9 am-12 pm

Topics to read: sectional properties and subleases, change of user and

extension of user and off plan investments, leases

9am -12pm
Topics to read: Voluntary Transfers and involuntary transfers, tenancies
and controlled tenancies, interests to be transferred and remedies and
reliefs of lessor and the lessee

Topics to read: charges and rights in alieno solo and cautions and 9am- 12 pm
inhibitions

Taxation of stamp duty and Capital Gains tax, Compulsory acquisition 9 am -12pm
and institutional framework for land administration and procedures of
converting land

Pre and contract stage and contents of sale agreements, professional 9-am-12pm
undertaking and power of attorney, completion documents

Allocation and extension and renewal of leases 9am -12pm

TOPIC ONE
2.7. PROCEDURES FOR CONVERTING CATEGORIES OF LAND
Private to Public Conversion:
The process of converting private land to public land is known as acquisition. The government can acquire private land for public use through various
legal procedures. The following are the procedures for converting private land to public land:

a. Identification of the land: The first step in the process of acquiring private land is to identify the land that is needed for public use.

b. Notification of the landowner: The landowner must be notified of the intention to acquire their land. The notification must be in writing and must
include the purpose for which the land is being acquired.
c. Valuation of the land: A valuation of the land must be conducted by a government-appointed valuer. The landowner must be given an opportunity to
object to the valuation.

d. Negotiation for compensation: The government must negotiate with the landowner for compensation for the land being acquired. If the parties
cannot agree on compensation, the matter can be referred to a court of law.

e. Payment of compensation: Once the compensation has been agreed upon, the government must pay the landowner the agreed amount.

f. Registration of the land: Once the compensation has been paid, the land must be registered as public land.

Relevant legal provisions and statutes:

The relevant legal provisions and statutes for the conversion of private land to public land in Kenya include the Land Act, the Land Registration Act,
and the Constitution of Kenya.

Public to Private Conversion:

The process of converting public land to private land is known as alienation. The conversion of public land to private land is highly regulated and can
only be done in specific circumstances. The following are the procedures for converting public land to private land:

a. Identification of the land: The first step in the process of converting public land to private land is to identify the land that is available for alienation.

b. Approval of the National Land Commission: The National Land Commission must approve the alienation of public land. The approval process
involves an assessment of the suitability of the land for alienation.

c. Valuation of the land: A valuation of the land must be conducted by a government-appointed valuer. The land must be valued at its market value.

d. Auction of the land: The land must be auctioned to the highest bidder. The auction must be conducted in a transparent and competitive manner.

e. Payment for the land: The successful bidder must pay for the land within a specified period. The payment must be made in full.

f. Registration of the land: Once the payment has been made, the land must be registered as private land

The Community Land Act, 2016

7. Procedure for registration of communities

(1) A community claiming an interest in or right over community land shall be registered in accordance with the provisions of this section.

(2) The community land registrar shall by notice in at least one newspaper of nationwide circulation and a radio station of nationwide coverage, invite
all members of the community with some communal interest to a public meeting for the purpose of electing the members of the community land
management committee.

(3) The notice shall also be given to the national county administrators and county government administrators in the area where the community land is
located.

(4) The community land registrar may use all available means of communication including electronic media to reach the community members.

(5) The community shall elect between seven and fifteen members from among themselves to be the members of the community land management
committee as provided in section 15, who shall come up with a comprehensive register of communal interest holders.

(6) The community land management committee shall come up with the name of the community and shall submit the name, register of members,
minutes of the meeting and the rules and regulations of the committee to the Registrar for registration.

10. Register of community land

(1) There shall be maintained for each registration unit, a community land register in accordance with section 8 of the Land Registration Act, 2012
(No. 3 of 2012) in which shall contain—

1. (a) a cadastral map showing the extent of the community land and identified areas of common interest;
2. (b) the name of the registered community;
3. (c) a register of members of the registered community which shall be updated annually;
4. (d) the user of the land;
5. (e) such particulars of members of the registered community as the Registrar may determine; and
6. (f) any other requirement under this Act.

(2) The Registrar shall not register any instrument purporting to dispose of rights or interest in community land except in accordance with this Act or
any other written law.

(3) For the avoidance of doubt, until any parcel of community land has been registered in accordance with this Act, such land shall remain
unregistered community land and shall, subject to this Act, be held in trust by the county governments on behalf of the communities for which it is
held pursuant to Article 63 (3) of the Constitution.
11. Registration of community land

(1) Community land shall be registered in accordance with the provisions of this Act and the Land Registration Act, 2012 (No. 3 of 2012).

(2) The Cabinet Secretary shall by a notice in the gazette, appoint an adjudication officer in respect of every community registration unit who shall—

(a) facilitate in consultation with the respective county governments the adjudication of the community land including the recording of community
land claims, demarcation of community land and delineation of boundaries; and

(b) perform any other function conferred by this Act.

(3) Upon adjudication, the title relating to community land shall be issued by the Registrar in the prescribed form.

21. Conversion of community land

(1) The Community land register shall, in addition to the particulars set out under section 8(1) of the Land Registration Act, 2012 (No. 3 of 2012)
contain the particulars of all conversions involving community land.

(2) A registered community shall, before the conversion of registered community land into any other category of land seek and obtain approval from
two thirds of the assembly in a special meeting convened for that purpose.

22. Conversion of community land to public land

(1) Community land may be converted to public land by—

1. (a) compulsory acquisition;

2. (b) transfer; or

(c) surrender.

(2) Nothing in this Act limits Land Act, 2012 (No. 6 of 2012) and any other compulsory acquisition of land.

(3) Reversionary interest of such land shall lie with the community in the first instance upon expiry of such public use interest.

(4) Transfer of community land shall, subject to the approval of the members of the registered community in a community meeting, be done in
accordance with the Land Act, 2012 (No. 6 of 2012) and any other applicable law.
23. Conversion of community land to private land

Registered community land may, subject to the approval of the registered community, be converted to private land through-—

1. (a) transfer; or
2. (b) allocation by the registered community, subject to ratification of the assembly as provided in section 21(2).

24. Conversion of public land to community land

(1) Public land may be converted to community land by allocation by the Commission in accordance with the Land Act, 2012 (No. 6 of 2012).

(2) Conversion of public land to community land under subsection (1) may be effected on a case by case basis.

(3) The Commission may, by an order published in the gazette identify other specific parcels to which subsection (2) shall not apply.

25. Conversion of private land to community land

Private land may be converted to community land by-—

(a) transfer; or
(b) surrender;
(c) operation of the law in relation to illegally acquired community land; or (d) operation of any other written law.

COMMUNITY LAND REGULATIONS, 2017

8. Registration of communities

(1) The community land management committee shall apply to the registrar for registration of the community.

(2) An application for registration of a community shall be made to the registrar in Form CLA 3 set out in the Fifth Schedule.

(3) An application for registration under paragraph (1) shall be accompanied by—

1. (a) name of the community;

 2. (b) register of members of the community;
3. (c) a certified true copy of the minutes of the meeting at which it was resolved to seek application for registration;
4. (d) rules and regulations of the community;
5. (e) description of the interest in land being claimed by the community including a sketch map.

(4) The registrar shall consider an application for registration and may issue a certificate of registration in the name of the community in Form CLA 4
set out in the Fifth Schedule, subject to such conditions, limitations or exemptions as the registrar considers appropriate, if satisfied that—

1. (a) the name proposed to be registered has not been used by any other registered community;
2. (b) the applicant has complied with the Act; and
3. (c) the rules and regulations of the community are satisfactory in substance and in form,

(5) Upon registration the community named in the certificate of registration shall—

1. (a) be a body corporate, in the name specified in the certificate, with perpetual succession and a common seal; and
2. (b) shall in its corporate name, subject to the Act and the conditions, limitations and exemptions in the certificate of registration, be capable of
—
1. (i) suing and being sued;
2. (ii) acquiring, holding, charging or disposing of movable or immovable

property; and

3. (iii) having and managing its own funds including borrowing and lending money; and
4. (iv) doing or performing such other things or acts necessary for the proper performance of its functions which may lawfully be done by
a body corporate.

