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CONVEYANCING
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ATP 107
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Statutes : RTA-s.79
RLA-ss.30,36,43
GLA-s.127
LTA-s.31
Legal Notices No146-153 of 2005
See also:
Estate Agents Act Cap 533
Advocates Act Cap 16 – Remuneration Order
Case law :
Barclays Bank Plc Vs. O‘Brien (1994) 1 A.C 180(on initial interview and duty to advise)
Mortgage Express Ltd VsBowerman& Partners (1996) 2 All E. R 836
Rajdip Housing Development Company vs J. WaciraWambugu CACA 4 of 1991
Mapis Investment (K)Limited vs Kenya Railways Corp. CACA 14 of 2005
Shah vsAkiba Bank Limited 2005 2KLR 424, 2006 2 EA 323
Gitwanyi Investment Limited vsTajmal Limited and 2 Others 2006 2 EA76
L. REMEDIES IN CONVEYANCING
Statutory,common law or equity?
Damages & Rescission
Specific performance and related equitable remedies
Statutory Rectification ,statutory damages,indemnification& other statutory
remedies
Statutory indemnity
Cautions and Caveats as pseudo remedies
Texts : I.C.F.Spry(supra)
Statutes : Section 143 RLA
Section 69 ITPA
Following the trial court‘s findings as aforesaid, the court concluded that the instrument of
charge and deed of Guarantee aforesaid were null and void ab initio, with the result that the
money they secured which had grown from the initial figure at Kshs. 10 million to Kshs.
57,308,137/50 was irrecoverable. The court gave judgement in terms and thus provoked an
appeal.
Mrs. V.Nyamodi did not hold a practicing certificate as at the date she drew the two documents.
She was qualified as an advocate having successfully gone through law School. However,
qualifying as an advocate is quite different from qualifying to practice as an advocate.
Neither the Advocates Act nor any other written law makes provision with regard to the validity
or otherwise of such documents. The Stamp Duty Act, Cap 480 Laws of Kenya, unlike the
Advocates Act, makes provision, in section 19, making an unstamped document inadmissible in
evidence. The Legislature, we think, not only made the document unregistrable but also made the
document invalid for any other purpose before stamping.
Section 9 makes provision for qualifications for practicing as an advocate, and the qualifications
include having in force a current practicing certificate. No person shall be qualified to act as an
advocate unless—
(a) He has been admitted as an advocate; and
GenerallyConveyancers duties are wide and varied and are not limited to merely drafting
the conveyance and registering the same.
The duties include:
Advising clients on buying and selling process + effect of transferring an interest
in land
Investigating title
Drafting the K with sale details, offers, leases, transfer
Liasing with lenders, estate agents, Advocates, etc
Paying taxes e.g. Stamp duty, land rent, VAT, CGT, Rates
Keeping records of payments and finally preparing a completion statement
Perfecting the documentation including proper execution, completion and
registration
Vendor‟s Advocate
Obtain information on:-
Full names of the parties, full particulars of the property, the price, whether any deposit is
required, details of encumbrances (if any), whether the property is vacant, expected date of
completion, prepare the sale agreement, obtain original title document from vendor, approve
transfer/conveyance, procure execution of transfer/conveyance, receive and account for the
proceeds of the sale to vendor., obtain rates, rent clearances, consents where required, obtain
discharge of charge/reconveyances.
Purchaser‟s Advocate
Obtain information on:-finances taxes and legal costs and expenses of the conveyance,
scrutinizing of title documents, investigation of title, approving sale agreement, preparation of
transfer/conveyance and engrossing the same, attending to execution of the conveyance or
transfer where necessary, stamping and lodging of documents where necessary, obtaining and
paying the purchase price to the vendor‘s advocates.
The worst mistake a practicing conveyancer can make is to fail to spot something fraudulent. A
conveyancer must not be negligent. Attestation of signatures without verifying could constitute
negligence. The need to verify if the practitioner on the other side is qualified is really important.
So are searches at government land registries.
A thorough understanding of the key conveyancing protocols is also important. (E.g. where
advocate for the buyer calls for original title documents and clearances without offering cheque
for purchase SUM to the sellers advocate or ensuring that requisite undertakings are given by the
buyer's financers.)
An understanding of the Law Society Conditions of sale, current practice notes and guidelines is
also important.
In this case, the firm named Kaplan and Stratton had acted for both the borrower and the lender
in a borrowing transaction. The firm had prepared all the relevant documents, including the
security documents.
Subsequently, the borrower had defaulted on repayment and had questioned the validity of the
security documents. Subsequently, Kaplan and Stratton had purported to enforce the said security
and the appellant sought a grant of injunction to stop the firm. The Court of Appeal held that
since Kaplan and Stratton Advocates were aware that there was likely to arise a conflict between
the lender and the borrower, and since having acted for both parties they were in a position to be
To appreciate conveyancing protocols better one ought to be familiar with the other branches of
law dealing with real property [Land Law], Obligations [Contract law] and remedies/restitution
[equity]. An appreciation of these branches of the law is thus necessary as advice to client will
run and cross through literally all of them in any ordinary conveyancing transaction.
[Reflection: what is the relationship of the other branches of law in particular the law of contract,
the law of torts, the law of equity, the law of real property to conveyancing law and practice?]
A Conveyancer must however not only be knowledgeable but also ethical and defensive.
See: JumaMuchemi V WaweruGatonye HCCC No.853 of 2002 NBI
Momanyi V Hatimy 2003 KLR 545
HISTORY
Conveyancing law in Kenya, like other branches of law has drawn its history mainly from
English Law. Up till 1535 the English medium of transferring an interest in land was vide the
primitive method of surrendering to the Lord of Manor the subject parcel of land and his
Lordship in turn granted the same to the transferee‘s nominee. The earliest and most important
form of conveyance however was the feoffment. This involved no formalities save in the form of
a ceremony known as livery of seisin (delivery of possession). The feoffment was an assurance
note made by the feoffor (owner of land) that he had given his right over an estate to the feofee.
The assurance note was accompanied with a formal public delivery of possession in the presence
of witnesses mainly feudal lords. The law then also recognized facts of leases, assignments,
exchanges and partitions. [Note the enactments of 1535 Statute of Uses and 1536 Statute of
Enrolments, the 1677 Statute of Frauds which introduced the requirements of writing, execution
and attestation, the Real Property Act 1845, Land Transfer Act 1875, Vendors & Purchasers Act
1874 and finally the most important of them all the 1925 Law of Property Act which like the
Registered Land Act Cap 300 Laws of Kenya was intended to simplify conveyancing.The 1925
The history of conveyancing in Kenya can be traced to the turn of the 19th Century. Like most
laws, the relevant statutes were also transplanted the last being the Registered Land Act in 1963
which was an even imitation of the Law of Property Act 1925 (U.K).
The first relevant conveyancing statute enacted in Kenya was the 1901 Registration of
Documents Act (RDA). Section 4 of the Act requires/d that documents conferring property
interest be registered within the month of its making to ensure its availability in evidence.
