender, the highest duty is to the lender. Where 3^rd parties are involved eg Spouse ensure that they have obtained independent legal advise. BBK PLC V O’brien (1994)1 AC 180- the transaction can be challenged on this ground.

SUBSEQUENT CHARGES/ PRIORITIES

The process is the same with subsequent charges.  The rules on priorities organize interests in ranking, so that each party can ascertain which interests are prior and which are subordinated to his or hers. The general rule is that the charge which is first made is first paid or discharged. Priority is conferred by registration. The first registered charge has priority over all the others. See S81 LA.

TACKING

The right of a secured lender to add further monies to the security so that further monies are also secured . The further advances are also tacked into the original charge and have the same priority over subsequent lenders only with their consent see S 82 LA.

CASE LAW

Angwenyi & Another V NIC Bank Ltd(2004) e KLR

Charge created but loan was not disbursed, bank sought to sell the property in satisfaction of a hire purchase facility which was secured by vehicles that were purchased. It was held that since loan was not disbursed there was no consideration that would entitle the bank to sell the property

Labelle International Ltd & Another V Fidelity  Commercial Bank & Ano. (2003) 2 EA 541

The Advocate who signed the attestation certificate is not the one who witnessed the chargors’ signatures. This was an RTA charge which did not need to be attested. Application for injunction was dismissed.

Anthony Anthanus Ngotho t/a Ngotho Architects Vs NIC Bank Ltd HCCC No, 319 0f 2003

Mortgage prepared by mortgagee’s advocates exclusively. mortgagor had no counsel representation. The Letter of offer was dated several months later than mortgage

It was held that the mortgage was validly executed

The apparent defect on the mortgage (ie it was created before the offer was accepted) is evidence of a prima facie case.

IMPLIED TERMS S 88LA

a)   To pay principle money on day appointed in charge and interest at rates agreed upon

b)   Pay all rates, charges, rent, taxes and other outgoings

c)   Repair and keep in repair all buildings and other improvements

d)   Insure

e)   Use land in a sustainable manner

f)     Not to lease or sublease for more than a year without consent of chargee

g)   Not to transfer, assign or lease without written consent of chargee

h)    If a lease; to pay rent perform and observe covenants in the lease

i)      If a second or subsequent charge, to pay interest on each prior charge when they fall due

j)      In 2, 3, 4, 5 and 8 chargee may pay on behalf of chargor and include the amount so paid in principal amount

FORM AND CONTENT OF A FORMAL CHARGE

Ø  Commencement date

Ø  The Parties

Ø  Principal amount

Ø  Recitals- the following facts are recited

The borrower’s title

Agreement to lend/borrow

Agreement to create a legal charge

CONTENT

Testatum (now this Charge witnesses)

·         Covenant to pay

·         Interest

·         Secured obligations- aggregate principal amount, all interest from time due, all costs, taxes, liabilities, charges and expenses incurred by the bank from time to time in relation to the charge

·         Charging clause.... Charge the premises as continuing security for the payment and discharge in full of the secured obligations

·         Chargors covenants

·         Events of default

·         Bank’s remedies

Serve notice  as per Section 90 LA and if the Chargor does not comply(S90 (3)LA:

a)   Sue the chargor for any money due under the charge

b)   Appoint a receiver of income of the premises

c)   Lease or sublease the premises

d)   Enter into possession of the premises

e)   Sell the premises

·         Statutory power of sale

                             Before sale-

a)   Serve 40 day notice

b)   Value the premises

c)   Prioritization of application of proceeds from sale ie rates, rent, taxes, discharge of prior charge, all costs and reasonable expenses, discharge of principal amount, payment of subsequent charges

·         Further advances (S 82 LA), To rank in priority to any subsequent charge

·         Right of consolidation- (S 83 LA), Chargee may consolidate

·         Application of monies- to satisfy the debt

·         Indemnity- chargor to indemnify chargee/receiver

·         Power of attorney- chargor appoints the chargee to be attorney of chargor

·         Discharge- upon payment of final balance

·         Matters to be noted in the register- the banks rights of tacking and consolidation

·         Governing law

                        ATTESTATION AND EXECUTION

S 38 LA, Contract for the disposition of an interest in land must be:

·         In writing

·         Signed by all parties thereto

·         Attested by a witness who was present when it was signed

This section should be read together with S 44(1) LRA which provides that every instrument affecting the disposition of land must be executed by each of the parties consenting to it. Section 44 (2) LRA- execution should consist of the person executing the instrument appending his or her signature or affixing his or her thumbprint or other mark as evidence of personal acceptance. S44(3)Execution of the instrument by a Corporate body, association, cooperative society or any other organization should be effected in the presence of an advocate, a magistrate, judge or a notary public. S45(1)LRA a person executing the instrument is required to appear before the registrar, public officer or any other person prescribed and be accompanied by a credible witness for purposes of establishing identity unless his identity is known to the Registrar or prescribed officer. The Registrar or public officer must identify the person executing the instrument and ascertain whether the person freely and voluntarily executed the instrument and shall complete a certificate to that effect. (S45(2)LRA). This execution process must be followed whenever executing all instruments under the meaning of disposition( which includes an agreement to undertake these dispositions). Does this then mean facility letters for credit facilities, letters of offer? S56(1)LRA requires that for charges the chargor must acknowledge that he understands the effect of s 90 of the LA which among other things provides for the remedies of the chargee.

Signed by the Chargor xxxxxxxxxxxxxxxxxx In the presence of ................................................ Advocate’s signature

ID  No:................................ PIN No............................... ................................................. Chargor’s Signature

I,  yyyyyyyyyyyyyyyyyyyyy, an advocate of the High Court of Kenya who witnessed the execution of this Charge, CERTIFY that the above named chargor appeared before me on the ....day of ....2012 and(being known to me/being identified to me by sssssssssss acknowledge the above signature or mark to be his/hers and that  he/she had  freely and voluntarily executed this instrument and understood its contents

I, the above named chargor acknowledge that i understand the effect of Section 90 of the Land Act (the Act) and the Chargee’s remedies under this charge and I hereby agree that the Chargee’s rights under Sections 82 and 83 of the Act and restrictions under Section 87 of the Act and Section 59 of the Land Registration Act be noted against the above title. ................................. Chargor’s  signature

Signed by ppppppppppp

The duly constituted Attorney of the chargee

Under and by virtue of a Power of Attorney registered at the Lands Titles Registry as number................and at the Registry of Documents at Nairobi as Number......

In the presence of

......................

Advocate

I,CERTIFY that the above duly constituted Attorney of the Chargee, appeared before me on the ....day of ....2012 and(being known to me/being identified to me by sssssssssss acknowledge the above signature or mark to be his/hers and that  he/she had  freely and voluntarily executed this instrument and understood its contents.

                                                                        ..................................

                                                                        Bank official’s signature

RETROSPECTIVE EFFECT

Part VII of the LA S 78(1)- has a retrospective effect that provides that provisions of Part VII shall apply to all charges including any charge made before the coming to effect of the LA. Retrospectivity of this Part may be challenged as being unconstitutional See Art. 116 (2).

