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INTRODUCTION
- Conveyancing Rules
- Reforms
o Is it jurisdictional?
o Is it a private contract?
Conveyancing is the only branch of law that takes from all other
branches of the law. E.g the law of contract the sale agreement.
Property Law and Land Law, Equity, Commercial Law etc.
Defensive Conveyancing
In Momanyi v Hatimy & Anor [2003] KLR 545 the advocate was
sued in negligence and misrepresentation. The advocate had failed to
conduct a search and advised the client that the property was
unencumbered. The client paid the purchase price. It later on turned
out that the property was actually encumbered and title could not be
transferred. The client filed a suit and sought summary judgment.
The court struck out the advocates defence and granted summary
judgment. On appeal, the Court of Appeal stated that in a claim for
damages in negligence, any defendant who had denied negligence was
entitled to unconditionally defend the suit.
If you represent to a party that the party can exercise such rights on
your property to be deemed an owner of the same and relying on your
representation that party acts to your detriment, the court is under a
duty through the principle of proprietary estoppel to declare the party
as the owner of the property.
In the case of Teng Hwan v Swee Chuong [1992] 1 WLR 11, two
brothers bought land jointly in their names and registered them in
their fathers name as a trustee. The defendant began construction on
the plot 3 years later. The plaintiff encouraged him to continue and
consented to the construction. He also indicated that he would
surrender his interest to the property to the defendant in exchange
for a plot that did not exist. The defendant completed the
construction and took full possession. When the father died, the
plaintiff moved the court and sought his share of the property or
money in lieu thereof.
We have borrowed heavily from the English but we are duty bound
By 1535, the Lords role was set out and consequently if there was to
be a transfer, he prepared a note or an assurance known as the
foeffment stating that the transferor had given up his right over the
property to whoever wanted to secure the property. There was no
registration of the same. Delivery was accomplished by a ceremony
known as delivery of ceisine (?) of the property itself in the presence
of all the feudal lords.
In 1535, the Statute of Uses was enacted by Henry the VIII. The
purpose of this statute was to mitigate and stall losses that the Crown
was incurring because the feudal lords decided they could also trade
on the property.
Prior to 1535 the land would be owned by the Lords and produce
owned by the state. The Statute of Uses introduced the principle that
any property owned was to be transferred unto the use of the
transferee and subject to the right of the crown. This ensured that
any transfer had to be drawn in a particular way.
The Real Property Act 1845 and the Vendor & Purchasers Act of 1874
introduced the regulation for the transfer of property by way of
prescribed forms.
In 1925, the Law of Property Act (later the RLA in Kenya ) was
enacted for the purpose of simplifying conveyancing/transfer and
dealings in land. It abolished particular forms of conveyancing in land
simple basic and straightforward forms introduced. It also abolished
various forms of interests and estates in land and kept only freehold
and leaseholds. All land was to be conveyed by way of grant.
LESSON 2
BASIC REQUIREMENTS IN CONVEYANCING
1. Documentation
This is the requirement of writing, which finds its origin in section 3
of the Law of Contract Act. There are other semi formalities e.g.
execution of the document, attestation of the execution, verification
of the execution process and other statutory requirements.
The British revised the Law of Property Act in 1989 and we followed
suit with the amendment of the LCA in 1991 (coming into force in
2003?) prior to then, one could either enforce a contract if
agreement was in writing or oral and part-performed the latter was
removed and this hampers courts from exercising equity which treats
as done that which ought to be done.
2. Registration
This is the keeping of records of land transactions in a land register.
What is kept is a notification not only of the existence of a particular
parcel of land but also of any other interest, duties, liabilities touching
on that particular parcel of land.
For Procedure:
RLA is governed by the RLA
RTA is governed by the RTA
GLA is governed by the GLA.
If land is registered under the RLA you will look for the register under
the RLA created by section 5 of the RLA. Section 5 of the RLA
authorizes the Minister of Lands to create Land District Registries.
There are two RDA registries i.e. The Principle Registry at Nairobi
and the Registry at Mombasa.
Qn. Identify the relevant registries under the different
statutes.
Any registration under the RTA will be prefixed with the initials I.R
(Inland Registry - Nairobi) or C.R (Coastal Registry Mombasa).
Section 10 of the RLA dictates that each particular parcel of land must
have its own register. The RLA register has three sections:
The registration under the RLA is two fold in certain instances. The
actual register is kept in the District Land Registry. The register is
either a green card or a white card in the District Land Registry.
When documents are registered entries are entered in the cards. It is
advisable upon registration to ask for a search to ensure that the
registration has been effected. The document may have been signed
but entries not made. This is especially so because there is no
requirement under the RLA that entry be made in the copy of the
title.
The Registrar keeps in the parcels file the document that has been
registered. Unlike the RTA and the GLA, under the RLA the Registrar
keeps the original document. The owner goes away with the duplicate.
Note that the register is the mirror image of the parcels files.
What is Registering?
Land will always belong to the government (hence the doctrine of
bona vacantia). It is not the land that is registered as this is done
once the grant is issued. It is an interest, or the liability of a duty that
is registered. These interests include:
1. An Allodium
This is the highest interest in land after the land itself. This describes
a situation where real property is owned free and clear of any
encumbrances including liens, taxes or charges.
3. Leasehold
This is an interest for a specific term where the grantee and the lessee
are given the property to own and possess exclusively at a premium
for the determined term. A leasehold can create another leasehold
(sub-lease) or the leasehold may also be created from a freehold.
Tulk v. Moxhay
2 Phillips 774, 41 Eng. Rep. 1143
Court of Chancery, England, 1848
Tulk v. Moxhay
Court of Chancery, England, 1848
2 Phillips 774, 41 Eng. Rep. 1143
Note that this principle applies only if the covenants are restrictive,
not positive, and this is a matter of substance, not form, To `keep the
park uncovered' sounds like a positive obligation, but in substance it
is a prohibition.
Prior to this case, for covenants to run, the original agreement had to
be made by a landlord and tenant at the time that they entered into
the lease, that is, there had to be privity of estate, also called
"horizontal privity." The Court noted that if the agreement had been a
contract instead of a covenant, it would have been enforceable.