(6) Upon registration of the community the persons elected as members of the Community Land Management Committee shall—
 1. (a) become the officers of the community;
2. (b) be responsible for management of any property of the community;
3. (c) exercise their powers on behalf and for the collective benefit of all the members of the community; and
4. (d) consult the community assembly on such exercise of their powers under paragraph (c).

(7) The community land management committee shall, on behalf of the community assembly, draft rules and regulations to govern the operations of
the community assembly which shall be adopted by the community assembly.

(8) The rules and regulations of a community shall provide, to the satisfaction of the Registrar, for all the matters specified in the Second Schedule.

(9) The content of rules and regulations may follow the model provided for in the Third Schedule.

(10) The community shall observe any conditions or limitations in the certificate of registration in so far as they are applicable to the community.

(11) The registrar may refuse to register a community if its application does not meet the requirements under these Regulations stating the reason for
the decision.

(12) A community that is not satisfied by the decision of the registrar may appeal to the Chief Land Registrar.

12. Identification of Unregistered Community Land

(1) Within eighteen months, from the commencement of these Regulations, every county government shall, in consultation with communities, prepare
and submit to the Cabinet Secretary an inventory of all unregistered community land within the county in Form CLA 6 set out in the Fifth Schedule.

(2) Upon receipt of the inventory submitted under paragraph (1) above, the Cabinet Secretary shall develop and publish in the Gazette a
comprehensive adjudication programme under section 8(1) of the Act.

(3) The Inventory shall contain the following details—

1. (a) the name of the community occupying the land or laying a claim on that land;
2. (b) locality of the land;
 3. (c) the description of the perimeter boundary;
4. (d) the current use of the land; and
5. (e) any other relevant information.

(4) If a county government does not submit the inventory within the period specified in paragraph (1), the Cabinet Secretary shall, in consultation with
the communities, prepare an adjudication programme based on the existing data on adjudication programmes.

(5) Upon the publication of the comprehensive adjudication programme, the Cabinet Secretary shall issue notice of intention to commence
demarcation, survey and registration of community land in Form CLA 7 set out in the Fifth Schedule.

(6) Any person with a claim on the land in the programme shall be required to appear in person to present their claim in Form CLA 8 set out in the
Fifth Schedule to the adjudication team for consideration.

(7) The decision of the adjudication team shall be communicated to the claimant in writing within thirty days from the date of determination.

(8) The adjudication team shall demarcate and survey the community land excluding public purpose plots and any other registered private land in
accordance with section 8(6) and (7) of the Act.

(9) Any dispute arising from the process of recognition and adjudication of community land shall be resolved in the first instance through the dispute
resolution mechanism provided by the Act and these regulations.

Goals of registration
The goals of registration of land in Kenya are as follows:

a. To provide legal proof of ownership

Registration of land provides legal proof of ownership, which is necessary for the transfer of land ownership and for obtaining financing.
b. To facilitate land transactions

Registration of land facilitates land transactions by providing a secure and efficient means of transferring ownership.

c. To promote security of tenure

Registration of land promotes security of tenure by protecting the rights of landowners and preventing fraudulent transactions.

d. To promote sustainable land use

Registration of land promotes sustainable land use by ensuring that land is used in accordance with the law and for its intended purpose.

TOPIC 2

Section 3(3)(a) + 3(3)(b) Law of Contract Act and Section 38(1)(a) + 38(1)(b) Land Act: a disposition of interest in land:

1. a) Must be in writing;
2. b) Must be signed by all parties; and
3. c) The signature of the signing parties is to be attested by a witness present when the contract is signed by such parties.

However, the aforesaid provisions do not apply to:

4. a) A contract made at a public auction;

5. b) Creation or operation of a resulting, implied or constructive trust;
6. c) A verbal contract to be reduced into writing within two hears from the date of the enactment of the Act
Section 44(1) LRA states that every instrument effecting any disposition under the Act shall be executed by each of the parties consenting to it, in
accordance with the provisions of this section. And this is by way of appending a person’s signature on the document or affixing the thumbprint (or
other personal mark) as evidence of personal acceptance of that instrument.

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—
to the leases, charges and other encumbrances and to the conditions and restrictions, if any, shown in the register; and
Overriding interest (S. 28 LRA)

3.2 PARTIES TO A TRANSACTION

PURCHASER- VENDOR, LESSEE- LESSOR, MORTGAGEE- MORTGAGOR,
In a conveyancing transaction in Kenya, there are several parties involved, including the purchaser, vendor, lessee, lessor, mortgagee, and mortgagor.
Each of these parties has specific roles and responsibilities in the transaction, and it is important to understand their respective positions and
obligations.

3.2.1 Purchaser-Vendor Relationship

The purchaser is the person or entity buying the property, while the vendor is the person or entity selling the property. In a conveyancing transaction,
the purchaser's solicitor will typically request for the property's title deed from the vendor's solicitor. The vendor's solicitor will then send the title deed
and other relevant documents to the purchaser's solicitor for verification. After the purchaser's solicitor has confirmed that the title is clean and the
property is legally transferable, the purchaser will make payment to the vendor, and the transfer of the property will take place.

3.2.2 Lessee-Lessor Relationship

In a lease agreement, the lessee is the person or entity leasing the property, while the lessor is the person or entity renting out the property. The lease
agreement outlines the terms and conditions of the lease, including the rent amount, duration of the lease, and other obligations of the parties. The
lessee is responsible for paying the rent and complying with the terms of the lease, while the lessor is responsible for maintaining the property in good
condition and ensuring that the lessee enjoys quiet and peaceful enjoyment of the property.

3.2.3 Mortgagee-Mortgagor Relationship

A mortgage is a loan secured against a property. The mortgagee is the lender providing the loan, while the mortgagor is the borrower receiving the
loan. In a mortgage agreement, the mortgagor transfers the legal ownership of the property to the mortgagee as security for the loan. The mortgagee
has the right to take possession of the property and sell it to recover the loan amount if the mortgagor fails to repay the loan as agreed. The mortgagor
is responsible for paying the loan amount, including interest, as agreed, and for maintaining the property in good condition.

Overall, understanding the roles and responsibilities of the various parties in a conveyancing transaction is crucial to ensure that the transaction is
conducted smoothly and legally. It is important to work with experienced and knowledgeable conveyancing solicitors to ensure that your interests are
protected throughout the transaction

PRE-CONTRACTUAL STAGE
A INITIAL Take instructions Identify parties Need for independent advice –
CLIENT S 34 Advocates Act: no What type of transaction Spouse (Barclays Bank v
B INTERVIEW unqualified person may take Conditions: O’brien)
Revocation
POWER Def: instrument by which a
person appoints another to act The POA must be: 1. Notice: issued to registrar in
OF for him, including dispositions 1. executed prescribed form with
ATTORNEY of land 2. attested intention to revoke (Form
3. verified LRA 8)
4. registered 2. Interested party may apply by
notice in writing that is has
been revoked
3. Automatic: death, insanity,
bankruptcy, performance,
Parties: Types: NB:expiry of time
principal (donor) and attorney 1. General (Form LRA 5) An unregistered POA does not
done 2. Specific (Form LRA 6) take effect
3. Irrevocable (Form LRA 7)
C OTHER NB: Donee
Estate Agent:must have capacity Land Valuer:
PROFESSION ● Identifies parties in a conveyance – ● Qualified under Valuers Act
ALS IN vendor, purchaser, lender ● Role is to value property at current market rate
● Must be registered under Estate Agent’s - Important if financed by bank
THE Physical Planner Architect
TRANSACTIO ● Qualified under Physical Planning Act ● Qualified under Architect and Quantity
● Control subdivisions and Surveyors Act
N ● Plan and design the project
Landdevelopments
Surveyors within local authorities Quantity Surveyor
● Qualified under the Surveyors Act ● Qualified under the Surveyors Act
● Determine the boundaries and markings ● Determine the quantities and costs of matters,
labor and time of development
D INVESTIGA Pre-Contract Enquiries Searches Requisitions
TION OF ● Preliminary issues 1. Historical Search ● Objections/queries after
● Touch on the physical ● At Land Registry to personal of documents
Reasons:
condition of the land establish history/ownership e.g. description of property
1. Caveat
● Vendor only under ● Shows all transactions that ● LSK Conditions 6.2 –
emptor
obligation to disclose patent have been done since made 14 days after delivery
2. Bona
defects = registration of title docs
● Importance of 2. Official/Postal Search ● If no objections – deemed
fide
Significance: physical ● Submitted to Local registrar to accept title
To identify : - inspection ● Conducts and issues
1. Encumbrance
- Valuers and surveyors certificate of official search
s - Look for patent and latent ● Reflect a true copy of