Registration of a transaction under the RDA guarantees no title but is merely evidence of the
occurrence of a transaction. Under the RDA certain conveyancing documents are still registered
to give efficacy to some conveyancing transactions. These documents include; Trust Deeds,
Powers of Attorney and Building Plans. Next was the Land Titles Act 1908 (LTA) which was
intended to help deal with the haphazard ―deserted‖ parcels at the Coastal strip of the country.
The LTA also guarantees no title. In 1915 the Government Lands Act (GLA) was enacted to deal
with conveyancing and land titles in the interior hinterland. It introduced a more systematic
approach to registration and provided for Deed Plans for all parcels of land to the registered. The
title under the GLA was usually the last Indenture of Conveyance (Freeholds) or
Assignment (Leaseholds).In 1920 the Registration of Titles Act (RTA) was enacted. It was
based on the Australian Torrens system as to systematic certainty of title. It provided for
registration of and guarantee of titles. It attempted to make conveyancing simple by introducing
statutory conveyancing form albeit not mandatory. The title document under the RTA is either
a Grant or Certificate of Title or a Lease.
The Registered Land Act (RLA) enacted in 1963 tried to ―modernize‖ conveyancing. The Act
borrowed heavily from the 1925 English Law of Property Act. Unlike the RTA, the RLA made
the use of statutory conveyancing forms mandatory(S.108). Thetitle document under the RLA
was a Title Deed/Land Certificate (for absolute proprietorship) or Certificate of Lease (for
Reflection: what is the Torrens System? Of what relevance is it today nearly 150 years since a
non-lawyer in Sir Robert Torrens cropped up with it in Australia?
Upon registration of the land or conveyance the registered proprietor acquires an indefeasible
title against the whole world [cf. Section 24 of the Land Registration Act No. 3 of 2012].
Registration is effected at the relevant Lands Registries.
Care must be taken that the conveyancing instrument is not only presented at the proper Registry
but is also signed/registered by the proper Registrar.
Effect of Registration
Pursuant to Section 24 of the LRA the registration of a person as the proprietor of land shall vest
in that person the absolute ownership of that land together with all rights and privileges
belonging or appurtenant thereto; and the registration of a person as the proprietor of a lease shall
vest in that person the leasehold interest described in the lease, together with all implied and
expressed rights and privileges belonging or appurtenant thereto and subject to all implied or
expressed agreements, liabilities or incidents of the lease.
One becomes an absolute owner of the title or interest registered. [Reflection: How absolute is
absolute?]
Pursuant to section 25 of the LRA The rights of a proprietor, whether acquired on first
registration or subsequently for valuable consideration or by an order of court, shall not be liable
to be defeated except as provided under the Act, and shall be held by the proprietor, together
with all privileges and appurtenances belonging thereto, free from all other interests and claims
whatsoever, but subject—
(a) to the leases, charges and other encumbrances and to the conditions and restrictions, if
any, shown in the register; and
(b) Overriding interest (S. 28 LRA)
See also: National Prov. Bank Limited –vs- Hastings (1964) Ch 9
Mbui –vs- Mbui (2005) I E. A 256
Marigi Vs Marigi 1996 LLR 463
Ogongovs.Ogongo CACA 29/2003
Esiroyo –vs- Esiroyo (1973) E.A.
Effect of Non-registration
Non-registration means simply that there is no interest passedat least in rem. See however Section
30 (3)a certificate of title or certificate of lease shall be prima facie evidence of the matters
shown in the certificate, and the land or lease shall be subject to all entries in the register.
NB
Registration at the Company‘s Registry under Section 96 of the Companies Act (Cap
486) is required where a Company creates a Charge over its parcel of land. Companies
Form 214. use of,
Registration at the Registrar of Co-operative Societies.
Purpose in both instances:
- Create a secured creditor vis-à-vis insolvency
- Notice to prospective Debentures- holders.
4 Section 27 of the RDA cap 285, the day upon which a document is presented for registration shall be deemed to be the date of
registration.
For any one to earn a commission as an Estate Agent one must be registered under the said
Estate Agents Act: See Omollo J. A. in Rajdip Housing Development Company Limited vs. J.
W. Wambugu t/a Wambugu& Company Advocates C.A.C.A 4/1991.See also the case ofMapis
Investment (K) Limited vs. Kenya Railways Corporation C.A.C.A 14 of 2005 and section 18 of
cap 5335.
It is otherwise a positive transgression of the law to practice as an estate agent when one is not
registered6and the message passed by the Court of Appeal in the MapisCaseis that a transaction
may be declared null and void and unenforceable ex turpicausa. The commission is earned when
the transaction is actually successful and is either as agreed or per the scale provided under the
Estate Agents (Remuneration) Rules 2002.
Rajdip Housing Development Company Limited vs. J. W. Wambugu t/a Wambugu& Company
Advocates
The seller asked the advocate to instruct an estate agent to get a buyer for property at the asking
price of 100 million. The advocate instructed the broker who got a buyer for 200 million. Then
the advocate moved a step further and managed to secure 225 million. When the seller realized
what happened he went to court and claimed unjust enrichment and instructed the advocate to
refund 25 million. The court of appeal alluded to the fact that advocates should actually earn
commission.
5 Section 18 provides(1) After the expiration of six months from the commencement of this Act or such further period as the
Minister may, by notice in the Gazette, allow either generally or in respect of any particular person or class of persons—
(a) no individual shall practice as an estate agent unless he is a registered estate agent;
(b) no partnership shall practice as estate agents unless all the partners whose activities include the doing of acts by way of such
practice are registered estate agents;
(c) No body corporate shall practice as an estate agent unless all the directors thereof whose duties include the doing of acts by way
of such practice are registered estate agents.
(2) Any person who contravenes subsection (1) shall be guilty of an offence and liable to a fine not exceeding twenty thousand
shillings or to imprisonment for a term not exceeding two years or to both.
6 Ibid
It must however be noted that the role of a Conveyancer and of the Agent must always be
separated. An Advocate must as a Conveyancer keep off the negotiations and show the least
interest. Likewise an Advocate must not allow an Agent to take over his role e.g. conduct an
investigation of the title on behalf of or for the Advocate. Besides estate agents, a conveyancing
transaction may also invite other ―innominate―parties. A conveyancer and or a party to the
conveyance may require the services of a ‗Valuer‘,‘an urban planner‘, ‗a surveyor‘, ‗an architect‘
to ensure the success of the transaction.
Land valuer
Land valuers must be qualified under the Valuers Act- Cap 532. They value the property
especially if the purchase is financed by a bank.
Architects
Architects must be qualified under the Architects and Quantity Surveyors Act (Cap 525). Create
the architecture of the development.
Quantity Surveyors
They must be qualified under the Act above. They estimate the quantities and cost of the
materials labour and time of the development.
Land Surveyors
They must be qualified under the Survey Act (Cap 299). They determine boundaries and
mapping. They are useful when subdividing the property.