Therefore, the Court decided that the covenant was enforceable at
equity, that is, when the plaintiff seeks an injunction as opposed to
damages. The case stands for the proposition that horizontal privity
(privity of estate) is not required for the burden of a covenant to run
at equity. In order for the burden to run, the covenant must satisfy
certain requirements: (1)It must "touch and concern" the land. (2)The
original parties must have intended that the burden run. (3)The party
to be burdened must have had notice of the covenant. (4) The party to
be burdened must hold or acquire some interest in the property that
the original promissor held.
LESSON 3
Registration is what gives effect to conveyancing. Other effects of
registration of title or of a person as the proprietor of land under the
GLA and the RLA include extinguishing communal land ownership.
See: Mbui v Mbui EA 2005 256 where the court of appeal stated
that registration does not extinguish customary law rights. In this
case, the son who had been in occupation of the land sued his father
who was trying to stop him from transferring 2 parcels of land
registered in his fathers name under the RLA. His case was dismissed
but he continued occupying the land. His father sought to evict him
on the basis that his son had threatened him. He also appealed on the
basis of being the registered owner of an absolute and indefeasible
title. His son argued that he was entitled to the land as a birthright
under Kamba customary law.
The court held in dismissing the appeal that the fathers right
although absolute was still subject to the rights and encumbrances
noted in the register. It also held that such right was subject to
overriding interests, which included customary law rights giving rise
to a trust that arose from the sons continued occupation of the land.
Note that if you are able to show that you have an interest in property
as a wife, the courts may treat you favourably. See: Kivuitu v Kivuitu
and Echaria v Echaria [2007]
Note that section 163 of the RLA excludes customary law rights
and or other rights accruing under customary law. See also section
164 on mortgages and charges.
Registration has the effect that any document registered under any
regime constitutes conclusive evidence of the interest availed or
passed by that instrument unless it is proved otherwise in a court.
The fact of registration speaks for itself.
The Effect of Non-registration
1. No passing of interest.
2. Non-registration of particular documents, which ought to be
registered by statute as a matter of course or compulsory
requirement, makes such a document invalid. See: Section
32 and 40 RLA on the compulsory registration of leases for
more than 2 years. The document is not void but is invalid
i.e. it works as between the two parties (interpartes) but not
3rd parties.
Both the RTA and the RLA were amended and section 38 of the
RLA states expressly that any transaction executed by both parties
will not be void but operate as a contract inter-parties. Section 32
of the RTA also makes it a statutory right for unregistered
instruments to confer some rights as between the parties.
Cap 533 expressly provides for their availability and regulation. They
participate in the negotiations at a commission. Their role is to
identify parties to a conveyance. They should never take up the
advocates role. They should not draw the conveyance or hold the
deposit or carry out the search.
You need to ensure that the estate agents you are dealing with is
registered mainly because if something happens the client will come
to you and you could be sued for negligence.
With regard to deposits ensure that you hold it but if the estate agent
holds it you must ensure that he is registered. Chapter 533 provides
for how much fees an estate agent is entitled to as commission. If he
wants more you must advice your client accordingly for example the
estate agent may be given the option to purchase the property.
Try to avoid getting involved with the estate agent because you end up
negotiating the terms, which is not your work. If you are the broker
your duty would only be to source the buyer and leave the parties to
negotiate.
LESSON 4
In conveyancing it is never advisable to act for both parties. You
ought to discuss with the client whether you are authorized to
disclose details and information about the transaction itself and
related details e.g. existence of a mortgage or source of finance to a
third party.
At the initial client interview, you also want to take details regarding
the financial implications of the conveyancing transaction e.g.
- if a sale transaction, whether the client has the 10% or whether
he can get it within the period stipulated
- whether your client is obtaining a mortgage to finance the
purchase
- stamp duty payable
- an advocate must always discuss his legal fees at the initial
client interview. It is advisable to discuss this last after setting
or advising the client
- an advocate must ask for a copy of the title documents at the
initial client interview
- you may also discuss any other miscellaneous issues
- follow up the interview with a letter confirming the instructions
as well as the details of the interview. One must also confirm
fees but at an approximate value
INVESTIGATION OF TITLE
Without a good title there will be no conveyance. Why do we
investigate title?
1. Prudence demands that you investigate anything that you want
to acquire. By investigating title, it gives you an insight of the
property you intend to buy or take as security
2. All land principles have the principle of a bona fide purchaser
for value without notice who acquires a good title. If you
investigate title it will inform you whether there are any
encumbrances hence bona fide or not.
3. The caveat emptor principle demands that the buyer is
responsible for checking the quality as well as the suitability of
the property he intends to acquire.
4. Investigation of title is not only confined to the registry or title
deed alone but also extends to the physical structure of the
property [pre-contract enqueries] e.g. merchantable quality
NOTE: The caveat emptor principle has its own exceptions. Latent
defects for instance must be disclosed by the seller. These are defects
which though existing are not manifest or active or developed and
would not be revealed upon reasonable inspection e.g. dry rot, crack
covered by paint. Patent defects are visible and stand out. Adverse
planning decisions, unregistered encumbrances etc are latent defects
A. SEARCHES
A search is the purposeful inspection of the title records or register
records at the relevant lands registry with the primary purpose being
to identify or detect an adverse entry on the title or the register itself.
There are a variety of searches to be conducted but the modern
conveyancer is more concerned with a search under at the Land
Registry, Company Registry, Survey Department etc. The search
should be conducted at the relevant land registry i.e. the registry
where the property is registered e.g.
GLA Nairobi or Mombasa
RLA The District Land Registry itself.
There are two types of searches:
b) Personal/Unofficial Search
Here one undertakes the inspection of the title records or register by
oneself upon request via prescribed form. You inspect and peruse the
title records or register oneself.
Under the RLA, the official search has its own advantage. S.144 of the
RLA provides indemnity where one relies on an official search to his
detriment as long as one is not a party to any such fraud or defect.
The equivalent section does not exist under the RTA and GLA.
S.43 of the RLA (sterility provision) states that if you apply for an
official search with the intention of transacting and with the authority
of the registered proprietor, no registration can take place for 14 days
from applying for the search. There is a stay of 14 days, the title
becomes sterile, and no registration can occur.