2. Who is
defects land register
the - Boundaries ● Govt liable in case of fraud

registered - Who is in actual occupation? 3. Personal Search

owner? NB: ensure good and marketable ● Inspect relevant register,

3. Title title parcel or deed file available

by Land Registry Staff
number may 4. Digital Search
● Via ecitizen platform
be ● Will help establish rightful
owner of property –
CONTRACTUAL STAGE
A REQUIREMENTS OF Must be in writing Execution and Attestation Drafts and Engrossment:
THE CONTRACT ● S 3 Law of Contract Act – ● S 38 LA – must be 1. Vendors advocate
contract for the sale of land executed and attested by prepares draft and send
must be written both parties to purchaser – include the
● All ingredients of a valid ● Sale agreement is word “DRAFT”
contract registered under RDA 2. Once approved, prepare
- Agreement only enforced of the legal document for
there is meeting of minds execution. It is then
engrossed
B PARTS OF SALE 1. Parties 5. LSK Conditions/ 9. Registration 13. interest rate
AGREEMENT 2. Recitals General conditions 10. General Conditions 14. Arbitration clause
3. Property/Nature of 6. Encumbrances 11. Vacant possession 15. Special conditions
interest 7. Completion date 12. Breach clause NB: Execution and
4. Purchase Price 8. Registration - Notice - 21 days Attestation
- Forfeiture of
deposit
C DEPOSITS Def: payment of purchaser before execution of K ● Payment ordinarily made to vendors
- Part of agreed purchase price advocate or estate agent
● LSK Condition 5 implied term: 10% of purchase ● LSK = payment made by bankers’
price (does not include movables, livestock chattels draft or cheque
etc.) ● Where > 1 million – should be made by
● Amount may be varied but not below 10% RTGS NB: non payment repudiates contract.
Nature of Deposits: Capacity of the holder
1. Security for competition: binds purchaser – ● LSK Condition 5 – estate agent or
removes fear of forfeiture + motive for advocate holds as stakeholder.
completion. - Agreement may provide it is advocate for
2. Non-payment of deposit = fundamental breach. vendor
Vendor may rescind contract upon notice ● As agent - hold deposit for vendor
3. Counts as part of purchase price – on (whether acting for either party) – upon
completion, purchasers advocate should release vendors demand – must release to him
deposit (unless agreement states otherwise)
4. Advocate may hold deposit as (i) stakeholder ● A stakeholder - hold for both parties in
or (ii) agent trust:
- Pay vendor if sale completed
- Pay vendor if purchaser defaults
- Return to purchaser if vendor
defaults NB: liable to pay if funds
mishandled.
Amount = client account – neither have
claim on interest unless in contract
Forfeiture: LSK Condition 4 Importance
● If breach of contract/unable to complete = 1. Security for completion
deposit forfeited to vendor (even if held as 2. Reduces burden of paying full purchase
stakeholder) price
● Vendor discharged by may opt for specific 3. Symbiotic relationship with vendor
performance (deposit would count) 4. Purchaser has right over lien of
property – enforceable in court
D COMPLETION What is completion? Transfer of interest in property “Time is of the Essence” clause = completion
in exchange for consideration date must be strictly adhered to
- Vendor: gives purchaser all registrable ● Failure = fundamental breach and
docs + possession burdened party may rescind contract or
- Purchaser: completely by paying balance of specific performance
purchase price ● If not stated, time becomes of the
essence once a completion notice is
given – 21 days (LSK Condition 4)

Date & Place of Completion Completion Notice – shall include:

● Can be expressly provided for in contract 1. Outline breach
● Where silent - should be a reasonable period. 2. Demand rectification within notice period
LSK Condition 2: where not provided 42 days 3. Time for performance (21 days)
after date of contract 4. Further default = rescind upon expiry of
 DUTIES OF THE
ADVOCATES VENDORS
ADVOCATE
STEP 1 ● Take instructions
● Confirm for conflict of interest (Kaplan & Stratton Advocates v Kings Woolen Mills)
● Payment
- Discuss advocate frees
- Pay the capital gains tax (5% of net profit)
STEP 2 ● Request for a copy of the title deed and the vendors ID.
● Carry out the searches
- Land registry out a search it will show you the owner, size of land and encumbrances).
- Registration of persons bureau - confirm the identity of the vendor.
STEP 3 ● Draft an appointment letter informing all the other parties including the purchaser that you are now
acting on behalf of the vendor.
● The appointment letter will lead the purchaser to ask you pre contract enquiries if any.
● Pre contract enquiries touch on the patent and latent defects of the land.
- Patent is on the face of it, latent is what you can see.
STEP 4 ● Draft a sale agreement and explain to the vendor.
● Send a copy of the sale agreement accompanied by a copy of the title deed and a copy of the vendor's
ID to the purchaser's advocate.
● Answer requisitions if any. These are questions strictly touching on title deeds.
● Receive an executed sale agreement from the purchaser's advocate together with the deposit.
- Remind the vendor that he now owes a duty of care to the purchasers as they have committed
themselves. (Maintain the status quo of the land.)
● Ask the vendor to deposit completion documents with you. Completion documents
o Original title deed
o Copy of ID/ Certificate of Incorporation of a Company
o KRA pin
o Rent and rates clearance certificate
o 3 passport size photos
o Consents if any are required e.g. spousal consent.
o Stamp duty valuation form.
STEP 5 ● Have the vendor execute the sale agreement and send it back to the purchaser's advocate.
● You will then receive a transferred document from the purchaser advocate for your perusal and
engrossment (stamp) and send it back.
NB - no party executes the transfer document at this point this is only done when the full payment has been
made.
STEP 6 Completion Notice
● prepare completed notice informing the purchaser you are ready with the completion documents to
complete the transaction
STEP 7 Completion Day
● The completion venue is at the vendors advocate chambers in which you will receive the balance of the
purchased price.
● Then have the vendor sign the transfer document and hand it over together with the completion
documents to the purchaser’s advocates.
STEP 8 With the vendors consent
- pay any money due to the transaction eg valuers, estate agents etc
- You will pay yourself the agreed amount.
 ● Hand over the balance to the vendor and remind him to pay CGT.