Reflection: In what instant will you advise your client to engage the services of each of the
above professionals?
Details on pre contract enquiries.Especially acting for seller. Here you are bound to receive pre
contract inquiries which are searches that inquire on the physical structure of the property. When
acting for the buyer at the initial interview you don‘t really tell your client to go and investigate
The nature of the advise you offer the client must be independentt [ Cf. Barclays Bank PlcVs
Obrien 1994 All E R, Royal bank of Scotland VsEtridge 2001 4 All E R 449]
Discussions on fees.-All relevant client care information, together with information on fees to be
charged must be confirmed in writing at the start of the conveyancing transactions. It‘s possible
to agree on the advocates fees for the whole transaction. It is also important to inform the client
the right to increase the advocate's charges should the transaction prove to be unduly
complicated or protracted. In this way, the advocate does not bind themselves to a fixed
unalterable fee. It may be necessary to reassure the client by saying that in the vast majority of
cases, no increase is, necessary. An advocate must inform the client in writing the estimate of
fees and should also advise the client immediately in writing if the figure is to be revised.
Reflection:‖...When men die at war it is usually because of lack of proper preparation...‖Sun Tzu
300B.C.How prepared isyou for your initial interview?
Ideally, investigation of title (or property) will be conducted prior to the contract being
executed. Post-contract investigations of title may however also serve the purposes.
[Reflections: what dangers would post-contract investigations of title pose to the Conveyancer
and or his client? Distinguish between patent defects and latent defects.]
There are basically three mediums of investigating the title or property. These are searches, pre-
contract inquiries and requisitions.
(a) Searches
Like registration, searches also shield against fraud. Searches are enquiries carried out usually
by the Purchaser‘s or Chargee‘s or Leassee‘s Advocate in the government departments so as to
check ownership of the interest as well as planning, environmental and encumbrances and other
related matters which affect ownership of the interest being transferred or given and which
matters are noted or ought to be noted on the title register.
With regard to the Lands Registry searches, the statutes recognize both official and unofficial or
hand (personal) searches. An official or postal search is one made by an Official of the relevant
lands Registry at the behest of a party upon payment of the requisite search fees and the results
of such official searches are guaranteed by both the registry and the Government as accurate. A
Certificate of Official Search is always issued for such searches. The personal or unofficial or
hand search on the other hand is made by a member of the public by inspecting the relevant
register, parcel or deed file availed by the Lands Registry staff. Currently only Lawyers and
Advocates are allowed to conduct personal or hand searches. The official search may have the
advantage of a government guarantee and indemnity for any loss resulting or sustained by reason
of a defective official search, but is also has its disadvantage in that the Registry staff may not be
able to discern and avail all the relevant information. Such failure to discern and avail
information may not necessarily amount to a ―defective search‖ to qualify for indemnity. The
Official Search on the other hand has one great advantage that one is able to collect the
information required without discrimination.
In conducting a search one ought to get details of ownership, of special conditions, of the tenure,
of the rental, of the user, of encumbrances and quasi-encumbrances (i.e. caveats). Expect
however to meet such hiccups as missing registry deed or parcel files.A third type of Lands
Registry Search ordinarily not conducted is the “historical search”. This refers generally to a
search on the history of the subject parcel of land. Such history will be found in the
correspondence file and not the parcel or deed file. The correspondence file contains all the
details about the origin of each parcel of land from the allotments to any subsequent subdivisions
and indeed to the ―root of the title‖. The correspondence file is comprised of the internal
correspondence between the various sub-departments of the Lands Department. It may thus be
The result of Searches will disclose information in relation to the Vendor/Mortgagor and or the
property. It may be necessary to disclose and discuss such information to the client as this may
impact on the decision to purchase or take the security. Good practice however demands that
you engage the other party or require the other party or his Advocates to confirm position of the
findings i.e. wills the detected encumbrances be discharged?
NB: read- s.39 RDA and s.34 LRA
Pre contract inquiries thus relate to matters touching on the physical condition of the property as
well as other matters not covered by searches. They are as important as searches. The
Purchaser, for example, buys the property as it stands and the Vendor is under no duty to
disclose any physical defects in the property. The Purchaser must be advised by the
Conveyancer of this and must be further advised that in order to protect himself or herself he or
she should have the property fully surveyed and inspected before the contract is signed. Some of
the pre contract matters one will bother himself with include development prospects and
planning permission matters of the property and adjoining property, access to the property,
boundaries of the property, water supply, physical defects detected or suspected, disputes
existing in court over property, tenants in occupation or absent, etc. The full extent of the pre
contract inquiries will depend on each particular transaction and property. When acting for the
Vendor it is important not to presume any answers to pre contract inquiries but to consult with
the client and answer accurately as possible. Answers if unequivocal and relied upon but turn out
to be untrue can lead to a suit in damages both against the client and his Advocate providing the
answers especially where the Advocate decides to step out of his role as Advocate and accepts
direct responsibility towards the third party: Gran Gelato Limited –vs- Richcliff (Group) Ltd
[1992] 1 All ER 865. See also Cross J‘s holding in National Provincial Bank Ltd Vs Hastings
1965 AC 1175 that ―persons dealing with unregistered land must obtain same information
outside the register in the same manner and from the same sources as people dealing with
unregistered land would obtain it‖.
(c) Requisitions
The purpose of requisitions on title besides aiding the process of investigation of title is to help
give the Purchaser title in accordance with the contract for sale. Requisitions relate to matters
which arise not on the basis of the search or simple physical inspection of property but through
the inspection of the title document or abstract availed. The requisitions are in the form of
forthright questions arising after a perusal and deduction of the title document. Deduction will
relate to tenure or the property, execution of the title document, identity of and description of
The LSK Conditions of Sale (1989) at Condition 10 provide for the requisitions or objections to
be made after the contract has been executed and in any event not later than fourteen (14) days
after delivery of the abstract, title deed or a copy thereof. However as requisitions do not enable
the Purchaser to have a second bite of the cherry in respect of matters which were overlooked at
the time of execution of the contract, good conveyancing practice would tilt towards conducting
requisitions prior to the execution. A Vendor is however under an obligation to fully and
correctly answer the requisitions.
Additional Notes
Why do searches?
The caveat emptor rule remains a cornerstone of conveyancing. It is prudent that a buyer will
need to find our as much as possible about the subject property before contracts arc exchanged.
The seller to some extent and under common law also has a duty to disclose any material
subsisting encumbrances. .A prudent buyer needs to discover as much as possible about the
property being purchased.
This is the obligation of the buyer's advocate. The buyers advocate must conduct pre-contact
searches and all preliminary enquiries. The advocate must carry out all appropriate searches and
enquiries before advising the buyer to sign any contracts to purchase property. Advocates must
bear in mind that if they fail to carry out every appropriate search, they will be liable in
negligence for any loss suffered by the client as a result of their negligent conveyancing. The
advocate must also advise the buyer of the need for a physical search or inspection of the subject
property prior to the exchange and the signing of any contracts. In Kenya, searches can be
divided into official and unofficial searches. In all searches, nominal fees are paid.