NOTE: There is a mischief however where one authorizes successive
searches, the title may be sterile indefinitely
A personal search enables one trace the root of title. In carrying out a
search, one looks for:
1. Issues regarding ownership
2. Issues regarding tenure/interest of property
3. Special conditions imposed on the property especially a
leasehold
4. The user, whether commercial, residential etc
5. The existence of any adverse entries e.g. encumbrances on the
title, cautions in the case of RLA and caveats in the case of the
RTA
See: Gitwany Investment Ltd v Taj Mal Ltd & 2 Ors HCCC 114
of 2004 (Unreported)
Lenaola J. relied greatly on the correspondence file in making a
finding on who was the rightful owner of the land. The case involved
double allocation of land. There are two confusing aspects as Lenaola
talked about RLA when the land was registered under RTA. There
were two deed files yet there was only one correspondence file.
Once you are through with the search you should inform your client
of any adverse entry. You should then clarify with the other side
whether the transaction can proceed or not. You should satisfy
yourself that whatever adverse impacts/entries revealed will not
adversely affect your client e.g. if there is a mortgage, whether the sale
price will clear the mortgage in full.
Other Searches
1. Companies registry
2. Survey Departments
3. Local Authority discloses zoning/development policies of
land. Urban planners and surveyors can carry out these
searches. This is especially important when you know what use
is to be made of the land
CHALLENGES IN SEARCHES
1) Unavailability of deed files or missing titles
2) Mutilation and destruction of files and documents in the files
3) Delays with regard to search results. You need about seven clear
working days before you get them
4) Unavailability of Land Registers to sign your searches i.e. lack of
efficiency and skilled manpower at the Land Registries
5) Slow pace of computerisation
Significance of Searches
1) Failure to carry out a search may lead to the failure to register
a document e.g. because of the existence of encumbrances
2) The vendor may turn out not to be the owner of the property.
This can be discovered by a search
3) The title document may be a forgery
4) The above errors occasioned because of omitting to carry out
search may lead to negligence suits against you
Letters of Allotment
This come from the Government through either the Commissioner of
Lands or the Local Council if it is Council Property. It is risky to deal
with a letter of allotment e.g.
1. Most have stringent conditions which if not complied with
within the stipulated time automatically revokes the letter of
allotment
2. One may carry out a historical search on land being allotted on
the general file i.e. zone file and correspondence file etc. in
carrying out a search on the basis of a letter of allotment look
out for planning conducted e.g. by the Local authority. Look for
the Part Development File (PDF) which should be properly
prepared and signed by the Chief Physical Planner and
Commissioners of Land
NOTE: The CA has held that unless a letter of allotment is
registered it is not recognised.
LESSON 5
B. PRE-CONTRACT ENQUIRIES/ PRELIMINARY
ENQUIRIES
These are those enquiries made to the seller or he who is parting with
an interest with the intention of seeking or eliciting information not
covered by the searches and information touching on the physical
stature of the property.
An advocate should not step into the shoes of his client and give
answers on his behalf unless authorized. See: Gran Gilato v
Wycliffe
Ltd & Others
The plaintiff paid £30,000 for an under-lease for 10 years. He
thereafter spent £100,000 renovating and shop-fitting the premises
to manufacture and sell ice-cream. The head lease contained a break
clause if there was a requirement for re-development by the head
lessor. The break clause required a 12 month notice.
Before the grant of the under lease the plaintiff s advocate sent to the
second defendant (advocate for the first defendant) inquiries before
lease i.e. precontract inquiries and sought to know if there were any
rights affecting the superior leasehold title which would inhibit the
enjoyment of the premises by the plaintiff in accordance with the
draft sub-lease. The advocate replied that there was nothing of the
kind to the best of the lessors knowledge. Five years after the service
commenced, the break clause in the head lease was exercised. The
plaintiff claimed damages against the head lessor and the advocate
for negligent misrepresentation in view of the inaccurate answer at
pre-contract inquiries.
C. REQUISITIONS
These are such queries or objections to the title which come as a
result of ones inspection of the title document qua title documents.
Things to look out for are:
- Whether the document has been properly executed and
witnessed e.g. if a company as opposed to an individual
(common seal in the presence of two directors, whether
there is a proper power of attorney in place)
- Whether the proper stamp duty on the document was
paid
- Whether there are any particular encumbrances or
adverse interests enforced in the title e.g. Grants always
have conditions and or limitations
Example:
b) Is the signature the proper signature of the executor?
c) If execution is by a company, ask for the mode of execution of
the company and a copy of the Memorandum and Articles of
Association. If a foreign company, and the MEMARTS are in a
different language ask for a legal opinion
d) Ask about the identity of the property
NOTE: There is no format for requisitions
PRELIMINARIES IN CONVEYANCING
These include:
- Execution and attestation of documents
- Verification of signatures of the persons executing the
documents
- Payment of stamp duty
- Obtaining clearance certificates
- Obtaining the requisite consents
- Registration
S.109 RLA dictates that for an interest to pass, both parties must sign
the document unless the registrar decides to exempt one party. The
RTA does not have a mandatory provision for both parties to sign the
document. It is only the person disposing the interest. However, in
light of s.3 of LCA both parties must sign the conveyance.
Attestation
This is the witnessing of the execution. Attestation should
occur when one sees the fact of signing. Under both RTA and
RLA. RTA s.58 states who ought to attest documents i.e.
Judges/advocates if in Kenya; notary public if in the
commonwealth; mayor or chief of city in which document
has been executed (commonwealth); consular general
Stamp Duty
This is basically a form of revenue collection by the Government by
selling either revenue stamps or the dye (red), the Government is
able to raise revenue. Stamp duty is provided for under the Stamp
Duty Act (Cap. 480)
Under s.5 of Cap 480, every instrument relating to property in Kenya,
if it is provided for that stamp duty be paid in the Schedule to that
Act, will be assessed and the required duty must be paid as a legal
requirement. See 1st Schedule to the Act for instruments in
conveyancing that will fetch stamp duty. S.6 of the Act says that duty
must be paid within 30 days of execution of the instrument or if
executed outside Kenya, within 30 days of receipt in Kenya. Failure to
pay duty means an offence has been committed. However, the
Government instead of exercising the Penal aspect of the Act will levy
a prescribed penalty. See: ss.26 & 113 SDA, S.20 also has penalty for
late payment
Mortgages attract 0.2% duty of the amount being borrowed and for
discharges 0.05% of the amount borrowed.
The value relates to the property itself and not the fixtures and
fittings. Fixtures and fittings ought not be included. However, the
requirement that no property will be registered unless the value is
declared by the Chief Government Valuer has led to fixtures and
fittings being included.