PURCHASERS ADVOCATE
A. WHERE THE PURCHASER HAS THE FULL B. WHERE THE PURCHASER IS C. PURCHASE OF CHARGED
AMOUNT BEING FINANCED LAND
STEP 1 ● Take instructions
● Confirm for conflict of interest
(Kaplan & Stratton Advocates v Kings
Woolen Mills)
● Payment
- Discuss advocate frees
- Pay the necessary stamp duty (2%
rural area, 4% urban area)
STEP 2 ● Draft appointment notice notifying all
parties you will be acting on behalf of
the vendor
● Draft any pre contract enquiries
STEP 3 ● Receive a copy of the sale agreement +
copy of the certificate of title/lease +
vendors ID/cert of incorporation
● With docs provided - conduct searches
- Land registry
- Bureau of persons
- Companies’ registry
● Forward any requestions to
vendors advocates
STEP 4 ● If satisfied with answer to requisitions –
instruct purchaser to execute the sale
agreement + pay the deposit (10%)
● send executed sale agreement +
deposit slip to the vendors advocate –
remind them that they owe you a duty
to care to hold it in trust
STEP 5 ● draft the transfer document + sent Draft a PU and issue to vendors Financier’s advocate will draft 2
it to vendors advocate for approval advocate – request release of PU’S
● in exchange you will receive the completion docs for purchaser to 1. one PU to the charge holder
executed sale agreement by the vendor register transfer + charge in (the other bank) requesting
favour of bank to which the
vendor will receive payment for completion documents
and a discharge so as to
enable the register the
transfer in favour of the
purchaser/borrower and a
charge in favour of the
financier after which will the
charge holder will receive
whatever amount is due to
them.
2. The financiers advocate will
draft a second PU and send it
to the vendor/owner of the
EP 6 Completion Notice After registering the transfer + After registering the transfer +
● prepare completed notice informing charge, draft a bank report charge, draft a bank report
informing bank that a transfer informing bank that a transfer
the vendor you are ready with the has been registered in favour of has been registered in favour of
balance of the purchase price to the purchase and they may now the purchase and they may now
complete the transaction release the money release the money

EP 7 Completion Day ● After money has been ● After money has been
● having paid the balance of the
released to the vendor’s released to the vendor’s
purchase price – take deposit slip to
chambers of the vendors advocate advocate, your request for advocate, your request for
● Receive executed transfer document discharge from the discharge from the
+ all completion documents professional undertaking. professional undertaking.
● Request for your payment Request for your payment
EP 8 Registration of the transfer
● Purchasers’ advocate’s duty to
register the transfer
● Will do so by paying stamp duty
indicated in the valuation form
● Lodge completiondocuments with
the Registrar for registration
● Ask for advocate fees after registration

NB: Confirm registration

B. Two weeks after registration – look in
the Registry to see whether title reads
client’s name
C. If not, lodge a complaint

CAN AN ADVOCATE ACT FOR BOTH PARTIES?

ENER ● one should avoid acting for both vendor and purchaser where there is a conflict of interest or where such a confli
L is likely to arise.
ULE NB: both parties must consent to the advocate acting for both
UTHROI King Woollen Mills & Another vs Kaplan & Stratton Advocates
Y ● the law firm had acted for both the borrower and the lender in a borrowing transaction,
- prepared all the relevant documents including the security documents.
- borrower defaulted on payment and the question of the validity of the security documents arose.
- Kaplan purported to enforce the said security and the appellant sought a grant of injunction to stop the firm
● Held: CA stated that since kaplan was aware that there was likely to arise a conflict between the lender and th
borrower and since having acted for both parties they were in a position to be privy to information pertaining
the appellants case they could not purport to enforce the said securities to the prejudice of the appellants
POWER OF ATTORNEYS
This is an authority in writing by which one person (donor/ prinicipal) 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 of Attorney
and could be irrevocable or revocable. Ordinarily it is irrevocable when there is some interest
conveyed or granted to the decree. The donee can use the authority to do only what he is authorized
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 mandatory form to be used in donating the authority which
form must be executed and the execution verified
Power of attorney may be revoked through the following ways:

a) By the donor executing a revocation

b) By performance of the act it was created to perform

c) Expiry of time

d) Operation of the law e.g. when the principal becomes a bankrupt, his power of
attorney in relation to property or rights of which he was divested by the
bankruptcy, is revoked by operation of law.

The Execution of Powers of Attorney

Section 48 of the Land Registration Act No. 3 of 2012 makes provisions for powers of attorney.
Pursuant to this section, an instrument dealing with an interest in land shall not be accepted for
registration where it is signed by an agent (other than the registered proprietor) without a power of
attorney. The original of such power of attorney must be filed. In the event that one wish to file a copy
of the power of attorney then it must be with the consent of the Registrar and the copy must duly be
certified by him.
However, an instrument may still be registered when signed by an agent without a power of
attorney in certain circumstances. These are:
a) Under section 48(3) of the Land Registration Act, the guardian of a person
under a legal incapacity or, if there is no such guardian, a person appointed under
some written law is allowed to generally represent that person for purposes of the
Act without necessarily obtaining a power of attorney, by way of an application
for the same.
 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.

N/B READ ON HOW TO DRAFT A SALE AGREEMENT

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

 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.

BRIDGING OF COMPETING INTERESTS

PUs involve arrangements for settlement such as

 Payment of purchase monies
 Loan funds
 Discharge of obligations
 Accounting to the other party for documents in returns
An undertaking by an advocate is subject to supervision by the Court, the breach of which
amounts to professional misconduct which is enforceable in Court for breach of contract.
Professional Undertakings are based on mutual trust. The concept of implied undertakings as
known in common law also applies
e.g. to return documents held should registration fail. Care should be taken in responding to
requisitions such that sufficient particulars of the specific charges or mortgages the subject of a
PU should be given
e.g. avoid statements like “an undertaking will be given as to how outstanding mortgages will be
dealt with”- what if some mortgage not the identified before emerges after a search?

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. Gichana Bw’omwando t/a Gichana Bw’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”
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’a Muiruri 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 Muguku Muriu 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. Njagi Waweru& Co. Adv. HCC No. 209 of 2008- Justice Njagi
refused the Advocates’ arguments that he was entitled to a lien over the funds
PRINCIPLES
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.
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.
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.
Undertakings can be given even to lay persons. (See KCB Limited vs. Adala 1983 KLR 467)

Failure by an Advocate to honour the terms of a professional undertaking is a prima facie evidence of
professional misconduct. Consequently, the Society will require its implementation as a matter of
conduct.
2.1The Society has no power to order payment of compensation or to procure the specified
performance of an undertaking if an Advocate declines to implement it. The Society will proceed by
way of disciplinary action for failure to honour the undertaking.
The Society will require an undertaking to be honoured by Advocates for so long as their names remain
on the roll and regardless of whether they hold current practicing certificates or not.
The Society has no power to order the release of an Advocate from the terms of an undertaking. This is
a matter for the court, or the person entitled to the benefit of the undertaking.

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.
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 Otieno Vs AGN Kamau & Co 134/03
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.

An ambiguous undertaking is generally construed in favour of the recipient.

Wording of the undertaking is very important. It has to be clear.
In interpreting an undertaking the court will not invite extraneous evidence or terms implied.

An undertaking does not have to constitute a legal contract to be enforceable in conduct.

No consideration is necessary for an undertaking to be enforceable in conduct.

An undertaking is still binding even if it is to do something outside the Advocate’s contro

. Before giving an undertaking an Advocate must carefully consider whether it will be possible to
implement it. It is no defence to a complaint of professional misconduct that the undertaking was to do
something outside the Advocate’s control

An Advocate is responsible for honouring an undertaking given by a member of the Advocate’s staff,
whether admitted to the Roll of Advocates or not.
Where an assistant gives an undertaking, the conduct of the assistant may also be called into question
by the Society.

Where an Advocate in partnership gives an undertaking as an Advocate in the course of practice, all
partners are responsible for its performance.
A partner remains responsible for the firm’s undertakings even after that Advocate leaves the firm or
the partnership is dissolved.

An Advocate cannot avoid liability on an undertaking by pleading that to honour it would be a breach
of duty owed to the client.
Since an Advocate will be personally bound to honour his undertakings, it is essential for the
Advocate’s protection that the client’s authority to do so is given before the undertaking is furnished.
See the case of Kenya Reinsurance Corp. –vs- V. E. Muguku& Co. Advocates (1995-98) 1 EA 107.