Personal searchesentail an actual examination of the deed files or register. A personal search
may be carried out by anyone. Normally advocates use their conveyancing clerks to do this. A
search will reveal details of all transactions registered against or in respect of the title.
Official searchesconstitute of an application to the registrar of lands to supply the person
applying with certified copies of details of the register (RLA). The registry by accepting to do so,
(v) To check fixtures and fittings contracted to be sold are in the subject property just prior to
the exchange
The buyer will want to be sure that items to be sold actually exist and are within the subject
property. (Water tanks, electrical fence, etc)
Advice on Survey
A purchaser / mortgagee/chargee should always be advised to have a survey carried out before
exchange of contracts because of the caveat emptor principle, 'let the buyer be ware.' It is for the
buyer to discover all the physical defects in the property and these may not be apparent from the
clients own inspection. A client may sometimes be reluctant to incur additional expenses in
survey fees. It is however the advocate's responsibility to advise the client that this is money well
spent. Failure on the advocate's part to give this advice could amount to professional negligence.
VERIFICATION
Verification is explicitly provided for under section 45 of the Land Registration Act. It is
however more than just witnessing. A person executing an instrument is required to appear
before the Registrar, public officer or other person as is prescribed; and be accompanied by a
credible witness for the purpose of establishing identity, unless the person is known to the
POWER OF ATTORNEYS
This is an authority in writing by which one person (donor) enables another (attorney in fact or
donee) to act for him. Attorney is a person who is appointed by another and has authority to act
on behalf of another. The authority could be general or special (specific). It authorizes the donee
to do some lawful act for and in the stead of the donor. The authority is contained in a Letter
ofAttorney and could be irrevocable or revocable. Ordinarily it is irrevocable when there is
someinterest conveyed or granted to the decree. The donee can use the authority to do only what
he isauthorized under the Letter of Attorney to do and no more. Since the Land Registration Act
makes no form for a power of attorneys the RLA prescribes a mandatoryform to be used in
donating the authority which form must be executed and the executionverified
It is a general rule that an act done under a power of attorney must be done in the name of the
person who gives a power, and not in the attorney's name. The power may be general or specific.
The person appointing is known as the principal or donor. The person appointed is referred to
as the donee. A power of attorney presupposes that the person donating it has capacity. As such,
a person of unsound mind, for example, has no capacity to donate a power of attorney.
Consequently where a person purports that he has a power of attorney donated to him by a
person of unsound mind, as was the case in Grace WanjiruMunyinyi& another v
GedionWaweru& 5 others,7 the power is null in law.A power of attorney must be executed by
the Donor of the Power and thereafter stamped and registered in the Register of Powers of
Attorney. Stamp duty is payable by the donor/executor.8
b) Under Cap 248 (Mental Treatment Act) one may apply to manage the property of
an insane person. Such a person need not have a power of attorney.
Sample forms on Powers of Attorney
The forms on power of attorney are to be found in the Government Lands Act (Cap 280), the
Registration of Titles Act (Cap 281), the Land Titles Act (Chapter 282), the Registered Land Act
(Cap. 300) which were all repealed by the Land Registration Act (LRA) No. 3 of 2012.
However the LRA does not provide for the forms on powers of attorney. Resort is thus provided
for under section 108 of the LRA which provides that:
Until the Cabinet Secretary makes the regulations contemplated under section 110, any rules, or
other administrative acts made, given, issued or undertaken before the commencement of this
Act under any of the Acts of Parliament repealed by this Act or any other law, shall continue in
REVOCATION
I shall not revoke this Power of Attorney as long as I remain indebted in any manner to the Attorney.
IN WITNESS WHEREOF I have hereunto set my hand and seal today this……day of June 2012
SIGNED and SEALED by me the Said MATUI DANIEL )
In the presence of: - )
Advocate )
IN WITNESS WHEREOF I have hereunto set my hand and fixed my seal this … … day of … … … … … 2012
SIGNED and SEALED by me the said )
MATUI DANIEL )
In the presence of : - ) )
Advocate )
DRAWN AND FILED BY:
KATINA & CO. ADVOCATES
ADVOCATES
WOYET PLAZA, 4TH FLOOR,
LOTODO LANE, MAKUTANO,
P.O. BOX 551-30600,
KAPENGURIA
STAMP DUTY
As part of conveyancing and taxation, stamp duty is basically revenue raised by the Government
by requiring stamps sold by the Government to be affixed to designated documents. The stamps
are affixed or embossed or impressed by means of a red dye or franking or adhesive revenue
stamps. The Stamp Duty Act (Cap 480) Laws of Kenya designates various conveyancing
instruments to be stamped. Section 5 of the said Act demands that every instrument relating to
property in Kenya, if specified in the Schedule to the said Act; do fetch stamp duty as prescribed.
The duty is to be paid within 30 days of execution of the document or of its receipt if it is
executed outside Kenya (Section 6). [Reflection: when do you date the conveyancing
instrument? Who authorizes payment of duty when there is a delay beyond the statutory time and
what is the penalty?].
Currently, stamp duty fees is collected directly by the Kenya Revenue Authority by payment
being made to the Authority‘s account in commercial banks. The document together with the
stamp duty assessment form and the banking pay-in slip is then delivered for stamping by the
Collector of Stamp Duty. The Collector has powers to adjudicate and decide whether a
document should fetch duty [Reflection: How wide is the Collector of Stamp Duty‘s discretion
under Section 17 of the Stamp Duty Act? Contrast and compare this Section with Sections 96/97
of the same Act].
Exemption from payment of duty is however the recluse of the Minister of Finance after
receiving the appropriate recommendation from the Minister of Lands [see Section 106]. Relief
and or exemption will be granted to charitable organizations as well as religious organizations or
institutions. Certain institutions are also duty-exempt. These include educational institutions,
government departments (e.g. Central Bank of Kenya) and the Export Processing Zone
Companies. [Reflection: what possible reforms would you recommend to the Stamp Duty
regime? E-stamping, first-time home owners be duty exempt, beneficiaries of deceased estates
to pay file duty, base duty on the theory of ―from each according to his means‖.]
It is important that in a conveyancer‘s brief; the Stamp Duty Assessment Form obtained from the
Collector of Stamp Duty is completed in a legible manner, the payment is re-checked to have
Land Rent, too, is a source of income for the Government as Landlord. Land Rent will be levied
only on leasehold parcels where the annual rent has been reserved at the time of the Grant being
issued. [Reflection: what is a peppercorn?] Section 39 of the LRA helps to assist the
Government in collection of rent as both Sections require that before any transaction on a
leasehold property is registered the parties must produce to the Land Registrar a valid Rent
Clearance Certificate. It is always the duty of the registered proprietor to pay and obtain the
Rates and or Rent Clearance Certificate, unless agreed otherwise. [Reflection: What is the
process of obtaining either a Rent Clearance Certificate or a Land Rates Clearance Certificate?