S.95 & 96 of the Stamp Duty Act. On adjudication and exemption of
stamp duty where there is a restructuring of sister companies
therefore they only pay nominal duty
S.106 deals with exemption from payment of stamp duty by the
Minister of Lands
CLEARANCES
There are two types of clearances in conveyancing i.e.
b) The Rates Clearance Certificates
c) The Rent Clearance Certificate
Other charges to the L.A. would include water and if a leasehold, the
Local authority may insist on rates. A rates clearance certificate is the
document that will satisfy the registrar that all rates have been paid.
The certificate must be valid as at the date of registration. S.33 (2)
RTA has an equivalent requirement of a rates clearance certificate.
CONSENTS
This depends on:
a) Where the property is situated
b) The tenure or estate one is dealing with
The form used to apply for consent is Form 1 of the Schedule. The
consent is issued by the LCB which is established to cover land within
which your land falls.
You must appear before the LCB and make your application. It will
ask several questions before issuing the consent. The consent is then
extracted i.e. the letter of consent which you will present together
with the transfer. The letter should be signed by the chairman of the
LCB
Does the LCB consent lapse? Especially if you do not register the
transfer?
It does not lapse. No such provision in the Act
Bosire J said:
The lack of statutory consent at the expirty of the 3 months makes
the transaction void for all purposes until then there is only a de facto
agreement which has no legal effect
SALE AGREEMENTS
1. What is the position of the vendor and the purchaser?
It has been stated that the vendor becomes the trustee for the
purchaser between the time of execution and completion of the
sale agreements. Do statutes support the statement?
2. What sort of sale agreement is acceptable to my client? A simple
agreement or a complex one with damages etc
In the case of short/simple agreements, one leaves himself open
to implied provisions and the courts mercy. The complex
agreement covers more issues. There is no statutory
requirement for the format of a sale agreement.
One may opt for a hybrid agreement, not too simple and not too
complex depending on the circumstances. Do not include
irrelevancies.
3. The agreement must comply with any statutory requirements.
These include:
(a)The Law of Contract Act (s.3)
(b) Other statutes will vary depending on the
circumstances
4. A sale agreement is a contract and one must ensure that the
agreement is in tandem with all the Law of Contract principles
of:
- offer and acceptance
- intention to be bound
- consideration exchanging hands
- the contract is certain
Under the statute, there are three basic requirements that relate to
the form of the agreement: Cap 23 Law of Contract Act (s.3)
(i) The agreement for sale of land to be enforceable must be in
writing. This applies to all dispositions of interest in land.
(ii) The agreement must not only be signed by both parties but
the execution must be attested/ witnessed in the presence of
the person attesting. This requirement runs across e.g. for a
charge includes attestation of the facility letter.
Where do you sign?
Practice dictates that you sign at the end but since the
purpose of the execution is to authenticate the document it
can be anywhere as long as it is witnessed.
(iii) The terms of the agreement ought to be in one document
s.3 seems to allow incorporation of terms by reference.
Although the reference is in the one document. In the UK,
there can be more than one document.
NOTE: Why didnt the court get rid of the uncertain provisions?
It did not have a saving clause in case of inconsistency
S.55 of the ITPA provides that in the case of an open contract (which
does not have various terms) the;
1. Vendor is under a duty to disclose any defects to the property
that he is selling (i.e. latent but not patent defects)
2. Vendor must also produce the title documents for purpose of
inspection and not delivery
3. Vendor is under an implied statutory duty to execute the
conveyance or the transfer in exchange for the payment of the
purchase price which entitles one to move to court for specific
performance
4. Vendor will pay all outgoings and discharge all encumbrances
registered against the property
5. Vendor is under a duty to take care of the property after
execution of the sale agreement and before the completion takes
place. This includes the management of the property, ensuring
that reasonable repairs are undertaken on the property and
ensuring that there are no squatters or trespassers on the
property (one need not improve the property unless the
contrary is provided for)
You must also indicate the position on encumbrances i.e. the property
is sold free of encumbrances. If there is an encumbrance, you must
indicate who is to service the loan/discharge the encumbrance. You
must state that the purchase price will be used to offset the balance of
the encumbrance/loan. Avoid allowing the clause sold subject
to all encumbrances
Ss. 2 and 3 RLA provide for sale of land plus that which is attached to
it. A fixture is something affixed to land by a human (not like a tree).
You must find out if property is being bought including the fixtures
and fittings i.e. they do not attract stamp duty. If you do not, the
vendor may argue that he is entitled to remove the fixtures and
fittings.
You could have a schedule listing out the fixtures and fittings being
bought indicate the value of the fittings. The transfer should have a
price less the value of fixtures and fittings.
Wake v Hall [1882] AC 195
Blackman J stated the degree of annexation is what matters
Special Conditions
These are those conditions which apply sui generis to each
agreement. They are being extended to mean the variations of the
general conditions. For this reason it forms a separate part of an
agreement.
Examples
- where the contract price includes the value of the fixtures and
fittings sold separately
- where the fact is that the property is sold subject to a mortgage
- where the fact is that the sale agreement is conditional upon the
vendor receiving duly sealed letters of administration or
probate
General conditions
These are general terms which apply to open contracts with the
intention of regulating the rights of the party e.g. the right to rescind,
give notice, take possession etc Any conditions varying these terms
are special conditions.
Special conditions
Sui generis clauses
Variation of general conditions
Capacity
Legal competence for a person to sell e.g. if selling as an attorney,
administrator, agent, beneficial owner
Assignment Clause
That is the transfer of the whole interest in the property. This is also
referred to as the conveyance clause in a sale agreement. Assignment
may be of the transfer or of the obligations and rights of the parties.
Default Clause
On omission or failure to perform a legal or statutory duty under the
contract. This clause addresses what happens in the event of breach
e.g. in case of default, a party will pay a specified liquidated amount
in damages
Disclaimer
Provides for under the LSK Condition 14 clause 5. It embodies the
caveat emptor doctrine i.e. buyer beware.
It is the equivalent of an exclusion clause stating the vendor shall not
be called upon to point out irregularities in the property. (Q. Whose
interest is being protected? One needs to inspect the contract and
carry out pre-contract inquiries)
General
One needs to put any general obligations in this clause. One may put
saving clauses, how and when payment is to be made, whether the
amount would be net or gross. One may also include a clause on
whether the agreement, if it is to be varied, should be varied in
writing or any other way.
Intention to be bound
This is a conclusion to the agreement where the parties are of one
mind. It is just before the execution clause. It is the parties
affirmation to the contract especially in relation to the law of contract
act.