VARIATION OF INTEREST

S 84 LA introduces an onerous provision that where it is contractually agreed that the rate of interest is variable, the chargee must serve a written notice to the chargor

·         Giving the chargor 30 days’ notice of the reduction or increase in the rate of interest

·         Stating clearly and in a manner likely to be understood the new rate of interest.

It’s important for banks to keep proof of such service

Fraud, Dishonesty and Misinterpretation of Prior Chargee

S81(4) LA any misleading, false information by a prior chargor to a subsequent lender leading to creation of a subsequent charge will result in the subsequent chargee getting priority in the exercise of its rights over the property.

Spousal Consent

S79 (3) of LA provides that a charge of matrimonial home shall be valid only if  any document or form used in applying for the charge or used to grant the charge is signed by the chargor and any spouse of the chargor living in that matrimonial home or there is evidence that it has been assented to by all such persons.

A matrimonial home is defined under S 2 to mean” any property that is owned or leased by one or both spouses and occupied by the spouses as their family home”

This provision should be read together with S 28 of LRA-overriding interests and S 93(3) of LRA. S93(3) LRA provides that where a spouse who holds land or a dwelling house in his or her name individually wishes to give a charge over that land or dwelling house, the lender shall be under a duty to inquire the borrower as to whether his or her spouses has9have0 consented to the charge.

Where a lender wishes to take a charge over property owned by an individual, the bank must make inquiries regarding the marital status of the potential chargor and also if the property is occupied as a matrimonial home. The bank should also make inquiries through the valuer. If the spouse misleads a lender as to whether his or her spouse has consented to the charge, the charge becomes voidable at the option of the spouse or spouses who have not consented to the disposition.

Spousal Overriding Interest over Matrimonial Property

Spousal rights over matrimonial property have now being included as an overriding interest subsisting over registered land whether or not those interests are noted on the register. S 28 LRA. Though not defined matrimonial property encompasses more than the matrimonial home described in S 79(3) LA defined in S2 LA. This is the doctrine of spouse deemed ownership- Are you married? Question will now feature in land transactions S93(2)- Rights of spouse who only makes a contribution recognized though not registered . Though the term ‘spouse’ has not been defined, the definition can be inferred from the term marriage S 2 LA- a civil, customary or religious marriage. What about marriage by presumption?

REMEDIES

Chargor’s right toredeem

Notice

Lender’s remedies

EQUITY OF REDEMPTION

Equitable doctrine that there should be no fetter or clog on the chargor’s equity of redemption- any provision which purports to limit, postpone or exclude the chargor’s equity of redemption is prohibited. The right to redeem is absolute

S 89 LA – Any law, written or unwritten that entitles the chargee to foreclose (bar) the equity of redemption is prohibited (S72(1) RLA

Lord Parker in Krelinger V new Patagonia Meat and Cold Storage Co (1914)AC 25 at 48-“.....the equity which arises on the failure to exercise the contractual right cannot be fettered or clogged by any stipulation contained in the mortgage or entered into as part of the mortgage transaction”

Mortgage was a conditional transfer with the mortgagor covenanting to pay by CDR (contractual date of Redemption)- Redemption means the right to buy back. Even though a charge does not involve a transfer, the chargee can exercise power of sale therefore CDR is part of mortgage or charge.

At common law if repayment was not done by the appointed day, the conveyance became absolute; equity found this too harsh since the lender’s right to the land was only a security for money. Equity therefore allowed the borrower to redeem his property after the legal or contractual date of redemption.

On or before legal or CDR the chargor has the contractual right of redemption. If the legal or CDR date passed without payment, the mortgagor obtained an equity of redemption. In Saleh V Eljofry (1950)24 KLR it was held that the mortgagor’s equity of redemption was a necessary incident of every mortgage and failure to repay on the CDR did not debar the mortgagor from his right of redemption. Some charge instruments allow for payment by instalments after the CDR with a provision that upon default the chargee will be entitles to exercise any of its remedies. In Industrial and Commercial Development Corporation V Kariuki&Ano(1977) KLR 52.- the court stated that the right of redemption subsists until the transfer is registered.

Interfered with in two forms

·         That which make the land irredeemable

·         Collateral provisions in the nature of a fetter of a clog

·         Nookes V Rice (1902) AC 24- mortgage had a stipulation that the mortgagor would only sell liquor provided by mortgagee. The mortgagor sought release from this clause on repayment-the court held that this was a clog to the equity of redemption

CLOGGED/FETTERED

Examples-

• Postpone the right to redeem for 20years Fairclough V Swan Bakery Co. Ltd 1(1912) AC 565- it was held that this clause was invalid and the borrower had a right to redeem at an earlier date
• Mortgage conferred on mortgagee option to buy the property-This was held to be against doctrine of equity of redemption- Samuel V Jarah Timber & Wood Paving Corporation Ltd (1904)AC 323.
• Clause which allowed mortgagor a limited period of redemption was void

NOTICE

Under S 56(2) LRA, where the date of payment of the money secured by a charge has not been specified or has passed without demand being made, the money becomes payable 3 months after service of a written notice of demand by chargee to chargor. Notice must be issued before exercising of any remedy under LA. Notice is issued in default of any obligation including failure to make payments where there is default for a month or more. Under S 90(1) of LA where a default in payment has continued for more than a month, the chargee may issue a statutory notice. This means that under S s 90(1) LA the notice will run for 3 months. Notice should require the Chargor to pay the money owing or perform and observe the agreement as the case may be.

Notice should inform the chargor S90(2) LA

·         The nature and extent of default

·         If default is non-payment of money, the amount that must be paid to rectify the default and the time by which the payment in default must be completed (this should not be less than 3 months)

·         If default consists of non-observance of covenants, what the chargor must do or not do to rectify the default and the time for rectification should not be less than 2 months

·         A statement that is the default is not rectified within the time specified, the chargee will exercise any of its remedies provided in the Act

·         The right of the chargor to apply to court for relief against those remedies 

REMEDIES

Section 90(3) if the chargor does not comply within two months after service of notice, the chargee may

·         Sue the chargor for money due and owing under the charge

·         Appoint a receiver of the income of the charged land

·         Lease the charged land, or if the charge is of a lease sublease the land

·         Enter into possession of the charged land

·         Sell the charged land

Reference to 2 months in s90 (3) is onerous since s 90(2) provides that the chargor should be given at least 3 months within which to rectify the default. S90 (4) if land is community land (Charge is only valid if done with concurrence of family), Chargee can appoint a receiver of income of charged land or apply to court for order to lease, sublease or sell the land. S90 (5) form of Statutory Notice to be prescribed by the Cabinet Secretary in consultation with the commission.