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.

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.
An undertaking should not be given by an Advocate as an inducement to a client to secure that client’s
business.

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.
Self explanatory.
Illegal undertakings intended for example to perpetrate a fraud should not be sought or given.

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 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 t

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.

CONTENTS OF A SALE AGREEMENT

Parties: the parties to the contract must be properly identified and their addresses must be clearly noted.
The address is crucial in the event that there will be need to issue a notice to either party

Particulars: this includes information such as:

1. The physical and legal description of the property;

2. Any encumbrances over the property (and an indication as to who will discharge the same);
 3. Any fixtures and/or fittings on the property; and
4. The consideration (purchase price) for the property

Special conditions; these are sui generis/peculiar/specific terms, such as:

1. Capacity of the vendor;

2. Payment of the deposit;
3. Payment of balance and interest on unpaid purchase price;
4. Payment for chattels/fixtures/fittings;
5. Possession before execution or completion;
6. Time and schedule within which matters affecting the title must be dealt with;
7. Date of completion;
8. Remedies in the event of default;
9. Any exceptions and/or reservations;
10. The risk and liability for insurance pending completion;
11. The power of the vendor to rescind the contract;
12. The power of either party to serve a completion notice; and
13. Any situation where the sale has been made subject to a mortgage, consents, LSK Conditions
for Sale, etc.

General conditions: these apply generally to the open contract and include implied terms developed
over time (from common law, equity and conveyancing practice), Section 55 of the ITPA (repealed),
LSK Conditions of Sale, etc. These general conditions cover issues on:

1. Rescission;
2. Preparation and content of transfer;
3. Possession and grant;
4. Deposit and forfeiture;
5. Notices and completion

Execution: affixing of one’s mark on the document. This can be by way of signature, thumb print, duly
appointed attorney, common seal of a company, etc. The purpose is to state the capacity in which the
parties are executing the document

COMPLETION DOCUMENTS

 Original Title documents;

 Transfer duly signed and executed;
 Land Rent Clearance Certificate + Original Land Rent payment receipts (for leasehold titles
only);
 Land Rates Clearance Certificate + Original Land Rate payment receipts (for municipal/urban
properties of both a leasehold and freehold nature, provided a local government authority has
levied land rates on the property)
 Copy of Capital Gains Tax (‘CGT’) Payment confirmation + CGT Slip;
 Relevant consents applicable to the transfer, including:

1. Consent of the Commissioner of Lands over leasehold interests;

2. Consent of the Land Control Board for agricultural land obtained in pursuance of the
Land Control Act;
3. Consent of any chargee or mortgagee having an interest in or over the property;
 4. Consent of any statutory authority necessary (e.g. KPC, KAA, KCAA, etc.);

 Notice of withdrawal of a caveat or caution (if there were any third parties with an interest in
the property)
 Copy of the ID’s, PIN Certificates and Certificate of Incorporation (if a company) of both the
parties;
 Copies of 3 coloured photographs of the parties (or the Directors of the company, where
applicable)
1. SALE AND PURCHASE THROUGH AUCTION
 An auction is a sale in public to the highest bidder at the fall of the hammer – it is considered a ‘hostile
purchase’
 Auctions could be public or private in nature  at a private auction, only a limited group of people
are invited to buy the property, whereas public auctions are open to everyone and are generally
advertised in the newspaper
 Auctions are ordinarily the result of:
o Execution of a court order (i.e. a decree for sale by auction); or
o Through exercise of a statutory power of sale (Section 96, Land Act)
 Section 3, Law of Contract Act does not apply to sales by way of auction since the contract is formed
at the fall of the hammer. However, 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 does
not meet the reserve price)  the reserve price is the value of the property as at the time of the
auction
 In auction sales, the seller is under a duty to act in utmost good faith. If he/she sells the property at a
value other than the mortgage debt, he/she must account to the mortgagor
 The auctioneer is also at liberty to reject a bid that does not meet the reserve price, and in situations
where no bids meet the reserve price, the entire auction is withdrawn
 The terms of the auction sale are – in most cases – pre-set:
o For instance, the auctioneers would have already determined they amount they want to raise
and there are no negotiations around the same
o In situations where the property is being sold pursuant to a court decree, the court will set the
terms, e.g. provision of the reserve terms
 People able to bid at auctions include: the chargee and their agents, the owners of the property, and
any other person desirous of owning the property  Sections 11 and 12, Restrictive Trade Practices
and Monopolies Act prohibits bid rigging
 Under the Auctioneers Act (Cap. 526):
o Auctioneers must be licensed by the Auctioneers Board to conduct an auction sale;
o The auctioneer must hold a valid practicing certificate;
o The place, date and time of the auction must be advertised in the local newspaper (for public
auctions, auctions of immovable property, etc.)
o The sale must take place as advertised, unless the same is cancelled by notice
o The presence of a reserve price, if any, must be indicated in the advert
 1.1 PROCEDURE FOR AUCTION (LAND ACT, 2012)
1) Issuance of a demand under Section 56, LRA
o The demand is for a duration of 3 months (cannot proceed without this period lapsing)
o The demand is issued only when the repayment date has not been specified in the Charge
instrument OR demand has not been made on the repayment date  if you have done either
of these 2 things, you are permitted to skip the first step of issuing a demand
o See: Bamboo Tree Holdings v NBK [2019] eKLR
2) Issuance of Statutory Notice under Section 90, Land
Act
o This is a 90-day notice for situations where there is breach of a monetary obligation by the
Chargor/Borrower
o However, this becomes a 60-day notice for situations where there is breach of a non-
monetary obligation by the Chargor/Borrower (e.g. failing to perform covenants under the
contract)
o The notice is to explain: the nature and extent of the breach, how to remedy the breach, by
when the breach should be remedied (i.e. either 60 or 90 days)
o The notice should also contain information on:
i. The Chargor’s right to seek relief from court as against the Chargee/Borrower
ii. The consequences of failing to remedy the breach (i.e. right to exercise statutory power
of sale)
3) Issuance of Notice of Intention to Sell under Section 96, Land Act

o While the notice under Section 90 calls for the repayment of the outstanding amount only,
the notice under Section 96 calls for the entire loan unpaid, i.e. the principal amount +
interest accrued thereon + bank charges
o This is a 40-day notice containing the same details as the Section 90 notice
o Remember: the notices should always inform the Chargor of their right to seek relief from the
court as against the Chargee/Borrower
o See: Albert Mario Cordiero v Vishram Shamji [2015] eKLR
4) Issuance of an Auctioneers Notice under Rule 15, Auctioneers Rules 1997
o Upon expiry of the 45-day notice, the auctioneer should advertise the intended auction
o The 45-day notice is applicable only to immovable property; a 7-day notice is applicable to
movable property that is not perishable; and, a 72-hour notice is applicable to movable
property and livestock
 2.1.1 CONTENTS OF AN AUCTION ADVERTISEMENT
 Rule 16, Auctioneers Rules 1997 dictate that an advertisement by an auctioneer shall, in addition to
any other matter required by the court, contain:
i. The date, time and place of the proposed sale;
ii. The conditions of sale or where they may be obtained;
iii. The time for viewing the property to be sold;
iv. In respect of movable property other than perishable goods and livestock: an accurate
description of the goods to be sold and a statement as to whether or not they are to be sold
subject to a reserve price;
v. In respect of goods of a perishable nature or livestock: an accurate description of the goods to
be sold and of their condition and a statement as to whether or not they are to be sold subject
to a reserve price;
vi. In case of immovable property: all the information required to be contained in the court
warrant or letter of instruction, except the amount to be recovered and the exact amount of
any reserve price
 Advertisements by auctioneers shall be by way of advertisement in a newspaper. However, in the
case of perishable goods and livestock, this requirement may be dispensed with if adequate notice to
all prospective bidders can be reached through another means of communication (e.g. radio or
television)