Execution
This is the affixation of ones mark on the document. It may be by way
of signature, thumb print or a duly appointed attorney of a company
or by a common seal. The parties have to authenticate the document.
One must state the capacity in which the parties are executing the
document.
DEPOSITS
There is no general law requiring the payment of a deposit. One may
argue that a sale agreement is a contract and for it to be valid there
has to be consideration. However, a sale agreement is only executory
and does not require consideration.
However, over the years, parties have always paid a customary
deposit of 10%. Indeed the LSK condition of sale 10 states that the
deposit shall be 10% of the purchase price. However, one may have a
sale agreement providing that no deposit is required. A deposit is
however included by most conveyancers as a form of commitment
and to go round the illiteracy of most court registrars who will refuse
to record a caveat where there is no deposit.
Deposit can also been held by an agent to the order of the person who
appointed him. If the vendor appoints the agent, the amount can be
forwarded to the vendor at any time upon request. If the purchaser
appoints the agent, on request the agent can refund the deposit.
NOTE: If the agent mishandles the deposit or becomes insolvent,
whoever appointed him bears the consequences.
A sale agreement is treated as a guarantee because of the issue of
forfeiture. If the purchaser is in breach of the agreement, the vendor
is entitled to exercise its right of forfeiture over the property (i.e.
entitled to deposit)
NOTE:
1. One can suggest reforms e.g. to reduce the amount of deposit to
5% and to only exercise the right of forfeiture where specific
damage or loss is proved
2. Another reform is to have some form of insurance for the risk
taken
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
Date
1. This will have been provided for in the sale agreement. If not, it
is deemed that completion will take place within a reasonable
time from the date of completion.
2. If not provided but LSK conditions will apply. Then condition 2
will be applicable i.e. to take place 42 nd day after date of
completion but where LCB consent is required, 42 days from
obtaining the said consent
The period before completion is very critical because it is the time the
parties:
1. Prepare or satisfy their respective conditions and obligations
under the agreement
2. The issue of where the risk of property lies arises. The risk
should be balanced between the parties to ensure the property
stays intact.
Date of Completion
When provided for in the sale agreement, it is just a target date for
completion BUT if it is provided in the agreement that the time for
completion is of the essence you must complete on the completion
date. If you are in breach, the innocent party may rescind it.
All parties must therefore adhere to the date and deliver what they
are required to. Failure to deliver/complete is a fundamental breach
both in law and equity and party at fault will not be allowed to seek
specific performance thereafter.
Completion venue
Usually at the vendors offices or his advocates office. If the vendor
has mortgaged property, completion could be at the Mortgagee s or
his advocates office. This is where it is not provided in the contract.
When you receive the deliverable, inspect them and confirm that they
are valid documents which you can use. If you do not do so, your
client can sue you for negligence if the transaction does not proceed.
Once you confirm that the documents are registrable and can confer a
valid title to the purchaser you then deliver the balance of the
purchase price or an acceptable undertaking where the transaction is
being financed by a financier.
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.
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
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 the GLA and LTA, these are simple deeds in the form
conveyances or assignments.
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.
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
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
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, ones 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.
Definition of Undertaking
This is an unequivocal declaration of intention addressed to someone
who reasonably places reliance on it and made by an advocate or a
member from an advocates firm in the course of practice or made by
an advocate as an advocate though not in the course of practice.
Guidelines
1. Breach of an undertaking is prima facie evidence of misconduct
the LSK will expect the enforcement as a matter of conduct.
Failure to honour a professional undertaking is professional
misconduct. The LSK only expects that you honour the
undertaking BUT it will not enforce the undertaking.
2. Undertakings are normally expected to be honoured between
the giver and the recipient only. Undertakings are NOT saleable
commodities. Neither the court nor LSK will be anxious to
entertain complaints by people who are interested in the
performance of the undertaking but were not recipients.
However, the residual power to enforce the undertaking vests in
the court and could listen to a party who was not a recipient.
KCB v Adala Enforcement of the undertaking is with regard
and touches on the honour and honourable conduct of the
members of the noble profession. The court will not hesitate to
allow non-recipients to benefit from the supervisory jurisdiction
of the court;
Naftali Radier v Njogu t/a Njogu Advocates & Co HCCC
532 of 2002; An advocate on the other hand cannot assign an
undertaking without the recipients consent
Ron Otieno v AGN Kamau & Co Advocates HCCC
134/03 The defendants advocates had given an undertaking
under their former name which partnership had since been
dissolved; when the plaintiff sought to enforce the undertaking
Mr. Kamau argued that a former partner Ms Kimani walked
away with some liabilities including the undertaking. Held: the
undertaking was joint and several i.e. personal to Mr. Kamau
and he could not walk away from it
3. Undertaking must be certain. If ambiguous it will normally be
construed in favour of the recipient. This rule exists to prevent
reconstruction of the undertaking by the giver to avoid
obligations and liabilities.
4. Proper wording of the undertaking is important because no
extraneous evidence. No terms will be implied/extraneous
evidence allowed in an undertaking.
Karsam Lalji v P. K. Kimani t/a Kimani Kairu & Co.
Advocates CA 135 of 1999
Advocate ordered to pay monies owed under an undertaking
together with interest although no interest was provided under
the undertaking
READ:
Kenya Finance Co v Ng eny and Anor [2002] 1 KLR 106
5. An undertaking need not constitute a legal contract. It need not
have consideration for it to become enforceable. Principles of
contract do not apply because there is an ethical obligation on
the givers part to comply. Question: When can you enforce an
undertaking?
However, where consideration is disclosed in an undertaking,
the giver of the undertaking is discharged if the consideration
fails e.g. upon receipt of the sum of x/= from the purchaser, I
will release the same to you. You will be discharged if the P
does not give you the money or if the P was to give the financier
some money i.e. the undertaking becomes more of a legal
contract and the principles of contract apply.
6. An undertaking is binding even if outside the givers control. It
demands of the giver to clarify with the recipient as well as the
client the nature of the undertaking you are about to give.
Consider whether you will be able to honour the undertaking
when called upon to do so. It is no defence that the undertaking
cannot be met/honoured due to the death or insolvency of the
client on whose behalf you gave the undertaking. You must be
able to control the outcome of the undertaking. Always ensure
you hold funds beforehand.