1. ACTION FOR MONEY

S91 LA- Chargee can sue for money secured if:

·         Chargor is personally bound to repay

·         The security is rendered insufficient (not by chargee or chargor’s fault) and chargee has given chargor opportunity to provide additional security

·         The chargee is deprived of the whole or part of the security through a wrongful act or default of the chargor

This remedy should only be pursued if the chargee has pursued other remedies relating to charged land unless the chargee agrees to discharge the charge

2. APPOINTMENT OF RECEIVER

S92 LA power to appoint receiver over income of charged property implied in charge instrument. After notice under section 90 (1) the chargee has to wait a further 30 days before appointing one. Appointment/replacement is in writing by chargee. Receiver is deemed to be chargor’s agent- he is given powers in the name of chargor to take possession of property and deal with it by selling, leasing or charging. Chargor is responsible for liabilities arising from acts of receiver.

Advantages- bank does not have the administrative burden of realization of security, the receiver’s costs are recouped from the assets of the chargor-not more that 5% of money received S 92(7) LA. See priority of payment of money received by receiver- S90(8) LA

3. LEASING

S93- follows the appointment of receiver

·         Lease can only be granted after 30 days upon expiry of notice

·         To take effect in possession not later than 6 months after its date

·         Reserve the best rent

·         Not more that 15 years or length on term of charge whichever is shorter

·         Contain reasonable terms and conditions having the interests of the chargor

·         Contain a declaration of appointment of receiver by chargee

4.  POSSESSION

S94 upon expiry of notice, the chargee can serve notice to enter and take possession at least one month after service of notice. Entry must be peaceful. Entry is achieved by taking the management of the property. Banks usually avoid this due to the administrative inconveniences involved and because they will be held liable for damage to property and account for profits and rents.

5. CHARGEE’S POWER OF SALE

S96(1) LA where the chargor is in default of obligations under a charge and remains in default upon the expiry of the demand under s 90(1) the chargee may exercise its power to sell. S 96 (2) before exercising the power to sell the chargee must serve a notice to sell of at least 40 days. Copy of notice to sell to be served on

·         Commission

·         Holder of the land out of which the lease has been granted if charged land is a leasehold

·         Spouse of chargor

·         Co-owner of chargor

·         Any other chargee

·          Guarantor

·         Any other person with right to enter on and use the land or natural resources in it

·         Any other person to be prescribed by regulations

Required of service on all this people makes the process tedious and longer. In summary the following notices must be served;

a)   3 months demand S 56(2) only if date of repayment is not provided or demand is not made on the repayment date.

b)   If default continues for at least 1 month serve 3 month notice under S 90(1) LA

c)   Forty days’ notice under S 96(2) LA

d)   45 days’ notice under the Auctioneers Act

POWER OF SALE- DUTIES OF CHARGEE

a)   Duty of care owed to chargor, guarantor any chargee under subsequent charge- s 97(1) LA.

b)   Chargee owes duty to chargor to obtain best price not more than 25% below market value (sale may be declared void) S97 (3).

c)   Property must be valued prior to sale S97 (2) LA to determine its forced sale value - The chargor may apply to court to declare sale void if sold at a value that doesn’t meet this threshold.

d)   S99 LA confers protection on the purchaser if there has been irregularity in the sale, he can claim damages against the person exercising the power.

e)   sale to chargee upon court order

f)     S 79(9) LA a chargee shall not possess or sell land whose title document has been deposited with the chargor under an informal charge without an order of the Court NB the word ‘chargor’ here should read ‘chargee’

POWER OF SALE CONDITIONS- S98

Sale

• may cover the whole or part of the land
• May be subject to or free of any charge or encumbrance having priority to the chargee’s charge
• By way of subdivision
• By way of private contract at market value
• By way of public auction-with reserve price
• For a purchase price payable in one sum or by instalments
• Subject to any other conditions of the chargee

There are therefore more ways in which the sale can be conducted.

RELIEF

S 103 to 106 LA chargor, spouse, guarantor, lessee, trustee in bankruptcy may apply to court for relief against the exercise by chargee of any of these remedies (error refers to remedies under s 85(3) (a) and (b)). Scope of those who can sue has been widened. The Court has wide ranging powers including widening the scope of orders by the court eg to extend time for chargor to rectify default- s 102 LA. Court has power to reopen charges secured on a matrimonial home S105(1) and 106(2) LA.

POWER TO RE-OPEN CHARGE SECURED UNDER MATRIMONIAL HOME

Under S 105(1) LA Court has power to reopen charges secured on a matrimonial home in the interest of doing justice between the parties.  S106 LA Charges can be reopened in 3 instances, on an application by:

a)   Chargor or chargee to enforce a charge or commence an action under s 90

b)   Chargor  for relief against exercise of any remedy by chargee

c)   Registrar where there is evidence of unfair dealing by chargee, or chargee is a corporate body that discriminates against certain classes of chargors e.g. on basis of gender.

RE-OPENING OF CHARGES

The court may:

1.    Direct that the charge shall have effect subject to certain modifications

2.    Require the chargee to repay the whole or part of the sum paid by the chargor

3.    Require the chargee to compensate the chargor

4.    Direct the chargee which is a corporate body to stop acting in a discriminatory manner.

DISCHARGE OF CHARGE

Right to discharge in 2 forms:

              i.    S 85(1) , S 102 LA gives right to discharge- upon payment of all money secured by the charge and performance of all obligations under the charge before the land has been sold by chargee or receiver appointed. This right is in mandatory terms

             ii.    S 85(3) a charge instrument may provide that a chargor who  wishes to  exercise their right of discharge before the expiry of the term of the charge shall give one month’s notice, shall pay not more than one month’s interest at the rate at which interest is payable as well as all other monies secured by the charge

It simply means the chargor has repaid the loan plus interest and penalties and the chargee has released the title to the property used as security back to the chargor. Like the right of redemption it should not be fettered or clogged- See S 85(2).

DISCHARGE

A discharge includes a re-conveyance, a re-assignment of charge. The mode of discharge to be adopted depends on how it was created.

              i.        If the mortgage was created by way of assignment or a conveyance the discharge will be in form of a re-conveyance or a reassignment

             ii.        If charge then a discharge of charge is prepared as per the prescribed form

Before sale or withdrawal from sale, the chargor may pay the amount due and the chargee may discharge the charge and deliver to the chargor a discharge of charge and instruments of title. The Chargor’s advocate prepares a discharge.

COMPANY SECURITIES

Securities given by companies sometimes differ from those given by individuals.

                                i.        Company charges are subjet to registration under the Companies Act-S 96

                               ii.        A company can create a floating charge over its assets so that it remains free to deal with the asset until specified evets(eg appointment of receiver) occur and the charge then crystallizes over certain assets and becomes a fixed charge

                              iii.        A company can create an irredeemable debenture

                             iv.        Directors can act ultra vires their powers to borrow

COMPANY CHARGES

Definition in S 2 CA is vague “debenture”,  includes debenture stock, bonds and any other securities of a company whether constituting a charge on the assets of the company or not

It is simply a document either creates a debt or acknowledges it. Debentures can come as single or in a series.  S88 of the Companies Act deals with debentures.  Charges may be given by the company to secure debentures

Floating Charge             While it creates an immediate security, it does not create an immediate encumbrance on the title until certain events occur such as the appointment of receiver and the charge then becomes fixed on the listed assets-crystallization

           

Fixed Charge When made, immediately attaches or fixes on the ascertained property. The right and ability of the owner to continue to deal with it is immediately encumbered

LEASES

1.    Definitions and distinctions

2.    Essentials of a lease

3.    Implied conditions and express covenants

4.    Assignment and determination

5.    The regime of rent Acts

6.    Duties of the Conveyancer

LEASE DEFINITION AND CHARACTERISTICS

An owner of a property who does not wish to stay or occupy the land himself may grant another person the right to occupy and use the property for a certain period in return for an agreed sum of money

In Prudential Assurance Co. Ltd V London Residuary Body (1992) AC286 it was defined as “a contract for the exclusive possession and profit of land for some determinate time”

S2 LA defines a lease as, The grant, with or without consideration by the proprietor of land of the right to exclusive possession of his or her land, and includes the right so granted and the instrument granting it and also includes a sublease but does not include an agreement to lease.