1.2 DIFFERENCE BETWEEN AUCTION SALES AND OTHER LAND SALES

(i) Potential buyers are required to pay a deposit of more than 10% before the auction
(ii) Interested buyers are given 15 days to pay the auction price of the property after the fall of the
hammer  if they fail, the property is offered to the next highest bidder
(iii) The minimum price offered at an auction is the forced sale value or the reserve price

1.3 DUTIES OF ADVOCATES IN AN AUCTION SALE

1.3.1 DUTIES OF ADVOCATE FOR PROSPECTIVE PURCHASER
 Conduct a search (‘caveat emptor’) – Most auctioneers are quite secretive and so the advocate is
tasked with raising the relevant requisitions and inquisitions discovered from the search
 Conduct enquiries on whether there are any pending matters in court involving the property to be
bought
 Engage a surveyor to advise you on the property (and advise the client on the need for this)
  Advise the client on the requirement to pay 30% - 40% of the purchase price at the fall of the
hammer, and that the balance is to be paid within 60 – 90 days (this is important as the risk of
forfeiture of deposit is higher than 10%)
 Engage a valuer to decipher to proper/real value of the property

1.3.2 DUTIES OF ADVOCATE FOR PROSPECTIVE VENDOR

 Act in good faith by ensuring that the property fetches the best price
 Ensure proper procedures are followed once the bid is accepted
 After receiving 30% - 40% of the purchase price, ensure the appropriate documents are put in order

1.4 ADVANTAGES AND DISADVANTAGES OF AUCTIONS

 The property is acquired with all its defects
 Time is short, making it difficult to conduct extensive due diligence
 The property might end up locked in court due to disputes between the Chargor and Chargee

 Bad root of the title can be disposed off

 There are too many interested parties involved since the sale is publicised
 Auctioning properties is costly (auctioneers fee, advertising costs, taxes, bank charges, etc.)
 The price the property is sold at does not indicate its true market value
 The procedure is embarrassing to the individual whose property is being auctioneers

2. SALE OF A PROPERTY OFF-PLAN (DEVELOPMENTAL CONVEYANCING)

 This is a purchase with no actual structure to buy  it is essentially basing a purchase on a plan for the
structure
 The types of properties that can be the subject of such a sale include: houses, flats, apartments,
duplexes, etc.
 The vendor normally gives the purchaser a letter of offer (prepared by the vendor’s advocate) and
requires the purchaser
to pay a non-refundable commitment fee (Note: the commitment fee is not the deposit)
 The sale is usually by way of a lease, i.e. an Agreement for Lease, with the head lessor being the
Management Company (in which the purchaser is a shareholder, and so also enters into a Share
Purchase Agreement)
 The interest sold, as indicated above, is ordinarily a leasehold interest and the reversionary interest
reverts back to the Management Company at the end of the lease period. It is the Management
 Company that is tasked with applying for an extension of the head lease when the same expires
 It is important to ensure that there is compliance by all parties with the completion date and other
contractual obligations
 ordinarily, the vendor may even be using the deposits to fund (part of the) construction costs
 The ‘defects liability’ period is ordinarily 6 months after completion, during which time the vendor
will bear the costs of any defects/damages/short-comings in the property that need to be remedied
 A Certificate of Occupation must be issued before the property can be inhabited. This is ordinarily
issued by the local authority, confirming compliance with local developmental standards  in most
situations, the completion date will be pegged to the Certificate of Occupation, e.g. “Completion
date means 30 days after issuance of a Certificate of Occupation”
 The purchaser must ensure that there are well-drafted warranties and indemnities clauses to rely on
 The advantages of an off-plan development include the fact that it is ordinarily a lower purchase
price for the buyer, and the seller is able to use the deposits to fund the construction work

2.1 PROCEDURE WITH MANAGEMENT COMPANY

(i) Take the parcel of land + construct a block of flats (i.e. the 'estate') on the same  Sale of these flats
will be based off the architectural plans and floor plans of the building
(ii) Incorporate a Management Company for the entire estate
(iii) Each individual purchaser seeking to buy one unit in the estate, will also purchase one share in the
Management Company (therefore it is necessary to execute SPAs and ensure that each purchaser has
a Share Certificate)
(iv) Transfer the reversionary interest to the Management Company, so that this Company may apply for
an extension of the head lease when the same expires
o Remember: the interest sold in a block of flats is a sub-lease with the lessee being the
Management Company and the head lessor being the Government (in leasehold properties)
o Where the leasehold interest is more than 25 years in duration, the Government issues the
purchaser with a Certificate of Lease

2.2 AGREEMENT FOR LEASE

 The sale agreement in this situation differs from an ordinary Agreement for Sale  in a block of
apartments, the purchaser normally enters into an Agreement for Lease (or sub-lease)
 It is important that this Agreement contains an easy exit clause for the purchaser in situations where
the structure is not aligned with what was promised in the plans
 The Agreement must also contain a defect-liability clause to cover situations where the purchaser
finds a defect in the property (during a defined period of time, e.g. the first 6 months) – such a clause
 places the financial obligation of repairing the defect on the vendor
 The Agreement must have a defined completion date which is ordinarily triggered once the
Certificate of Occupation is issued
 The Agreement must also state clearly the date on which the reversionary interest is to be transferred

2.3 DUTIES OF ADVOCATES IN OFF PLAN SALE

2.3.1 DUTIES OF PURCHASER’S ADVOCATE
 Conduct an investigation of Title
 Obtain the site plan so as to ascertain/identify the sub-divisions and check to see whether this differs
with the Registry <ap where the legal sub-divisions are marked

2.3.2 DUTIES OF VENDOR’S ADVOCATE

 Obtain planning permission and ensure compliance with the building codes
 Obtain a Certificate of Practical Completion
 Follow up on issuance of the Certificate of Occupation so as to close in on completion date

3. SALE OF A PROPERTY THROUGH SURVEY AND SUBDIVISION (SECTION 22, 42 LRA)

 Sale of a property through a sub-division (or an amalgamation) is similar to a conventional sale
agreement, however, it is in addition also governed by Section 42 and 22 LRA
o Section 22 LRA: subject to authentication of the cadastral map, the Registrar may:
 If contiguous parcels are owned by the same proprietor and are subject in all respects
to the same rights and obligations, combine these parcels by closing the registers
relating to them and opening a new register or registers in respect of the parcel or
parcels resulting from the combination, OR
 Authorise the division of one parcel into two or more parcels, by closing the register
relating to the parcel and opening new registers in respect of the new parcels resulting
from the division, and recording in the new register all subsisting entries appearing in
the closed register
o Section 42 LRA: no part of any land shall be transferred unless the registered proprietor has
first subdivided (or amalgamated) the land and registered each new subdivision (or
amalgamation)
 Therefore, in the case of a subdivision, the old register for the portion of land is closed and two new
ones opened. A new map is also drawn to show the two new parcels formed
  The Agreement for Sale for a sale by way of subdivision will differ from an ordinary Agreement for
Sale in the following respects:
i. There will be a sketch map annexed to the agreement to show the specific portion being sold;
ii. The cover page will read “Sale of a portion of Land Reference No. 1234/56”
iii. The agreement will state who bears the costs for and associated with the subdivision of the
property
iv. Completion date will not be the ordinary ’90 days’ as the time taken to effect the subdivision
will need to be
accounted for. E.g. completion may be “30 days after finalisation of the subdivision”

4. SALE AND PURCHASE THROUGH A CO-OPERATIVE SOCIETY OR LAND BUYING COMPANY

Example of situation covered: Company X owns 50 acres of land. This company sells shares in 1-acre plots, i.e.
1 acre = Kshs. 50,000/= = 1 share in Company X. In the event you want to sell your interest, you sell your shares
in the Company and do not sell the land. In the event that Company X is wound up, all the property of the
Company will be sold – including acres of land. The creditors of the Company will be paid first, after which the
shareholders can split what is left. However, being a shareholder, your right to the 1 acre extinguishes as soon as
the company goes insolvent/is wound up