7. It is no defence that to honour the undertaking would be in
breach of a duty owed to the client i.e. an undertaking is
personal and not subject to the whims of your client. This
discourages advocates from giving undertakings flippantly. You
will also not be able to frustrate the recipient of an undertaking
who has relied on it by relying on change of events or
circumstances to give an undertaking for balance of the
purchase price but this undertaking should only be issued and
be accepted where the purchase is being financed. You should
not accept such an undertaking where the purchase is not being
financed. You need to establish this at the inception of the
transaction and you may include it in the sale agreement.
Mortgage
This is the conditional transfer of property to a lending institution or
bank which transfer may become absolute if the borrower falls into
arrears or is completely unable to make payments as per the
covenants between the bank/lending institution. S.58(a) of the ITPA
and the case of Santley v Wilde[1899] 2 Ch 474
The Master of Rolls Lindley A mortgage is a conveyance of land as
security for payment of a debt or the discharge of some other
obligation for which the land had been given. You actually convey
your interest in a mortgage.
Charge
On the other hand while a charge is also a security for money
advanced, the property is neither conveyed or transferred to the
lender/bank. In the case of a charge, the interest will only be
conveyed to the lender in a very legal and abstract way after you have
defaulted.
S.58 of the ITPA on forms of mortgages but for a charge there is only
one legal form:
S.58(b) A simple mortgage
S.58(c) A mortgage by conditional sale
S.58(d) A usufructuary mortgage i.e. you actually deliver possession
of the property
S.58(e) English mortgage (most common)
S.95 Anomalous mortgage. Hybrid mortgage or where a mortgage is
none of the ones set out above e.g. Islamic Mortgage bank buys the
property and the borrower still occupies it as a tenant as he pays rent
towards the loan.
e) To obtain all the requisite consents if the same has not been availed
by the borrower e.g. consent to charge from the Commissioner of
Lands, L.A.s consent
f) Duty to confirm that the borrower has obtained independent legal
advice i.e. its independent in the sense that the certificate is from
independent legal qualified advice. It is critical in a mortgage by
guarantee i.e. where the mortgagor is not the borrower, he is giving
his property as security for the lending to a third party. This is crucial
because:
1. Most mortgagors say that they did not get the benefit of the
loan/amount
2. Most mortgagors say that they did not know what they were doing.
To pay stamp duty on the charged document and lodge the same for
registration in Lands Registry as well as the Companies Registry
when applicable i.e. charge or mortgage being created by a limited
liability company. S.96 of the Companies Act indicates that unless a
notice of charge created by a registered limited company is lodged
within 42 days of its creation with the registrar of companies, the
charge will be void against the liquidator or any creditor of the
company. If the company goes into liquidation the chargee will be
ranked at the same level as unsecured creditors.
This process is the same with a further charge and further mortgage
(save for investigation of title) and second charges and second
mortgages.
Further charge
Borrower and lender always the same RLA and RTA
Further mortgage
Same borrower and lender GLA and LTA
Second charge/mortgage
There is a new party in the form of a second lender or financial
institution advancing additional finances. The second financial
institution requires the consent of the first lender.
S.108 RLA states that the forms under the Act are to be utilized but
these can be varied with the approval of the Chief Lands Registrar.
S.65(1) RLA states that to create a charge you must use a specified
form and register it.
See:
Simiyu v Housing Finance Co. Ltd [2001] 2 EA 540
Ringera J held that where the plaintiff has shown a correct address
and has alleged that she was not served with the statutory notice, she
was entitled as a matter of course to an injunction restraining the
bank from selling the property for lack of a proper statutory notice.
NOTE: Where the lender is in possession of several addresses, the
best approach is to send the statutory notice to the last known
address.
2. The covenant to repay the amount advanced. This covenant should
encompass the principal amount advanced as well as any interests
accrued or charged. Also include the redemption date. This is
important because in the event of default on the part of the borrower
and the lender issues the statutory notice, sells security and there is a
shortfall, this covenant to repay will be the basis of suing for the
shortfall. Without this covenant, one cannot sue for the shortfall.
Without this covenant, one cannot sue for the shortfall.
There is need to bind the borrower to pay taxes and rates etc
4.Charging Clause
This is the covenant that creates the security. Without this, there is no
security i.e. THE BORROWER HEREBY CONVEYS, ASSIGNS etc
The charging clause is not only confined to the property i.e. LR No X.
One must go further and charge also all improvements, fixtures and
fittings in the property (Pattni Case)
Equip Agencies v. Credit Bank Ltd [2004] 2 EA 61
The charging clause didnt include chattels fixtures and fittings. It was
held that in the absence of a chattels mortgage or a debenture, the
bank could not sell the chattels, fixtures and fittings but could only
sell the land.
5.The redemption covenant
The equity of redemption can never be taken away and for purposes
of this covenant, must never be fettered. In the absence of such a
covenant, the court sitting as court of equity is under an obligation to
determine whether or not the intention of the lender was to use the
equity of redemption and also ensure that the security is indeed a
dead pledge. The equity of redemption under s.72 RLA disappears the
moment the lender correctly sells the property. See also s.60 ITPA
In realizing the security, the lender must exercise good faith even
though he is not a trustee for himself or borrower. Where there is
carelessness, the bank will not be liable to recover the shortfall and
will be open to liability in damages. See:
Cucimere Brick Co. Ltd v Mutual Finance [197-] 2 All ER 633
Sajabi v Amreli Wala [1956] EACA 71
Good faith to be exercised even in private treaty sales.
B. APPOINTMENT OF RECEIVERS
Under the ITPA receivers can only be appointed after the
statutory power of sale has arisen as they must have the power
to sell the property. The receiver is not the agent of the lender
even if appointed by the lender i.e. protects the interests of the
borrower.
C. FORECLOSURE
This is the right conferred upon the lender under the ITPA to
move to court and extinguish the equity of redemption.
Consequence borrower/mortgagor ceases to have any interest
in the propery. It then matters not if good faith is not exercised.
The remedy of foreclosure is expressly established by s.80 of the
RLA. This is because in a mortgage some interest is conferred
whereas in a charge there is no interest transferred thus no
need to extinguish interest.
LEASES
S.3 of the RLA defines a lease as a grant with or without consideration
by the proprietor of land to another person to the exclusive
possession of that land. S.105 of the ITPA states that a lease is a
transfer of a right to enjoy such property made for a certain time or in
perpetuity in consideration of a price paid or promised.