What are the challenges met by ordinary practitioners?]
CONSENTS
There are quite a number of consents in conveyancing to ensure the success of the transaction.
Different transactions however require different consents and occasionally some will over-lap.
Reflection: what is the rationalebehind the various consent?
Facts
The suit land was agricultural land, but the consent of the Land Board was not obtained. There
was supposedly an arbitration, which recommended that the superior court should order the
appellant to transfer the suit land to the respondent without delay. On appeal;
Held
The transaction for which the respondent sought specific performance required the consent of
the relevant Land Control Board. This was a legal requirement. The effect of the arbitrator’s
award was to grant the respondent the specific performance he sought. If no consent of the
relevant Land Control Board was obtained, then that award was illegal.
1. These consents are required to complete any given transaction. In the absence of these
consents the conveyance e.g. lease, mortgage etc will not be registered
2. Condition 16 of the LSK provides that for purposes of completion, all necessary consent
must be obtained by the vendor/lessor (he who is parting with the interest). In most
agreements in practice, the person obtaining the interest is given a duty to assist in
obtaining the consent especially where both parties presence is required.
3. If the consent is not availed or obtained one will be held to be in breach. Unfortunately,
the person who is aggrieved has remedies in damages only. There is no room for specific
performance because as long as the consent is not given within the specified period, the
agreement lapses.
See: Mucheru v Mucheru [2002] 2 EA 456
The CA held that if LCB consent is not obtained the transaction becomes void even if the duty to
obtain the consent was not exercised.
The CA held that the establishment of a trust is a disposition of property within the requirements
of s.6 LCA and the LCB consent was necessary. Having not been obtained within the required
time i.e. 6 months, the whole disposition was void
What is the difference between agreement to sell land and a contract for sale of land?
ENFORCEABILITY
The requirement for writing was introduced in a 1968 and was borrowed from the Statute of
Frauds of 1677. This requirement of writing was often defeated by the application of the
equitable doctrine of part performance.An amended was introduced on 1st June, 2003 vide Act
No. 2 of 2002. Section 3(3) was repealed to read as follows:
To disclose to the buyer material latent To disclose to the seller info which
defects in the property increases the value of the property
Other terms are found in S 46-48 of Sectional Properties Act- for sale of sectional
properties.Remember the terms must be certain
Read Michira vs. Gesima Paper Mills Ltd (2004) EA 168
The entire agreement was held to be void for uncertainty
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
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.
-
Question then is: Why do we draft and title the as ―a contract for sale‖ or a ―a sale agreement‖?
What is the difference anyway between a contract and an agreement or there is no difference?[
cf. Lord Diplock‘s reference to ―bisynallagmatic‖ associations as distinguished from ―mere
concordance of opinions‖] . An agreement to sell land is basically a contract. The next question
perhaps thus that one would want to ask himself is what sort of agreement is he to draw: a ―pigs,
whistles and all‖ or a ―mini skirt‖ agreement? It is recommended that a hybrid of both be
adopted, instead of either. Finally there is the need to ask and answer the question: what is the
nature of the relationship that exists between the parties during the period between the execution
and completion of the contract (See: Derry vs. Peek, Shaw vs. Forster)?
As an agreement is a contract compliance with the basic tenets of the Law of Contract is
necessary and so is compliance with the provisions of the Law of Contract Act (Cap 23) Laws of
Kenya as well as Sections 38 through 42 of the Land Act 2012.
It is possible though that the parties may have some pre contract negotiation documents in place
and prior to actual execution of the contract. These include Heads of Terms, Term Sheets, MOUs
and Letter Agreements [what are they and are they binding once executed? Can either party
enforce the same in a court of law or equity?]
In general an ordinary Sale Agreement will contain five parts namely: the parties, particulars of
sale, special conditions, general conditions and execution.
An agreement must at whatever cost be certain. If agreement is not certain even if one
complies with statutory provisions the agreement will be void. See: Muchira v Gesima
Power Mills Ltd (2004) 2 EA 168
The COA held that any agreement that contains uncertain clauses is void and specific
performance or reliance on it for any remedy will not be allowed.
Facts: The vendor sold land to the purchaser for 10 million. The parties themselves drew the
agreement. The execution was witnessed by a qualified advocate. 10% deposit was to be paid on
execution, 20% later and balance within 90 days or when the title was produced in the
Parties: This is self-explanatory. The parties to the contract as well as their addresses must
be properly stated in the contract. The address is crucial in the event that there will be need to
issue a notice to either party. It is important that the parties to any contract are properly
identified.[It is not necessary that only parties to a contract are those who must get some benefit
there from or shoulder some obligation]
Particulars: This entails a description of the subject property. Both the physical and legal
description of the property are given in the particulars of sale. Encumbrances, if any, also
constitute part of the property definition. Occasionally, fixtures and fittings will form part of
the particulars of sale. Finally the consideration (purchase price) will be part of the particulars.
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…‖
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
In such cases you may have a clause titled special conditions.A sale agreement (if the LSK
conditions apply) will be completed within 42 days of obtaining consent. This is a special
condition which varies the general conditions of sale.
General Conditions: These are terms which in the absence of any specific terms apply
generally to the open contract. They came from implied terms which have been complied
together from common law, equity as well as conveyancing practice generally. Section 55 of the
ITPA contains examples of such general terms. Likewise the LSK Conditions of Sale now in its
third edition is an assembly of the general terms and conditions. The general conditions apply
also to fill up gaps in a contract and cover a variety of matters e.g.Regulating right to rescind,
preparation and content of transfer, possession and grant, deposit and forfeiture, notices and
completion. The Sale Agreement will always be drawn by Vendor‘s Advocate (see Salim –vs-
Okongo, 1976 KLR 42, LSK Condition 24).
Note: Fixtures and fittings – Case Law- Melluish –vs- BMI (No. 3) Ltd 1996 AC 456
- Ellitestone –vs- Morris 1997 1 WLR 687
- Leigh –vs- Taylor 1902 AC 157
- Wake Vs Hall (1882 ) 8 App Cases 195
[Reflection: What are the dangers of electronic drafting and negotiation of contracts?]
See also Hand outs - Steps commonly taken by Buyer‘s Advocate
- Steps commonly taken by Vendor‘s Advocate
- Checklists – acting for Vendor
- acting to Purchaser
- Model Sale Agreement Clauses (for class discussion)
- Deposits & Completion
- J. M. Kibuchi on LSK Conditions of Sale
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
Completion documents
That is the purchaser is to deliver the purchase price and the vendor is to deliver the completion
documents. The date of completion must be stated i.e. time is of essence.Provide for place of
completion usually at the vendor‘s advocates office.Where there is a financier, a professional
undertaking is given instead of the money/cheque. One also has to state vacant possession.
Completion documents include title documents, Clearance and Consent certificates, executed
transfer, photos, consents, stamp duty valuation forms.