 This shows that purchase of property through a Co-operative Society is an investment (you will not
be given Title to the land), and even though you are allowed to use the land for a duration of time,
you cannot offer the same as security (e.g. when taking a loan)
 In these situations, an acquisition agreement for the shares is required and a share certificate is issued
entitling one to own a property (in addition to the ordinary completion documents), and so a Share
Transfer Form should be executed
 It is prudent for the purchaser’s advocate to conduct a search/thorough investigation of the Co-
operative Society’s affairs, including its actual and contingent liabilities

5. PURCHASE OF COMMERCIAL PROPERTY FOR DEVELOPMENT

 In these situations, acquisition of Change of User should be a condition (precedent) in the agreement
 The purchaser’s advocate must scrutinize local development plans and ensure that their client‘s
development plan has been approved
 When purchasing commercial premises, it is important to look out for things such as protected
tenants (and to get vacant possession where and when possible)
  Areas in Nairobi are normally allocated uses: Residential (Karen); Industrial use (Industrial area);
Commercial use (CBD, Upper Hill); Agricultural use (Kiambu), etc.

5.1 CHANGE OF USER

 The power to control land use and development in Kenya is vested in the County Governments
 Therefore, the owner/legal entity wishing to develop his/her land for any purpose other than that
earmarked on the approved Master Plan/Title Deed, will make an application – along with the
relevant documents – to the respective County Government’s Department of Physical Planning for
consideration through a registered physical planner
 E.g. where the Title Deed says that the property has been allocated a use of ‘single dwelling house,
with one guest house’, yet the property has been purchased with the intention of demolishing the
existing structure and putting up a commercial property, a change of user is required (and is normally
a condition precedent, to be obtained by the vendor)

6.1.1 PROCEDURE TO APPLY FOR CHANGE OF USER

(i) Placing an advertisement in the local newspaper to obtain recommendations from members if the
public and line ministries (which are obtained by the County Government)
(ii) The investor, through a registered Physical Planner, will make an application for change of user by
filling out a PPA1 Form (which must be duly signed by the Physical Planner). The application is
often combined with an application for a construction permit.
(iii) The Physical Planner and the investor will then publish public notices regarding the proposed change
of user in two daily newspapers, inviting objections from the public within a period of not less than
fourteen (14) days. A site notice will also be placed on the site indicating the intention to change its
use within the same duration
(iv) A planning brief/planning report is then prepared by the Physical Planner
o The process of preparing and implementing a planning brief/planning report provides a
framework for collecting information about a site, as well as investigating and evaluating
different interests in it
o The planning brief will explain why the Change of User is in line with local policies and why
it will not have any negative impact on the land or neighbouring properties
(v) The requisite fee will be paid to the respective County Government and the receipt will be annexed
to the planning brief prepared by the Physical Planner
(vi) The brief will then be submitted to the County Government’s Department of Physical Planning for
approval
(vii) The County Government then receives submissions from the general public on any oppositions to the
 Change of User – this process could take up to 14 working days
(viii) The County Government will then review the Change of User proposal/brief with the public
objections received (if any) and will pass a resolution, recording reasons, regarding its consideration
or non-consideration for the change. This process takes a minimum of 20 days and could be
extended, depending on the requirements the County Government places
(ix) The Department of Physical Planning shall, if it finds that the changes sought are relevant to
planning principles and are in the public interest/not in contravention of any statute, give permission
for the same by issuing a PPA2 Form

In summary, the requirements for a Change of User application are:

i. Two duly filed PPA1 Forms in triplicate, submitted and signed by a Registered Physical Planner;
ii. Planning brief, prepared and signed, by a Registered Physical Planner;
iii. Ownership documents, i.e. the Title Deed;
iv. Comprehensive location plans;
v. Advertisement of the proposal in two local daily newspapers and on site;
vi. Application fee and the receipt of the same; and
vii. The latest rates payments receipts.

6. SALE AND PURCHASE OF A LEASED BUILDING (E.G. TENANT OFFICE BLOCK)

 When acting for the purchaser in this situation, ensure the following:
o To conduct all pre-contract investigations in order to ascertain the existence of any covenants
and conditions in the lease
o That the assignment of lease has been consented to by the Lessor (this should be made a
condition (precedent) in the agreement due to its importance)
o If a Change of User is required, the same should be obtained by the Lessor
o Ensure the requisite planning permissions are obtained
 When acting for the vendor, ensure that there is a guarantee that the tenants will comply with the
conditions of the lease

7. FRACTIONAL SALE AND TIME SHARES

 FRACTIONAL OWNERSHIP: Fractional ownership is a method in which several unrelated parties
can share in, and mitigate the risk of, ownership of a high-value tangible asset, usually a jet, yacht or
piece of resort real estate
 o It can be done for strictly monetary reasons, but typically there is some amount of personal
access involved
o One of the main motivators for a fractional purchase is the ability to share the costs of
maintaining an asset that will not be used full-time by one owner
 TIME SHARE: A timeshare (sometimes called vacation ownership) is a property with a divided
form of ownership or use rights
o These properties are typically resort condominium units, in which multiple parties hold rights
to use the property, and each owner of the same accommodation is allotted their period of
time
o The minimum purchase is a one-week ownership, and the high-season weeks demand higher
prices
o Units may be sold as a partial ownership, lease, or "right to use", in which case the latter
holds no claim to ownership of the property  The ownership of timeshare programs is
varied, and has been changing over the decades
 These methods of sale apply to luxurious (holiday) homes, and Kenyan companies have started
offering this method of ownership in recent years, i.e. where a number of people (not known to one
another) come to buy one very expensive (holiday) home for use at different times of the year, and
the amount they pay depends on what time of the year they are allowed to use/access to the property
.
8. PROTECTED TENANCIES/CONTROLLED TENANCY
 This is a lease agreement governed by the Landlord and Tenants (Shops, Hotels and Catering
Establishments) Act and is ordinarily for hotels or shops with a lease term of less than 5 years
 Such agreements cannot be entered into between a local authority and any other body
 When seeking to increase the rent for controlled tenants, the landlord must show an increase in the
market value of the property in the area
 Section 4(2) of the Act governs the procedure for terminating or altering a controlled tenancy:
(i) A notice is to be given to the tenant, in that regard, of not less than 2 months. Such notice
should be in the prescribed form and should be stamped by the Tribunal;

(ii) The tenant may agree to the termination/variation or may not agree;
(iii) If the agreement prescribes a notice period of higher than 2 months, then that notice period in
the agreement takes precedence and must be adhered to;
(iv) The notice must state the grounds for termination/alteration/reassessment;
(v) The notice may be served on the tenant, an adult member of the tenant’s family, or any other
servant employer in the premises concerned
 9.1 GROUNDS FOR EVICTION IN CONTROLLED TENANCY
 These grounds are contained under Section 7 of the Landlord and Tenants Act and are as follows:
(i) Where the tenant has failed to comply with their obligations in respect of repair and maintenance
of the premises;
(ii) Where the tenant has defaulted in rent payments for two months or consistently delays rent
payments;
(iii) Where the tenant has committed other substantial breaches of his obligations under the tenancy
(iv) Where the landlord has offered and is willing to provide/secure the provision of alternative
accommodation for the tenant, which terms are reasonable having regard to the terms of the
tenancy and all other relevant circumstances;
(v) Where the landlord intends to demolish or reconstruct the premises comprised in the tenancy
or a substantial part thereof, or to carry out substantial work of construction on such premises
or part thereof, and cannot do so without obtaining possession of such premises; or Where the
landlord, on the termination of the tenancy, himself intends to occupy – for a period of not
less than one year – the premises comprised in the tenancy for the purposes of a business to
be carried on by him.