NOTE:
A lease entails a transfer or grant of a right or interest in property for
a limited period of time (RLA) or even in perpetuity (ITPA) Exclusive
possession. Whoever is granting the right excludes himself from
interfering with lessees possession.
Period
The ITPA and RLA do not make clear provisions of the period.
However, it is essential that the period be certain. A conveyancer
should consider period carefully becaused under RLA, if the lease is
for more than two years, for it to take effect in rem, it has to be
registered. ITPA lease over one year should be registered.
Parties
Must be certain.
Grant
This is the transfer of the property for a particular period of time. The
terms of the grant should be certain. See:
Rye v Rye [1962] AC 496
Lord Denning gave instances of situations where you can grant a lease
to yourself. JLO thinks it is not possible especially a right of the
principle of mergers of the --- interest. He gives instances of a firm of
lawyers who own property and lease it to the firm. The two essentials
which distinguish a lease from a license is:
- Exclusive possession
- A grant of the interest
A licence on the other hand is a mere permission given by the
proprietor of the land to a licensee to do some act in relation to the
land which act would otherwise be deemed to be trespass if the
permission was not granted.
This distinction is also important because of the rent regime acts Cap
296 and 301 were intended to protect tenants from scrupulous
landlords. However, it has been decided that what matters is not just
the document but the actual happening on the property.
See:
Street v Moundford
In leases, the interest granted can be assigned to ---. In licenses if the
permission given cannot be assigned to a third party i.e. you cannot
mortgage it, transfer or inherit it.
Examples
1) The lessor must covenant to give quiet and peaceful
possession ITPA (s.108);RLA (s.53-55)
2) The lessor must also covenant not to derogate from
the grant/lease as given to lessee
3) The covenant that the premises is fitting for
habitation. This is a covenant on the part of the
landlord.
The tenant (lessee) also has covenants expected of him. See:
s.64 RLA
s.108(b) ITPA
The covenant that limits the users of the property must be strictly
observed i.e. if the premises are let as an office you must use them as
an office. The landlord on the other hand is also duty bund not to
interfere if you are using it for the purpose let to you.
Termination of Leases
1. By effluxion of time
This is the expirty of the time stated in lease s.64 RLA, s.111
ITPA
2. By giving of a notice
This must however be provided for in the lease document and
also must indicate the period of the notice. It is not necessary
for leases for fixed periods.
3. By forfeiture
This refers to the determination of the lease by the lessor for
breach of a condition by the lessee or in the event of the lessee
becoming insolvent. This mode of determination can be court
assisted i.e. asking the court to declare that the lease is
terminated by virtue of the breach of the lessee. Where the
lessor does not act when there is a breach, he will be deemed to
have waived the right of forfeiture. An action must be taken
within a reasonable period of time upon detecting breach.
4. Surrender
The lessee yields up his interest back to the lessor. It is usually
done by mutual consent. If there is no mutual consent, the
lessor is entitled to claim his rent for the unexpired rent by way
of civil suit. S.63 RLA provides that the lease can be
surrendered by writing the words SURRENDER on the
original lease document.
5. By way of a merger
i.e. a merger between the leasehold interest and the
reversionary interest. The merger of this two interests must
however be with the same person.
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REMEDIES IN CONVEYANCING
As an advocate your advice is not limited to theoretical solutions i.e.
statutory provisions. One must pick on a relevant/correct remedy in
practice. Every case must be considered on its own facts. The
remedies in conveyancing are four-fold i.e.
1. Statutory remedies
2. Equitable remedies
3. Common law remedies
4. Quasi remedies e.g. cautions, caveats, inhibitions, prohibitions
Damages
The issue is to ensure that the damages to be awarded are given as if
the contract had been performed. Value the property depending on
the loss of bargain. The compensation is and must be intended to put
the aggrieved party in a position equivalent to that which would have
existed if the contract had been performed e.g. if the contract is
performed and vacant possession is not given, damages will be
limited to the time you did not have vacant possession until when you
get it.
Since these are common law remedies, you must mitigate your losses
and not just wait for court to determine. If the transaction is not
completed advice your client that the party in breach must
compensate you. However, you must demonstrate that you were also
ready and able to complete i.e. both of you have to be in a position to
complete.
If the above can be shown, when does the court assess the amount
due to you?
NOTE: the assessment is done on the day you go to court and the
court will award interest to cover the wasted years. Ringera J has
however held that assessment must be as at the day of judgment.
Rescission
This is the right to undo the contract either through self help or with
the courts assistance. This right will take place when there is
evidence of fraud on the part of either party. Also when there is
misrepresentation which gets to the root of the contract e.g. a
misdescription of the property to the contract which induces you to
enter into the contract. If it is not part of the agreement, you will not
be allowed to rescind as you would have inspected. When there is a
defect in title which cannot be rectified on notice.
NOTE:
These vitiating factors must not be trivial.
Equitable Remedies
1. Specific Performance
As the appellation suggests, specific performance means to call upon
someone to perform his part of the bargain specifically with the
assistance of the court. See:
Hasham v Zenab [1960] AC 316
The vendor tore the sale agreement immediately upon execution and
having received the deposit. The purchaser moved to court and asked
the court to order specific performance. The vendor argued that he
had not sold two acres but only half an acre. He also argued that there
was no evidence that he was going to breach the contract. The privy
council held that specific performance was the right remedy and
analysed it.
A court of equity will not abuse equity i.e. act to affect another party
entitled to an equitable remedy i.e. with competing interests. The
court will weigh the two interests and will not abuse that other equity.
Read:
Bullen & Leake on Specific Performance
2. Injunction
This is always sought as an interlocutory/cautional measure to stop
e.g. disposal. Stops also attempted breach. An injunction can also be a
specific final measure e.g. where there is a breach of contract.
STATUTORY REMEDIES
1. Right of redemption
2. Foreclosure
3. Statutory Power of Sale this cannot be taken away
4. Damages RLA & ITPA especially where your property is sold
to a bona fide purchaser for value without notice s.69 ITPA
5. Rectification Found under all the statutes; RLA (s.142), RTA
(s.59), LTA (s.69), GLA (s.120) Ordinarily, this is a post
completion remedy. It comes into play after the conveyancing
has been finalized e.g. you borrow 20 million but the charge
registers 10 million, you can move to court to ask for
rectification of the title or even the conveyancing document
itself. Object of rectification is to correct a genuine mistake for
accurate records. Rectification was originally to correct oral
mistakes and thereafter extended to fraud and correction
generally.