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
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 one‘s 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.
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?
5. Draft the Contract and dispatch to Buyer‘s Lawyer with copy to Seller for approval.
Send also to Buyer‘s Advocate
- copy or abstract of the Title
- reply to pre-contract inquiries
- copies of relevant planning consents, covenants, easements, licences, insurance
certificates etc.
9. Confirm deposit cheque has been honoured and ask Seller to execute Contract.
10. Return counterpart copy of the Contract to Buyer‘s 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 the 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 the Conveyance.
17. Arrange for and host completion meeting.
18. Report completion to Seller and Estate Agent and authorize release of keys to Buyer.
PROFESSIONAL UNDERTAKINGS
Common practice in banking and conveyancing transactions
What is a PU?- Encyclopaedia of Forms and precedents ―any unequivocal declaration of
intention addressed to someone who reasonably places reliance on it and made by...a solicitor in
the course of his practice, either personally or by a member of his staff under which the solicitor
becomes personally bound‖
Ingredients:
Unequivocal declaration of intention by an advocate
Addressed to someone
MAYENDE CONVEYANCING 78
Places reliance on it
Made personally by an advocate in the course of practice or as an advocate or
by a member of staff
It is simply a promise made by a solicitor or on his behalf by a member of his staff to do or
refrain from doing something. It is one of the ways of completing a sale transaction.
WHY?
Given by lawyers to smoothen and hasten the process of transactions. They create bridges
without which a transaction may never be completed banks would not release funds without
registration of transfer or mortgage. The Vendor on the other hand faces the risk of losing his
property to a purchaser who may fail to release the purchase price after registration.
INSTANCES
Vendor‘s Advocates undertaking not to release the purchase price to Vendor pending
actual registration of the Transfer.
Purchaser‘s Advocate undertaking to hold completion documents to Vendor‘s order
pending payment of the purchase price.
Mortgagee‘s Advocate undertaking to advance the loan upon registration of the Charge
plus/or transfer simultaneously.
Mortgagor‘s Advocate undertaking to pay the redemption amounts upon registration of
the discharge.
PUs ought to be given to professionals not to laymen. They ought to be in writing although no
law bars oral undertakings. The giver and recipient don‘t have to be in an advocate/client
relationship (See Bridge up Containers Services vs. GichanaBw’omwando t/a
GichanaBw’omwando& Co. Advocates, Misc. Civ. App. 386 of 2006).
Law Society of Kenya ―Digest of Professional Conduct and Etiquette‖ provides that an
undertaking shall be in a form which is clear and once accepted by an Advocate shall bind him or
his firm to the undertaking and any breach thereof shall constitute professional misconduct‖
MAYENDE CONVEYANCING 80
Naphtali Radier vs. D Njogu& Co. Advs - An advocate is obliged by law as an officer of the
Court to honour his professional undertaking. Failure to honour= professional misconduct. In the
UK- Advocates cannot give uninsured undertakings. In Kenya advocates are faced with the
dilemma of losing a client (e.g. banks) or issue a non funded PU.
IS IT A CONTRACT?
It places both a legal and ethical obligation on the giver. In Peter Ng’ang’aMuiruri vs. Credit
Bank & Charles Nyachae t/a Nyachae& Co. Advocates (Civil Appeal No. 263 of 1998-Court
of Appeal Nairobi)- the Court held that an undertaking is a solemn thing, in enforcing it the
Court is not guided by considerations of contract but the Court aims at securing the honesty of its
officers.
An undertaking must be clear, unambiguous and certain and without conditions precedents
• see Kenya Re V MugukuMuriu t/a MugukuMuriu& Co. Advocates (Civil Appeal No.
48 of 1994)
• See Kimaru J’s ruling in Pyrethrum Processing Co. Ltd vs. Rogers Shako Adv. HCC
148 of 2004- an undertaking is a form of trusteeship
• See Onyancha J‘s ruling in David Muema vs. Victor Mulee (eKLR 2007)- undertakings
should be looked at from an ethical point of view
• See DK Thou & Co. Advs vs. NjagiWaweru& Co. Adv. HCC No. 209 of 2008- Justice
Njagi refused the Advocates‘ arguments that he was entitled to a lien over the funds.
TYPES
• The granting advocate is able to personally fulfil the stated obligations e.g. ―...to hold the
documents to your order returnable on demand.....‖
• The granting advocate‘s promise can only be fulfilled by the lawyer‘s client (see the case
of HaritSheth t/a HaritSheth Advocates vs. K.H.Osmond t/a Osmond Advocates Civil
Appeal No. 276 of 2001 CA NBI)
ENFORCEMENT OF PUS
MAYENDE CONVEYANCING 81
Once it is determined that an undertaking exists and the same has been breached the recipient has
the following options jointly and severally;
• Co-operation with the undertaking party e.g. extending time
• Demanding compliance in writing
• Seeking enforceability through Court action –O 52 of CPR through an Originating
Summons
• Reporting the matter to LSK for disciplinary action
• Undertakings can be enforced even if one is not the recipient-KCB V Mohammed
MuigaiAdv (HCC757 of 2003)
Thirteen principles, which are generally applicable to all undertakings, are set out below. It is
hoped that the principles as presented are clear and informative.
PRINCIPLES
1. An undertaking is any unequivocal declaration of intention addressed to someone who
reasonably places reliance on it and made by a Advocate in the course of his practice, either
personally or by a member of the Advocate‟s staff whereby the Advocate (or in the case a
member of his staff, his employer) becomes personally bound.
1.1. There is no obligation on an Advocate either to give or accept an undertaking, nor
can an Advocate be required to stand guarantor for a client by way of an undertaking.
1.2. The Society does not recommend the giving or accepting of oral undertakings. Oral
undertakings can lead to uncertainty as to the nature and extent of the undertaking.
Evidential problems may arise. When oral undertakings are given, the lack of formality
detracts from the gravity which should be attendant on the giving of any undertaking.
The Society recognizes that an oral undertaking given by one person to another may be
enforceable at law, but the Society will not render assistance to a party seeking to enforce
that undertaking as a matter of conduct.
1.3. Undertakings can be given even to lay persons. (See KCB Limited vs. Adala 1983
KLR 467)
MAYENDE CONVEYANCING 82
3. An undertaking will normally be required to be honoured only as between the giver and
the recipient.
3.1The Society will normally require compliance with an undertaking only at the instance
of a recipient.
3.2. An Advocate cannot assign the burden of an undertaking (and thus claim to be
released from its terms) without the express approval of the recipient. ROA
OtienoVs AGN Kamau& Co 134/03
3.3. The court will however not hesitate to enforce an undertaking on an application by
the recipient‘s client. See: NaphtallyRadier vs. David Njogu t/a D. Njogu& Co.
Advocates HCCC No. 582 of 2003 (Nrb), Kenya Commercial Bank Limited vs.
Mohammed Muigai Advocates HCCC No. 757 of 2003 where the court held that
undertakings are not just given at the behest of clients but the recipient‘s client takes
the benefit of the same and can enforce the same.