LEASE CHARACTERISTICS

A grantor of a lease is known as the lessor while the grantee is known as the lessee. The words ‘lease’ and ‘tenancy’ denote the grant and are sometimes used interchangeably. However the word tenancy has come to be used in reference to short term leases. Under the Landlord and Tenant(shops, Hotels and Catering Establishments) Act Cap 301 a tenancy is described as a tenancy created by a lease or underlease, by an agreement for a lease or underlease by a tenancy agreement or by operation of law, and includes a sub-tenancy but does not include any relationship between a mortgagor and mortgagee as such;

APPLICATION OF PART VI LA

S55 LA provides that unless otherwise provided in a lease instrument the provisions of part VI of the Act shall apply to all leases, other than leases governed by legislation relating to community land. What does the above provision mean?

Lease agreement is based on freedom of contract. The provision enables parties to a lease to contract out of the provisions of the said part VI.

LEASES AND ASSIGNMENT

In a lease only a term of years is granted to the lessee and the lessor has a right of reversion after the expiration of the term granted. An assignment conveys or assigns the entire leasehold interest to the purchaser and the vendor has no right of reversion. The vendor can only assign the unexpired residue of his term.

LEASE AND UNDERLEASE

A lease is a direct relationship between the lessor and the lessee. An underlease anticipates the existence of aheadlessor. The underlessor is a tenant of the headlessor.

LEASE AND LICENSE

A license is a relationship whereby the licensee is granted a right to enter into or use the premises without becoming entitled to exclusive possession. A licensee has no interest in the premises but he can exclude the whole world from the premises except the licensor. S2 LA defines a license as permission given by the commission(for public land) and proprietor(for private land) allowing the licensee to do some act in relation to the land which would otherwise be a trespass but does not include an easement or profit.

Lease v License

Exclusive possession is the central and indispensable feature of a lease. The lesser must acquire a right of possession of the property to the exclusion of the lessor. If the lessor visits the property without lawful authority (notice must be given) he can be sued for trespass. Possession alone does not result in a lease. If it is not exclusive then a license is created. The exclusiveness of possession also depends on the degree of control.

Desai vs.Cooper (1950)214 KLR 32- the defendants did not have keys to the front door of a shop and could only access it from the back. They could not enter the front when they pleased but had to go to their portion through the plaintiff’s portion. The plaintiff sought to recover the portion occupied by the defendants. The Court held that even though the defendants had exclusive use of a portion of the premises, they did not have exclusive possession and were licensees not tenants.

Hecht vs.Morgan (19957) EA 741- ‘paying guest’. The respondent lodged a complaint under the Central Rent Tribunal Board against his landlord. The tribunal had to decide whether it had a jurisdiction (only if it was a lease). The respondent proved that he had exclusive possession and the court of appeal held in his favour. The court held that there must be a clear intention to create a lease. London Northwestern Railway Co. Buckmaster(1874) 10 LR –exclusive possession precludes interference from the landlord. Possession does not necessarily mean tenancy- Runda Coffee Estate V UgagaSingh(1962) EA 564

Halsbury’s Laws of England Volume XX page 9(2 ed.)

...a grant under which the grantee takes only the right to use the premises without exclusive possession operates as a license, regard must be had to the substance of the agreement. If the effect of the instrument is to give the holder, the exclusive right of occupation of land though subject to certain reservations and a restriction of the purposes for which it may be used, it is a lease. If the contract is merely for the use of the property in a certain way and on certain terms while it remains in the possession and control of the owner, it is a licence. To give exclusive possession there need not be express words to that effect, it is sufficient if the nature of acts to be done by the grantee require that he should have exclusive possession....

LEASE

1.    Lord Templeman in Street V Mountford(1985)AC 809 said “whenever exclusive possession of premises is granted for a term of a rent, then prima facie a lease will be created

2.    Can assign /transfer

3.    Confers more rights- quiet possession, non-derogation from grant, repairs, fit for habitation etc.

4.    Not easily revoked

5.    Protection granted by other statutes e.g. Cap 301 and Cap 296

LICENCE

1.    Permission to use premises

2.    Cannot assign/transfer

3.    Rights limited

4.    Can be revoked upon reasonable notice

5.    No protection by statute

REQUIREMENTS OF A VALID LEASE

Property and parties must be sufficiently identified

Certainty and duration

1.    Commencement date must be fixed or capable of ascertainment

2.    Term granted must be ascertainable e.g. A grants to B a lease for 7 years commencing when E vacates the premises. Is this ascertainable?

3.    A grant to determine on the death of lessor or expiry of 20 years whichever is longer?

Exclusive possession, the lessee must have an interest that entitles him to exclude all other persons including the lessor from the premises.

1. DEFINED AREA AND PARTIES

The land or part thereof must be defined. Ratwani vs. Deganela(1956)17 EACA 37- for a lease to exist the land must be defined. In this case the lessee was to share a shop and his portion was not defined. S56 LA gives power to lease whole or part of the land. If part of land is being leased it shall be accompanied by a plan or other description which the registrar deems adequate to identify the property.Parties must also be identified.

2. CERTAINTY OF DURATION

Term of years must be definite it must be for a specific period or for a period capable of being ascertained. If the lessee has a fixed term, he can underlet or sublet the whole or a portion of his leased term. S 56 LA the owner of land may lease the land or part of it to any person for a definite term or for the life of the lessor or the lessee or for a period which though indefinite may be determined by the lessor or lessee.Avoid creating leases that have clauses for perpetual renewal

Leases can either be in possession or commence at a future date. S61 LA a lease can be made to commence at a future date not being later than 21 years after the date it is executed. If the term of a future lease is for more than 5 years it must be registered.A term made to come into effect at a passed date is called a lease in possession. A lease to commence at some future date is called a reversionary lease. S 61 LA a lease may be made for a term to commence in future within 21 years from the date of its execution otherwise it is void.

EXCLUSIVE POSSESSION

Already discussed under licence

PERIODIC LEASES

Periodic S 57 LA

      i.        Term not specified and no provision is made for giving notice to terminate the tenancy (it is deemed to be for the period by reference to which rent is payable)

     ii.        Term is from week to week, month to month, year to year or any other periodic basis for rent payment in relation to agricultural land it shall be for 6 months

    iii.        Lessee remains in possession with the consent of lessor after expiry of the term of the lease unless there is an express or implied term agreed. The conditions and term of expired lease apply.

   iv.        No agreement in writing but there is occupation and payment of rent.