6. Remedy under the Distress for Rent Act i.e. taking away items
to activate payment.
7. Cap.296 Landlords & Tenants, Shops, Catering
Establishments
Cap301
Caveats are lodged by any person who claims some defined interest in
land capable of registration e.g. mortgagee, lessee etc A caveat itself is
an instrument which forbids the registrar from effecting any
registration against the subject title absolutely or unless the
transaction is expressed to be subject to the claim of the caveator or
as is required by the caveat itself. Caveats are bound under ITPA
properties.
Distinctions:
1. Caveats and cautions prescribed forms by individuals
Inhibitions and prohibitions court order
2. Caveats and cautions compensation if wrongly lodged
Inhibitions and prohibitions no compensation
Various Purchasing Situations with respect to Sale of Land
(Koki Mbulu)
(1) Purchase of New Houses, Flats and Apartments
Entails a sale agreement for land just like any other sale agreement
for land. However the terms of sale will be crucial such as ownership
of shares in a management company which manages the day to day
affairs of the estate, attends to the affairs of the owners. The
reversionary interest of the property will be transferred to the
management company upon registration of all the leases of the
flats/apartments. This is to ensure perpetuity of the lease.
One also needs to check how much your client will pay upon the
transfer of the reversionary interest. That figure should be known
before the signing of the agreement because if left out it can be hefty.
It is usually between 10,000 and 50,000.
The sale agreement also provides for some extra charges. However,
there is no rule that states that the buyer should pay the vendors
advocates fees. If your client is going to pay, then it should be
established early in advance. (However, nowadays when it comes to
buying of apartments there might be such a requirement in respect
of the fact that the vendors advocates will also handle the formation
of the management company and fee in respect of the same to the
purchaser.) Other charges are electricity deposit, water deposit etc
(these amounts need to be the statutory amount), six months service
charge (security, caretakers fees, maintenance of car park, swimming
pool, playground and gym etc) The service charge ought to be audited
by the management committee.
The sale agreement should provide for the amount to be paid by your
client for his share in the management company. This should not
exceed Kshs.10,000. In relation to new houses, management
company does not apply however occupational certificates will apply.
The sale agreement should state who will bear the cost of change of
user i.e. in most cases it will be the purchaser. The vendor usually
pays for the subdivision costs. One must be wary of certain things
when purchasing a commercial property:
- status of tenancy i.e. leases for 5 years or protected tenancies.
This will affect possession clauses i.e. is he taking the property
with tenants (if so, should confirm the exact number of
tenants) or without tenants
- Are there fittings and fixtures? If so how does one craft the
sale agreement?
Auction Sales
Also a purchasing situation i.e. where someone buys property
advertised. An auction is a public or private sale by way of an auction
signified by fall of the hammer. It arises in two situations:
a) Execution order of court
b) Statutory power of sale
Auctions are governed by the Auctioneers Act plus the rules. Also the
CPR apply i.e. O. XXI. The RTA & RLA also have provisions for sale
by way of auction i.e. by a Mortgagee/Chargee exercising a statutory
power of sale.
Where the sale is by an order of the court, the court sets the terms of
the sale e.g. reserve price. If court says the property must get the
reserve price any sale below this is void.
Who can bid? The owner, other people can bid and the decree holder.
The auctioneer must accept at least 10% of the purchase price as
deposit or what has been set. Bidder must be ready to pay this
amount at the fall of the hammer.
If you are acting for the bank, ensure it is acting in good faith i.e. you
need to advice them to sell the property at the best price possible that
it can fetch. Any balance over and above what is owed should be
returned to the lender.
See. S.21 of the Auctioneers Act i.e. time, date and place of sale must
be advertised in the newspaper and whether the sale is reserved (i.e.
private treaty) where there is no reserve price (public sale) the seller
should not bid. Property should be sold to the highest bona fide
bidder if his price corresponds to the reserve price
The Auctioneer must have a valid practicing certificate for that year
because failure to hold such may render the sale void.
SALE AND PURCHASE OF LAND
Steps Commonly Taken By Sellers Advocate
1. Take instructions from Seller
- Take Sellers instructions including details of proposed, of
related purchase, authorization to disclose details in chain
transaction, replies to pre-contract inquiries etc
- Check conflict of interest issue
- Discuss fees, disbursements, taxation matters and
confirm instructions
- Check and confirm that proceeds will clear any
encumbrances
2. Draft initial letters
To agents, to client, to Buyers Advocate etc
3. Obtain title deeds from Seller and other documents necessary
for purposes of sale which are available immediately. If
property is leasehold address following issues:
- Is consent required? From who?
- What are the outstanding outgoings?
- Will the freehold or leasehold be deduced?
4. Draft and reconfirm with Sellers answers to pre-contract
inquiries
5. Draft the Contract and dispatch to Buyers Lawyer with copy to
Seller for approval. Send also to Buyers advocate
- copy or abstract of the Title
- reply to pre-contract inquiries
- copies of relevant planning consents, covenants,
easements, licenses, insurance certificates etc
6. Engross the Contract (Sale Agreement) on receipt from Buyer.
If amendments proposed then consult with Seller before
engrossing.
7. Return Contract to Buyer for execution or signature.
8. Receipt and deposit in the client account any deposit payable
9. Confirm deposit cheque has been honoured and ask Seller to
execute Contract
10. Return counterpart copy of the Contract to Buyers
Advocate
11. Advise Seller that he had a continuing duty of care towards the
property and should take reasonable care to ensure that the
property remains in the state in which it was at the date of the
Contract
12.Reply to any requisitions on title. Attend to specific queries or
objections raised by Buyer
13.Peruse and approve the Draft conveyance and return the
approved or revised Conveyance
14.Prepare for redemption of any Mortgage(s). Contact Mortgagee
and send Discharge with undertaking
15. Prepare a Completion Statement. Purchase price less deposit
paid add apportionments (and interest)
16.Arrange for execution of conveyance
17.Arrange for and host completion meeting
18. Report completion to Seller and Estate Agent and
authorize release of keys to Buyer
19.Redeem Mortgage(s). Comply with and satisfy undertakings
and obtain release from undertakings
20. Account to client for proceeds of sale. Full purchase price less
Mortgage redemption less commissions to Estate Agent add
apportionment (and interest?) less Advocates fees. Pay net to
Seller