10. An Advocate who gives an undertaking which is expressed to be dependent upon the
happening of a future event must notify the recipient immediately if it becomes clear that
the event will not occur.
MAYENDE CONVEYANCING 84
11. In addition to the Society‟s power to enforce undertakings as a matter of conduct, the
court, by virtue of its inherent jurisdiction over its own officers, has power of enforcement
in respect of undertakings.
11.1Where undertakings are given by Advocates to court, the Society takes the view that
enforcement is a matter for the court; for this reason the Society will not normally
intervene.
12. An undertaking should not be given by an Advocate as an inducement to a client to
secure that client‟s business.
13.The seeking by an Advocate of an undertaking from another Advocate which the first
Advocate knows, or ought to know, should not be given, may be deemed to be professional
misconduct.
13.01 Self explanatory.
13.02 Illegal undertakings intended for example to perpetrate a fraud should not be
sought or given.
ADDITIONAL NOTES
What is a completion notice?
The vendor has to ensure registration of the documents of conveyancing (even though the prime
obligation rests upon the purchaser) because it is only after registration that he can get paid.
Therefore he must follow the process through to ensure he is paid on time.
What is apportionment? This is the process of apportioning the rates and rent payable in case
property is sold midway through a particular year. So for example if rent charges or rate charges
were Kshs 1000 for every year, then if the property is sold midway through that year then rent/
rates due will be Kshs 600. This is the process referred to as apportionment.
Interest chargeable on late payments accrues from the date of completion. Such interest should
not be punitive i.e. it should not be higher than the interest recommended by the Central Bank of
Kenya as the base lending rate.
Exam Focus: List 5 or 6 Completion documents. These should be prioritized in the following
order
DEPOSITS
It is usual for a contract to provide for the payment of a deposit by the Purchaser upon or before
execution of a contract. A deposit is part of the agreed purchase price. There is however no
common law provision entitling the Vendor to demand or require the Purchaser to pay a deposit.
Indeed Section 55 of the ITPA provides for the purchase amount to be delivered on completion.
Therefore a special condition to this effect must be inserted in the contract. This customary
requirement has however seen the Law Society of Kenya Conditions of Sale provide expressly
for the same at Condition 3, effectively meaning that even if not expressly provided for as a
special condition it will be implied unless expressly excluded. The Law Society of Kenya
MAYENDE CONVEYANCING 86
Conditions at the interpretation part has also adopted the customary ―10% of the purchase price‖.
Thus a ―deposit‖ is defined as:
“ten (10) per centum of the purchase money excluding the price of movables,
livestock, chattels, fittings and other separate items Law Society Conditions of
Sale.”
It is thus basically implied in each contract in Kenya. You can however contract out of it by way
of a special condition and this is often done especially where the Purchaser is being fully
financed.
The amount of deposit (i.e. the customary 10%) can also be varied but care is to be taken not to
accept anything less once the variation is effected. Thus if you agree on 20%, as the Vendor‘s
Advocate you should not take 10% otherwise liability for any losses on your client may befall
you.
Payment is ordinarily made to the Vendor‘s Advocate or to the Estate Agent who introduced the
Purchaser. The Law Society of Kenya Conditions require payment to be made by bankers draft
but it is now perfectly acceptable to take a client account cheque and it is to be banked in the
client account too. From client account to client account. Where the deposit amount exceeds
Kshs. 1,000,000/= payment is to be effected by way of electronic transfer or RTGS. Often this
payment has been varied to be made to the Vendor and this may be pretty risky. There is need to
provide very carefully in such situations; like in estate covenyancing or sales by developers.
None payment means that the contract if already signed is repudiated upon notice. It is however
always paid before the Vendor signs the contract and care needs to be taken to ensure that the
cheque is cleared upon presentment.
NATURE
A deposit is security for completion. It is an earnest to bind the bargain and the fear of its
forfeiture creates a motive on the part of the Purchaser to complete. The Purchaser will not
MAYENDE CONVEYANCING 87
capriciously change his mind. It sort of guarantees performance. It thus helps in assuring all that
its forfeiture in the event of a default is not a penalty but rather an agreed loss.
Non-payment of a deposit as agreed means there is fundamental breach of the contract on the
part of the Purchaser and the Vendor is entitled to rescind the contract. Under the Law Society
of Kenya Condition 3
Rescission will only take place after notice to the Purchaser. A deposit also counts as part of the
purchase price on completion. The Purchaser‘s advocate is at completion expected to formally
authorize the release of the deposit to the Vendor. Deposits also help create the symbiotic
relationship between the Purchaser and the Vendor. It helps to entitle the Purchaser to a lien
enforceable by the courts over the property.
CAPACITY OF HOLDER
Under the general conditions (LSK Cond. 3), the holder of the deposit whether Estate Agent or
Advocate always holds the same as a stakeholder. The agreement can however provide that
you hold as agent for the Vendor.As an Agent, you hold the money to the order of the Vendor
whether you are acting for the Purchaser or the Vendor himself and the Vendor in such a case
has a proprietary interest in the funds. Upon his demand you have to release to him unless the
agreement specifies otherwise. In such cases the funds may be utilized to his benefit i.e. clear
outgoings without necessarily asking for provision.
A Stakeholder holds the deposit to the order of both parties. He holds the same in trust to
ultimately deal with it in different ways in different contingencies. Pay to the Vendor if the sale
is completed. Pay to the Vendor if the Purchaser defaults. Return to the Purchaser if the Vendor
defaults. Safety is the Stakeholder‘s responsibility. You mishandle the same you pay it. You
deposit it in a ―collapsing‖ bank you pay. Deposit it in a client account unless urged to do
otherwise by the parties. As neither the Purchaser nor the Vendor has any proprietary claim any
interest earned can actually be kept by the Stakeholder (as reward for holding the stake?) Unless
the contract states otherwise, as a stakeholder if the Purchaser consents you may use it as another
―earnest‖ for the purchase of another property. In the event of insolvency of holder various
difficulties may arise. Who bears the loss? The Vendor or the Purchaser? It there is a binding
contract the Vendor bears the loss as he ―who nominates the principal accepts the risk‖. If it is
MAYENDE CONVEYANCING 88
insolvency of the Vendor, the Stakeholder must refund the Purchaser. If there is insolvency of
the vendor and the deposit is held by an Agent then the Purchaser loses out as the money was,
strictly speaking, the Vendor‘s.
FORFEITURE
If the Purchaser is in breach of the contract and is unable to complete the contract, the deposit is
forfeited to the Vendor even if held by a Stakeholder. The Vendor is also discharged from the
contract. The Vendor may however opt for specific performance in which case the deposit will
still count as part of the purchase price, although the Vendor will ask for damages too. Forfeiture
however does not apply where the purchase price is paid rather by way of installments and there
is no deposit (especially in estate conveyancing) but you may however provide for part
forfeiture.Courts will ordinarily not intervene unless the deposit was more than the customary
10%.