May be terminated by giving notice whose length is not less than its period and shall expire on the day when rent is payable. S 57(4). Does the above provision conflict with S 4 of cap 301.S28(f) LRA periodic tenancies are overriding interest- leases or agreements for leases for a term not exceeding two years, periodic tenancies and indeterminate tenancies.

SHORT TERM LEASES

Short term lease S58 LA

      i.        For a term of 2 years or less without an option for renewal

     ii.        Periodic lease

    iii.        No agreement in writing but there is occupation and payment of rent.

It may be made orally or in writing. A short term lease is not a registrable interest in land. A short term lease may also be made orally or in writing.

REGISTRATION OF LEASES

S58 LA leases of more than 2 years should be registered. S 54 LRA- after registration of lease with a requirement for consent of lessor no dealing will be registered until consent of lessor.S30 LRA no certificate of lease shall be issued unless the lease is for a certain period exceeding 25 years. S32 the registrar shall note the disposition on the original and duplicate lease or charge.S7 LA title to land may be acquired through a long term lease exceeding 21 years.

WHAT IS THE EFFECT OF NON-REGISTRATION OF A LEASE?

S43(2) LRA- No instrument affecting any disposition of private land under this Act shall operate to sell or assign land, create, transfer or otherwise affect land, lease or charge until it has been registered in accordance with the laws relating to registration of instruments unless the disposition is exempt from registration. S36(2) LRA- unregistered instruments shall be construed as contracts.S 4 of the Registration of Documents Act requires registration of leases and licenses of over 1 year.

James MichikiMwangi& Ano.Vs Esther WanjiruKabugu& Ano (2006) eKLR

Lease for 5 years 1 month not registered. Walsh V Londsdale (1882)21 Ch.Dquoted(where a tenant holds under an agreement for a lease equity regards him as holding a lease). The tenant continued in occupation after expiry of term and landlord accepted rent. S 52 RLA provided that acceptance of rent was evidence of consent to continue in occupation.

Bachelor’s Bakery Ltd vs. Westlands Securities Ltd Civ Appeal No.2 of 1978.

Lease of shop was for 6 years and was unregistered. Upon its expiry the landlord sought possession. It was held that it was not a protected tenancy as there an unexecuted lease for more than 5 years which created a tenancy and did not require to be registered under ITPA S107.

IMPLIED COVENANTS-LESSOR S 65 LA

A lease will normally contain certain agreements regarding payment of rent, insurance, repairs, assignments, subleases etc. The agreement will also refer to the remedies of the parties for breaches. These are freely contracted and fixed. The agreement may however be silent on some matters or there may be no agreement at all.The law implies certain covenants into the agreement because they are essential.

LESSOR’S COVENANTS S65 LA

1.    Quiet enjoyment

So long as lessee pays rent and observes and performs the obligations contained or implied in the lease the lesee shall peaceably and quietly possess and enjoy the land leased during the term of the lease without any interruption from the lessor or a person rightfully claiming through him. It does not mean absence of noise. Interference eg removal of windows and doors.

2.    Non-derogation from grant

Not to use or permit any adjoining or neighbouring land that the lessor owns or leases that would in any way render the leased land or any buildings on the leased land unfit or materially less fit for any purpose for which they may be used. It goes hand in hand with quiet enjoyment.

3. Duty to repair

If part of the building is leased, keep the roof, all external and main walls and drains and common parts, installations and facilities, including passages and walkways in a proper state of repair.

4. Fitness for habitation

If flat, house or room that it is fit for human habitation at the commencement and throughout the lease period.

5. Suspension of rent

If premises are destroyed by fire, flood or explosion or other accident(not caused by lessee’s negligence), civil commotion, lightning, storm, earthquake, volcanic activity or other natural disaster, rent shall be suspended until premises are made fit for habitation within 6 months and lessee shall have the option to terminate.

6. Fitness for purpose

If the land or premises can only be used for one purpose, the lessee can terminate by one month notice if the property can no longer be used for that purpose.

7. Pay all rates, taxes dues and outgoings

LESSOR’S RIGHTS

      i.        S65(2),Either personally or by agents enter leased land or buildings at a reasonable time to inspect the condition of premises and repair.

     ii.        Terminate lease by serving a notice of intention to terminate

·         If any rent is unpaid for one month after due date whether or not it has been demanded in writing

·         There is breach of lessees covenants by lessee for one month

CONSENT S 67 LA

A covenant by lessee not to do anything without the consent of the lessor shall be construed to mean that the lessor shall not unreasonably withhold the consent if the lessor applies for the consent. The lessor is supposed to either give or refuse to give consent within a reasonable time

If lessor refuses to grant consent unless the lessee pays additional rent or premium or a fine or any other consideration or imposes an unreasonable condition or objects to a transfer or sublease on grounds of gender or nationality of the transferee or sublessee it will be concluded that it has unreasonably withheld consent. Unreasonable withholding entitles one to seek damages and recover money lost. Chantly vs. Ward (1913) 29 TLQ the court held that the landlord must show a solid and substantial cause for withholding the consent.

CONDITIONS IMPLIED ON LEASES ON PART OF LESSEE S 66

a)   Pay rent at times and in the manner specified

b)   Use land in a sustainable manner and in accordance with the conditions in the lease including not to cut down any tree unless this is necessary to enable use of the land

c)   Yield up the land and buildings in the same condition as they were when the term of the lease began except for deterioration caused by:

                                      i.        Reasonable wear and tear

                                     ii.        Fire, flood, explosion, civil commotion, lightning, storm, earthquake, volcanic activity or other natural disasters

d)   Keep all boundary marks in repair

e)   Keep all buildings comprised in the lease in a reasonable state of repair

REMEDIES AND RELIEF

               A lease is a contract so the usual remedies under contract e.g. specific performance, injunctions, sue for damages etc are available. However since a lease is a special estate contract which imports some special remedies:

Enforcement by Lessor

1. Forfeiture

S 73 LA it allows the lessor to re-enter the premises making the lease voidable at the lessor’s option if the lessee:

a)   Commits any breach or omits to perform any agreement or condition expressed or implied in the lease

b)   Is adjudicated bankrupt

c)   Goes into liquidation

It is exercised in two ways:

              i.        If lessee is not in occupation by entering and remaining in possession of the land

             ii.        By court action

S 74 LA forfeiture has the effect of determining every sublease and other interest appearing on the register relating to the lease unless the court sets it aside on grounds that it was procured by fraud or grants relief under S 76 LA. Lessor must give one month notice under s 75

a.    Specifying the breach

b.    If breach is capable of remedy require the lessee to remedy within a reasonable period specified in the notice

c.    In any case other than default in rent payment require payment of compensation in money for breach

Relief against forfeiture s 76 application by lessee (court may grant or refuse to grant relief) or by sublessee or chargee(court may vest the property on the sublessee or chargee so long as they are not involved in breach. This section applies whether lease is registered or not

2. Distress for rent

Right given under S 3 of Distress for Rent Act (cap 293). Gusii Mwalimu Investment Co. Limited & others vs. Mwalimu Hotel Ltd Civil Appeal no. 160 of 1995 – destrained goods must remain in situ for at least 10 days. Distress must be carried out within 6 months after expiry of lease

Others

3. Action for recovery for rent arrears- subject to the limitation period of 6 years under the Limitation of Actions Act (cap 22). Landlord may only sue after distraining if the goods already sold are inadequate to meet the rent arrears

4. Action for damages- to put the landlord in the position he would have been had the breach not occurred

5. Injunction to restrain the committing of a breach.

LESSE’S

·         To institute proceedings for injunction or damages

·         Repudiate the agreement all together

·         S77 LA a lessee unlawfully evicted shall be relieved from paying rent

THE LAND LORD AND TENANT ( SHOPS, HOTELS AND CATERING ESTABLISHMENT) ACT CHAPTER 301

Applies to

a)   “catering establishment” means any premises on which is carried out the business of supplying food or drink for consumption on such premises, by persons other than those who reside and are boarded on such premises.

b)   “hotel” -any premises in which accommodation or accommodation and meals are supplied or are available for supply to five or more adult persons in exchange for money or other valuable consideration

c)   “shop” -premises occupied wholly or mainly for the purposes of a retail or wholesale trade or business or for the purpose of rendering services for money or money’s worth

What is a controlled tenancy?

S 2(1) “controlled tenancy” means a tenancy of a shop, hotel or catering establishment—

(a)Which has not been reduced into writing; or

(b) Which has been reduced into writing and which

             (i)   Is for a period not exceeding five years; or

             (ii) Contains provision for termination, otherwise than for breach of covenant, within five years from       the commencement       thereof; or(iii)relates to premises of specified by the Minister as             controlled tenancies

Provided that no tenancy to which the Government, the Community or a local authority is a party, whether as landlord or as tenant, shall be a controlled tenancy. Tenancy agreement may be in prescribed form. Terms and conditions to be implied in every tenancy not reduced in writing or not in controlled form.

(i)That the premises are fit for habitation and comply with the laws relating to health in all respects.

(ii)That where the premises are destroyed by fire, civil commotion, or accident, through no negligence on the part of the lessee, any liability to pay rent shall be suspended until the premises are again made fit and habitable.

(iii)The lessee shall have quiet enjoyment of premises provided that he complies with express or implied covenants.

(iv)The lessor shall not use adjoining land or premises in a way which would render leased premises unfit for the purpose for which they were let.

(v)The lessor shall be responsible for all repairs to roofs, main walls, main drains, main electric wiring and structures, and shall be responsible for all necessary renewals to the premises.

(vi)The lessee shall be responsible for all internal repairs and decorations, fair wear and tear excepted.

(vii)The lessor shall be responsible for the repair, maintenance, cleaning and lighting of common parts where part of a building is let.

(viii)The lessee shall pay rent for the premises in advance.

(ix)The lessor shall pay all rates, taxes and similar outgoings, unless the lessee is responsible therefor under any written agreement.

(x)The lessee shall keep the fixtures and fittings in good and tenantable repair.

(xi)The lessee shall permit the lessor or his agent and his workmen to enter the premises and to examine or repair the same at all reasonable times after giving reasonable notice thereof.

(xii)The lessee shall not transfer, part with possession, or sublet the premises or any part thereof without the consent of the lessor, which consent shall not be unreasonably withheld.

Cap 301 S4 (cap 301) Termination or alteration of terms of a controlled tenancy to take effect 2 months after service of tenancy notice

Does this conflict with s 57(4) on termination of periodic tenancies?

RENT RESTRICTION ACT (CAP 296)

The purpose of the Act is to restrict the increase of rent, right to possession and creation of premiums and for fixing of standard rents in relation to dwelling houses. The Act applies to dwelling houses which have rent of Kshs. 2,500/= and below. Increase in rent shall only be after a rent assessment. The Act controls the management of tenancies for the houses within its ambit.

EXPRESS COVENANTS

These are the covenant expressed in the lease document and usually include implied covenants. They may differ depending on the usage of the leased property. Purpose- implied covenants may not cover everything.

EXAMPLES

a)   Users covenant

b)   Insurance covenant

c)   Covenant to repair

d)   Covenant against assignment, transfer or otherwise parting with possession

e)   Covenant for renewal

f)     Covenant against alteration

g)   Covenant to deliver possession at the end of the term

h)    Option to purchase the reversion

OPTION TO RENEW CLAUSE

One of express covenants that at the end of term, the landlord is willing to extend the lease for another period as may be agreed by the parties.

Contents

a)   Time within which the tenant must indicate his desire to renew the lease eg 3 months to expiry

b)   Manner in which it will be exercised- eg in writing

c)   Conditions to be fulfilled eg repairs, compliance with covenants of present lease

d)   Terms on which new lease will be granted

INSURANCE

Inserted to protect against loss of rent or property

Who should insure?

·         Both landlord and tenant have insurable interests

·         Either or both can insure looking at the nature of the premises, existing obligations, payment of service charges, risk in the use of the property

DUTIES OF LESSOR’S ADVOCATE

1.    Obtain precise instructions from your client on the following inter-alia:

a)   Description of the property (obtain copy of title)

b)   Portion to be leased (if not whole)

c)   Rent to be paid

d)   Proposed use of the property by lessee

e)   Covenants

2.    Draw the lease to reflect the wishes of your client ensure all the essentials of a lease are included and the covenants protect your client’s interests

3.    Obtain all requisite consents e.g. consent to lease

4. Obtain stamp duty from the lessee
5. Register the lease

DUTIES OF THE LESSEE’S ADVOCATE

a)   Investigate landlord’s title

b)   Approve draft lease

c)   Advice your client on the contents of the draft - See Sykes V Midland Bank & trustee Ltd (1970) All ER 471 there was a prohibition on any other use of the premises unless permission is granted by lessor and headlessor. The former gave consent while the latter did not. Held the solicitor ought to have explained the consequence of this clause

d)   Collect disbursements from your client eg stamp duty, registration fees etc.

DUTIES OF ADVOCATES

AVOID CONFLICT OF INTEREST- See Francis Mugo& 22 others V James Muthee& 3 others (2005 )e KLR- application for Andrew Musangi to cease acting for plaintiff because he drew and witnessed a lease between the defendant and other parties relevant to the suit and would be a witness in the suit. Rule 9 of the Advocates Practice Rules was quoted.- No Advocate may appear in any matter in which he may be called as a witness to give evidence. The Advocate was ordered to disqualify himself.

ASSIGNEMENT AND TRANSFER

What is the difference?

Transfer- passing of lease from one party to another. Assignment- transfer of rights and obligations to the leased property. The assignee acquires the same rights as the assignor. Effect of the two is more or less the same.

The subject of transfer or assignment is the interest held in the lease and the reversion.