IMPORTANCE OF DEPOSITS
1. Deposit acts a security for completion, fear of forfeiture makes the purchaser complete
2. Reduces the purchaser‘s burden of paying the full purchase price at a go. It is part of
purchase price and the purchaser‘s advocate is expected to authorize its release to the vendor
on completion.
3. Gives the purchaser the right over a lien on the property enforceable in Court.
4. Creates a symbiotic relationship with the vendor
• Since both parties have no proprietary right over the deposit held as stakeholder, the
interest earned can be for the stakeholder
[Reflection: what reforms would you propose to the issue of Deposits in sale transactions if
any?]
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.
MAYENDE CONVEYANCING 91
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.
Considerations to note:
See Auctioneers Act
MAYENDE CONVEYANCING 92
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.
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
MAYENDE CONVEYANCING 95
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
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
PURCHASE AGREEMENT
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
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?
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:
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
MAYENDE CONVEYANCING 100
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:
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 heeded 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),
MAYENDE CONVEYANCING 102
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.
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;
MAYENDE CONVEYANCING 103
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.
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 lien on the property as security of the purchase
price, the Vendor will always retain possession. He must however honour his duty to
MAYENDE CONVEYANCING 104
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 Transfer
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
MAYENDE CONVEYANCING 105
Transfer Conveyance
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
MAYENDE CONVEYANCING 107
• Miscellaneous provisions
– Implied covenants especially under GLA
• Final part
– Testimonium- 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.
MAYENDE CONVEYANCING 108
• 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.
MAYENDE CONVEYANCING 109
• 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
MAYENDE CONVEYANCING 110
Bankruptcy or Insolvency
Adverse Possession
Compulsory Acquisition
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
Testacy
death Intestacy
Escheat
MAYENDE CONVEYANCING 112
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.
Freehold
Charge
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
MAYENDE CONVEYANCING 115
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
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-nuptial 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
MAYENDE CONVEYANCING 117
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?
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)
MAYENDE CONVEYANCING 120
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.
Blocks
Registration Sections
Blocks
Registration Units
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)
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
MAYENDE CONVEYANCING 122
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.
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
MAYENDE CONVEYANCING 125
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…‖
MAYENDE CONVEYANCING 126
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.
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.
MAYENDE CONVEYANCING 128
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:
MAYENDE CONVEYANCING 129
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
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.
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
MAYENDE CONVEYANCING 131
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.
MAYENDE CONVEYANCING 132
(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
MAYENDE CONVEYANCING 133
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 ofplain,
simple language and short words and brief sentences is advisable. This is the best way todraft
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
wholedocument includes a lease and Further lease a court of law will read both the lease and
theFurther lease in-order to discern the intention of the parties. The document too is to be read in
itsentirety and not selectively.
3. Words must be given their ordinary meaning
Ordinary meaning is the accepted grammatical meaning of the words. There are however
twoexceptions to this rule. Courts of law will sometimes give words their special, technical
orcustomary 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 theopinion that the ordinary meaning would lead to some absurdity, repugnancy or
inconsistencywith 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 resolvelatent
ambiguity.
MAYENDE CONVEYANCING 134
(ii) Surrounding circumstances existing at the time of the time of executing the documentmay 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 offraud
or mutual mistake.
5. Clerical errors will be corrected in accordance with proper grammatical spelling of the
words butthe correction must be so as to give effect to a parties’ true intention as
appearing in the whole ofthe documents.Self-explanatory.
6.
6. ―Contra-Preferentum Rule” where the document has been drafted in a language chosen by
one ofthe parties the document must be construed against the person who drafted it in the event
of anyambiguity.
7. “Ejusdem Generis Rule”
Where general words follow words of a peculiar class the general words must be construed
aslimited to the same kind as the particular words. E.g. in the phrase ―cows‖ ―goat‖ ―sheep‖
andother animals the general words and any other animals will be interpreted to refer to
domesticanimals.
8. “ExpessioUnius 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 theITPA will be ousted by express provisions contained in the lease document executed
by theparties. Alongside this rule too is the rule that “falsademonstratio non nocet”. This latter
rule is tothe effect that a false description in a document does not prejudice or vitiate its effect.
This latterrule is particularly applicable when interpreting the parcel‘s clause.
REMEDIES
Remedies are applicable in Conveyancing when the transaction for whatever reason is not
completed orwhen it is completed but one party still feels aggrieved. The remedies are either
statutory, equitable orobtainable under common law.
COMMON LAW
MAYENDE CONVEYANCING 135
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
theformation of a contract is affected by some vitiating factor such as fraud. The contract is
hereannulled 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
theconsequence of an innocent party‘s acceptance of the repudiation of the contract by the
otherparty‘s breach of an essential term. This acceptance however does not result in rescission
ab initioand the innocent party‘s entitlement to damages for breach remains intact. Rescission for
breachwill arise where there is a misdescription or misrepresentation by one party or presentation
of adefective title or even for failure to complete on the completion date and or after a notice
tocomplete has been given.
EQUITABLE REMEDIES
The special character of land has led equity to ensure that a Purchaser or Vendor for that matter
is notleft content simply with the common law remedy of damages for breach of contract.
MAYENDE CONVEYANCING 136
Damages may neverconstitute adequate compensation for him. Two main equitable remedies
exist in equity to parties to aconveyancing transaction:
Specific Performance
This is a remedy available to and peculiar to land transactions. The Plaintiff (Purchaser
orVendor) seeks a decree from the court ordering the other party to perform the
contractspecifically. There is no need for breach of the contract itself to be entitled to
specificperformance.(see: Hasham –vs- Zenab 1960 AC 316). The remedy is however
discretionary and the principlesof 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 theremedy 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
MAYENDE CONVEYANCING 137
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 3rd
MAYENDE CONVEYANCING 138
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
MAYENDE CONVEYANCING 139
EQUITABLE
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.
Equitable Mortgages Act(cap 291) recognizes the creation of mortgage by delivery of title
S100(2)(g) of ITPA also recognizes them
S66 of RTA also allows for equitable charges by deposit of title
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)
Barclays Bank DCO V Gulu Millers (1959)EA 540
Samuel Kenneth Ondendaal& the official receiver V Richard Gray (1960)EA 263
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
MAYENDE CONVEYANCING 141
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
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- iecredit 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
valuersetc).
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 3rd
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.
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&Ano 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 &Ano. V Fidelity Commercial Bank &Ano. (2003) 2 EA 541
MAYENDE CONVEYANCING 145
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 AnthanusNgotho 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.
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
MAYENDE CONVEYANCING 149
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
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.
MAYENDE CONVEYANCING 150
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.
REMEDIES
Chargor’s right
toredeem
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
MAYENDE CONVEYANCING 152
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.
MAYENDE CONVEYANCING 153
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.
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
S92(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
MAYENDE CONVEYANCING 155
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.
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‘
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.
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 chargorseg 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).
MAYENDE CONVEYANCING 158
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