·         S69 LA transfer or assignment of reversion or part of it by lessor imposes the covenants and rights to benefits on the assignee against the lessee. Lessee must be notified of transfer or assignment, registration alone does not satisfy the required notice(s70LA)

·         S71 LA transfer or assignment of lease or part of it by lessee relinquishes the transferor or assignor from the common law rule that they remained liable for the breaches of the assignee or transferee

The assignor/transferor is discharged from the rights and obligations of the lease from date of transfer/assignment unless he remains in possession. S71 LA. If lessee vacates the land before the termination of lease he shall remain liable to perform all obligations including payment of rent for the next 1year unless the lease provides for a shorter period unless the lessor leases the property to another person before the end of the year. Under common law the lessee would be liable for breaches committed after assignment or transfer but the LA liability only falls on lessee before assignment or transfer.

TERMINATION OF LEASES

A lease may come to an end by:

·         Expiry

·         Surrender

·         Merger

·         Disclaimer

·         Frustration,

·         Forfeiture

·         Notice

1.    Forfeiture: S73 of LA forfeiture available where the lessee commits a breach of covenants, is adjudged bankrupt or goes into liquidation.

2.    Surrender: the lessee voluntarily yields up the premises to the lessor. It can be express or implied. Under S 64 LA surrender of a lease for renewal shall not affect a sublease if the latter will expire on or before the new head lease expires or if the sublease is periodic which means notice can be given for its termination

3.    Expiry: the lease lapses because of exffluxion of the term. Periodic tenancies and tenancies at will are an exception since they do not have an agreed term

4.    Merger: occurs where there is a vesting of the reversion and the leasehold interest in the same person at the same time eg the lessee acquires the reversion.

5.    Disclaimer: By trustee in bankruptcy- S 58 of Bankruptcy Act cap 53 if the property is burdened with unnecessary covenants making it unsellable

6.    Notice: It is required for fixed term leases if the lease agreement provides as such. Under periodic tenancies s 57(4) LA requires notice equivalent to the period of tenancy

7.    Frustration- S65(e) LA destruction of property through fire, earthquakes, civil commotion etc entitles a lessee to terminate the tenancy if after 6 months it has not been repaired by giving 1 month notice

SUBLEASES AND SECTIONAL PROPERTIES

Introduction

S 54 (3) & (4) LRA registration of sectional properties shall be as per the Sectional Properties Act No 27 of 1997. S 4- Sectional plan to be presented for registration if it describes 2 or more units. S 5- after registration of sectional plan, registrar closes the register of the parcel and opens a separate register for each unit and issue a title deed for each unit. The Titles are deemed to have been registered under LRA. The titles can be transferred, leased, charged etc as though held under LRA. Common property held by owners of units as tenants in common as shares proportionate to the units they own. The ownership of shares is noted in the register.

SECTIONAL PROPERTIES

The sectional plan can only be registered on a freehold or leasehold property with a  minimum balance of 45 years reversion.

CORPORATION

S 17 SPA- on registration of a sectional plan a corporation under the name “the owners, Sectional Plan No.....” Members of the corporation are the unit owners. Corporation has perpetual succession and a common seal. Capable of being sued and suing. Corporation is regulated in accordance with SPA and its by-laws and not Companies Act.

DUTIES OF CORPORATION

a)   Insure property and pay premiums and enforce the insurance contract

b)   Keep common property in good state of repair

c)   Comply with any notice or order of local authority or public body requiring repairs or work on the property

d)   Control manage and administer the common property

e)   Creation and enforcement of by-laws

The corporation is run through a board of management.

SECTIONAL UNITS MANAGEMENT

The common property is managed through the corporation. The sectional units are managed through a management agreement. Sale of unit is by way of purchase agreement and all documents required to be delivered to purchaser (ie purchase agreement, by-laws, management, recreational agreement, lease of parcel and sectional title, charge(if any)) to be delivered 10 days before execution of agreement. Developer holds purchase money in trust. 50% payable on delivery of sectional title to purchaser and balance upon completion of improvements (see s48 SPA)

TERMINATION OF SECTIONAL PROPERTY

S 55 SPA by:

a)   Unanimous resolution

b)   Application to court by corporation, owner, a registered chargee of a unit or purchaser

Court declares the termination of sectional status if in the interest of all stakeholders. The Corporation files a notice with Registrar in prescribed form who registers the notice, the unit owners become entitled to the parcel as tenants in common in shares proportionate to the unit factors of their respective units.

SUBLEASES

Another way of owning flats. Developer of leasehold or freehold property subleases the units for a shorter term than the lease and retains the reversionary interest. Management company is incorporated under the Companies Act to manage the estate. It purchases the reversionary interest from the developer and the unit owners are shareholders. The flat sold must be properly described eg flat no.  ..... Built on LR No.....together with ownership of common areas. Monthly service charge is collected for payment of rates, rent, maintenance of the common areas. Preferred minimum number of years of enjoyment of unexpired interest is 50 years.

Restrictions:

                                i.        No remodelling without consent of the management company

                               ii.        Use of flat

                              iii.        Fixing aerials

                             iv.        Hanging of washings

                              v.        Obstruction at car parks

                             vi.        Garbage dumping

                            vii.        Pets

                           viii.        Assigning, subletting, transfer or any form of parting with possession without consent of lessor

SUBLEASE/LEASE V SECTIONAL PROPERTY

SECTIONAL PROPERTY

SUBLEASE

1.    On registration of sectional plan the register of the parcel is closed and separate registers for each unit is opened and title deeds issues. 2.    No title issued for common property but upon registration of plan  a register is opened for the common property for recording matters such as schedule of unit owners etc 3.    Common property defined and owned as part of the unit in the title 4.    Less formalities in the formation of the corporate body (on registration of plan). 5.    Plans used for registration are prescribed 6.    SPA protects the purchase process- e.g. time of delivery of agreements, the holding of the deposit by vendor as stakeholder etc

1.    Sublease registered and issuance of titles must comply with section 54(5) of LRA in terms of geo-referencing 2.    Title for common property issued and may lead to duplicity of titles 3.    Common property not defined and owned by unit owners as shareholders in the management company 4.    Management Company formed under the Companies Act. It can be deregistered 5.    Plan not prescribed 6.    No such protection of the purchase process

RIGHTS IN ANOTHER’S LAND

a)   Cautions

b)   Easements

c)   Profits

d)   Restrictive agreements

e)   Wayleaves

RIGHTS IN ‘ALIENO SOLO’

Cautions/inhibitions/restrictions

Easements

Profits

Restrictive Agreements

Wayleaves

CAUTION

 S2 LRA Caution means:

a)   Notice in the form of a register to the effect that no action of a specified nature in relation to the land in respect of which the notice has been entered may be taken without first informing the person who gave the notice

b)   Caveat

CAUTIONS

One of the ways of imposing restraints on dispositions in land. Others- inhibitions (court) Restraint (registrar). S71 LRA Qualifications of a lodger.

a)   Claims a right (eg contractual) to an interest in land, lease, or charge which is capable of creation by an instrument registrable under the Act

b)   Is entitled to a licence

c)   Has presented a bankruptcy petition against the proprietor of registered land, lease or charge

·         Effect - Forbid registration of dispositions and the making of entries affecting the land, lease or charge

·         In prescribed form. Registrar may require an affidavit to accompany it.

·         Registrar to give notice to proprietor after registering caution

·         Withdrawal can be by the cautioner, removal is by the Court or Registrar

·         Registrar may refuse further caution from same person in relation to same matter as in previous caution

·         Punishment for wrongful cautions is liability in an action for damages S 75 LRA

·         Court may order an inhibition forbidding registration in land S68 LRA

·         Restriction by registrar s 76 LRA to prevent fraud or improper dealing

Inhibition S 68-70 LRA	Caution S71-75	Restriction S 76-78
Order made by Court and registered by registrar	Lodged for registration by any one with an interest capable of registration	Registered by registrar to prevent fraud pr improper dealing
No notice required to be given  to proprietor before its registration	No notice required   to be given  to proprietor before its registration	Notice requires to be given  and hearings held before registration.
May endure for a particular period or until the occurrence of a particular event or further order	Unless removed, it forbids registration of dispositions in land lease or charge and making of entries affecting the land, lease or charge	May endure for a period, until the occurrence of an event or the making of a further order

EASEMENT

An easement is a non-possessory interest in another’s land allowing the holder to use  the land to a particular extent, to require the proprietor to take an act relating to the land or to restrict the proprietor’s use to a particular extent and shall not include a profit(S2 LA).

There must be 2 pieces of land:

a)   The land for the benefit of which any easement is created (dominant land)

b)   The land of the person by whom an easement is created (servient land)

NATURE S 138 LA

·         Right to do something over, under or upon servient land (positive easement) right of water, right of way, right to run telephone lines on another’s land

·         Right that something should not be done (negative easement) e.g. easements of support, of light, of air

·         Right to require the owner of servient land to do something over, under or upon their land

·         Right to graze livestock on servient land

Easements are either expressed (by agreement) or implied (e.g. through a transfer, the purchaser takes the land together with rights attached thereto). Quasi easements-a form of implied easement. Once an easement is created it attaches to the property where there is 1) an existing use of the property at the time of the grant 2) the use continued for the benefit of the property after the conveyance.

Rights of way-

S139 LA Entry Order: owner of dominant land may seek entry order from court to enable him to enter the servient land for purposes of doing anything on the dominant land. Under the Public Roads Access Act (cap 299) a land owner may apply to have a road of access over another person’s property to a public road or railway line. S 140 LA- access order. Owner of landlocked land may apply for access order (analogous rights) . Easements and analogous rights are to be enjoyed by owner of dominant land and any successors in title including lessee of dominant land, chargee etc.

CREATION AND CANCELLATION OF EASEMENTS

S 98 LRA- creation of statutory easement either in the prescribed form or by grant or reservation in the instrument of transfer or lease. The easement should contain full particulars of

§  Nature of easement, conditions, limitations or restrictions subject to which it is granted

§  Period of time for which it is granted

§  Land or part burdened

§  Land to benefit from easement

§  A plan sufficiently defining the easement should accompany it.

S98 (7) LRA- No easement by presumption of a grant from long uninterrupted use. Cancellation S99 LRA- by owner of dominant land, servient land (if registrar is satisfied that the period of easement has expired or it has served its purpose)

WAYLEAVE

Wayleave right of way over another land usually for installation of sewer, drain, power line or pipeline. A 144 LA application by state department, county government, public authority or corporate body to the commission. The Government gives notice of wayleave creation and compensates the owner.

PROFIT

Profit a prendre (in french for right of taking) Right to enter another’s land and take something usually natural resources  from that land capable of ownership e.g. right to catch fish, graze, hunt,  cut trees, fetch clay, petroleum, minerals. You cannot have a profit to take away minerals and water. Why? The government owns them

RESTRICTIVE COVENANTS

S 2 LRA, LA restrictive agreement means

a)   A restrictive covenant or

b)   An agreement by an owner of land restricting the building on, use or other enjoyment of that land for the benefit of the owner of the land or neighbouring parcel

c)   S 41(2) LRA avoids the creation of restrictive covenants- no transfer shall contain a direction that the land shall be used or enjoyed by the transferee in a particular manner.

d)   There are no further provisions on restrictive covenants in the new land laws.

e)   They confer a negative duty on a neighbouring land eg  to maintain a certain standard of design

REMEDIES IN CONVEYANCING

a)   Common law remedies

b)   Equitable remedies

c)   Statutory Remedies

COMMON LAW

The remedy is limited to damages

              i.    Compensation for delay, rate of interest in contract or LSK conditions of sale

             ii.    Damages for breach of contract S38 LA

They are prima facie conferred upon breach of a contract

They are enjoyed as of right

EQUITY

      i.        Injunctions

     ii.        Equitable damages

    iii.        Specific performance

   iv.        Declaratory reliefs

    v.        Rectification

   vi.        Equitable compensation

  vii.        Rescission of contract- failure to comply with completion notice

 viii.        Forfeiture of deposit if failure to complete is buyer’s fault

They are discretionary

STATUTORY 1. RECTIFICATION

S 79 LRA- rectification of register or instrument by registrar when there is an error affecting interest in land, by consent of the parties, after resurvey and dimensions are found to be incorrect. S80 LRA Court can order rectification of register by ordering cancellation or amendment if made by fraud or mistake- this remedy is limited in that if rectification affects a proprietor in possession who acquired for valuable consideration without prior knowledge of the mistake or fraud then the register will not be rectified S80(2).

2. INDEMNITY

S 81 LRA anyone suffering damage as a result of rectification of the register or an error in a copy or extract of the register or plan certified under the Act shall be entitled to indemnity. The Act prescribes method of determining amount of indemnity- S82 LRA value of interest when mistake/omission/before rectification of register occurred

3. OTHER STATUTORY REMEDIES

Inhibitions (court), cautions (individuals) and restrictions (registrar). These are other forms of remedies offered by statute. S103 LRA, S157 LA- offences.

a)   Making of false statement (orally or in writing) in connection with a disposition or information under the Act

b)   Fraudulently procuring the registration or issue of a certificate of ownership or making of an entry or endorsement of an instrument, cancellation or amendment of instruments

c)   Fraudulently alters, erases, defaces, mutilates or destroys any instrument

Punishment- max 5 years or max fine Kshs 5m

Unlawful occupation of public land- max Kshs. 500,000 or if offence continues an additional kshs 100,000 for every day in occupation.

S39LA – in case of breach, vendor to regain possession peaceably or through an order of the court

S40 LA – damages payable to vendor

S73LA –forfeiture

Remedies under charges-S90 097 action for money, appointment of receiver, possession, power of sale etc.

4. CRIMINAL OFFENCES

S103 LRA, S157 LA- offences

·         Making of false statement (orally or in writing) in connection with a disposition or information under the Act

·         Fraudulently procuring the registration or issue of a certificate of ownership or making of an entry or endorsement of an instrument, cancellation or amendment of instruments

·         Fraudulently alters, erases, defaces, mutilates or destroys any instrument

Punishment- max 5 years or max fine Kshs 5m. Unlawful occupation of public land- max Kshs. 500,000 or if offence continues an additional kshs 100,000 for every day in occupation.