POWER OF ATTORNEY

 There are three types of power of attorney:

i. General Power of Attorney (Form LRA5)
ii. Specific Power of Attorney (Form LRA6)
iii. Irrevocable Power of Attorney (Form LRA7) – ordinarily where there is some interest
conveyed or granted to the donee
 1. REVOCATION OF POWER OF ATTORNEY
 Section 116(3) RLA: a power of attorney may be revoked by the donor at any time, and this is done
by the donor issuing a notice in the prescribed form to the Registrar, indicating his intention to
revoke the power of attorney
 Such a revocation must be entered in the register of powers of attorney, noted upon the power, and
the notice should be filed in the file of powers of attorney
 Section 116(4) RLA: an interested party may give notice in writing to the Registrar that a power of
attorney which was registered has been revoked by death, bankruptcy or disability of the donor, or
the death or disability of the donee
o Such a notice must be accompanied by such evidence as the Registrar may require
o Here too, the revocation must be entered in the register of powers of attorney, noted upon the
power, and the notice should be filed in the file of powers of attorney
 Section 116(5) RLA: a power of attorney given for valuable consideration is irrevocable during any
time which the terms thereof state that it is irrevocable
 Section 116(6) RLA: where, owing to the length of time since the execution of a power of attorney
or for any other reason, the Registrar considers it desirable, he may require evidence that the power
has not been revoked and may refuse to register any disposition by the donee of the power of
attorney until satisfactory evidence is adduced
 Section 117(1) RLA: a duly registered power of attorney, where no notice of revocation has been
registered, is deemed to be subsisting as regards any person acquiring any interest in the land
affected by the exercise of that power, for valuable consideration and without notice of revocation
and in good faith (bona fide purchaser for value)

1.1 SITUATIONS OF REVOCATION OF POWERS

 By the donor executing a revocation in the prescribed form (Form LRA8)
 By the performance of the act that the power of attorney was created to perform
 By the expiry of time
 By the operation of the law, e.g. in the case of bankruptcy
 When the donor of the power dies

CHAPTER 5: LEASES
Section 2, Land Act defines a lease as ‘the grant, with or without consideration, by the proprietor of land of the
right to exclusive possession of his or her land, and includes the right so granted and the instrument granting it
and also includes a sub-lease, but does not include an agreement to lease’

1. LEASES v OTHER INTERESTS

1.1 LEASE AND ASSIGNMENT
 Under a lease, only a term of years is granted to the lessee, and the lessor has a right of reversion after the
expiration of the term granted
 Under an assignment, the entire leasehold interest is conveyed or assigned to the purchaser and the vendor
has no right of reversion. The vendor can only assign the unexpired residue of his term

1.2 LEASE AND UNDERLEASE

 A lease is a direct relationship between the lessor and the lessee
An underlease anticipates the existence of a head lessor. The under lessor is, indirectly, a tenant of the head
lessor

1.1 LEASE AND LICENSE

 Section 2, Land Act defines a license as permission given by the commission (for public land) and
proprietor (for private land), allowing the licensee to do some act in relation to the land which would
otherwise be a trespass, but does not include an easement or profit
 A license is a relationship whereby the licensee is granted a right to enter into or use the premises
without becoming entitled to exclusive possession
 A licensee has no interest in the premises but he can exclude the whole world from the premises,
except the licensor
 Desai v Cooper [1950] 214 KLR 32: the defendants did not have keys to the front door of a shop and
could only access it from the back. They could not enter from the front as and when they pleased, but
rather, to access their portion they had to go through the plaintiff’s portion. The plaintiff sought to
recover the portion occupied by the defendants. The court held that – even though the defendants had
exclusive use of a portion of the premises, they did not have exclusive possession, and so were
licensees and not tenants

2. REQUIREMENTS OF A VALID LEASE

 (i) Exclusive possession:
o The lessee must have an interest that entitles him to exclude all other persons, including the
lessor, from the premises
(ii) Defined areas and parties:
o The land, or part thereof, as well as the parties must be clearly defined/identified
o Section 56, Land Act gives power to lease whole or part of the land. If part of the land is
being leased, it shall be accompanied by a plan or other description which the Registrar
deems adequate to identify the property
o Ratwani v Deganela [1956] 17 EACA 37: for a lease to exist, the land must be defined (in
this case the lessee was to share a shop with someone else and his portion was not clearly
defined)
o Antoniodes v Millers [1988] 3 Weekly Law Reports 1205: the landlord and tenant shared a
one bedroom flat and they were both paying rent equally (like a sub-tenancy). It was held that
the plaintiff was not a landlord in the strict sense of the word as both of them has exclusive
possession (concurrently)
(iii) Certainty of duration:
o If the lessee has a fixed term, he can underlet or sublet the whole or a portion of his leased term
o Section 56, Land Act says that the owner of land may lease the land or part of it to any person
for a definite term, or for the life of the lessor or the lessee, or for a period which though
indefinite may be determined by the lessor or lessee
o However, it is advisable not to create leases that have clauses for perpetual renewal
o Section 61, Land Act says that a lease can be made to commence at a future date – not being
later than 21 years after the date it is executed. If the term of a future lease is for more than 5
years, it must be registered
o A term made to come into effect at a past date is called a lease in possession, while a lease to
commence at a future date is called a reversionary lease (‘future lease’)
o A reversionary lease that commences in more than 21 years from the date of execution is void
o Lace v Chantler: an agreement to let premises for ‘the duration of the war’ was held to be void
due to uncertainty of the period of the intended lease

3. TYPES OF LEASES
3.1 PERIODIC LEASES
 These are governed by Section 57, Land Act
 The term of the lease is not specified and no provision is made for giving notice to terminate the
tenancy – it is deemed to be for the period by reference to which rent is payable
 There is ordinarily no agreement in writing but there is occupation and payment of rent
 The term is from week to week, month to month, year to year, or any other periodic basis for rent
payment. In relation to agricultural land, the period shall be for 6 months
 The lessee remains in possession with the consent of the lessor after the expiry of the term of the
lease unless there is an express or implied term agreed (i.e. the terms and conditions of the expired
lease will continue to apply)
 The lease may be terminated by giving notice whose length is not less than its period and shall expire
on the day when the rent is payable

 This may be construed as being contradictory to the 2-month notice under the Landlord and Tenants
(Shops, Hotels and Catering Establishments) Act (Cap. 301), however, it is to be borne in mind that
the 2-month notice period for protected tenancies will always stand and will supersede the above
requirements under the Land Act

3.2 SHORT TERM LEASES

 These are governed by Section 58, Land Act, which provides for leases for a term of 2 years or less
without an option for renewal or for periodic leases where there is no agreement in writing but there
is occupation and payment of rent
 Such a lease may be made orally or in writing
 However, a short-term lease is not a registrable interest in land (only needs to be registered if the
term of the lease is for 5 years or more)

4. REGISTRATION OF LEASES AND EFFECT OF NON-REGISTRATION

 The provisions governing registration of leases are:
o Section 58 Land Act: All leases of more than 2 years should be registered
o Section 30 LRA: No Certificate of Lease shall be issued unless the lease if for a certain period
exceeding 25 years
o Section 54 LRA: After registration of a lease which required consent of the Lessor before
registration, no further dealings will be registered without the same consent of the Lessor
o Section 32 LRA: The Registrar shall note the disposition on the original and duplicate lease or
charge
o Section 7 Land Act: Title to land may also be acquired through a long-term lease exceeding 21
years
 In the event of non-registration of a lease, the effect is as follows:
o Section 43(2) LRA: No instrument effecting any disposition of private land under the LRA
shall operate to transfer any lease until the same has been registered in accordance with the
 laws relating to registration of instruments
o Section 36(2) LRA: Therefore, unregistered lease instruments shall be construed as mere
contracts and not as an interest having passed
o Section 4, Registration of Documents Act: Requires registration of leases and licenses of over 1
year
 James Michiki Mwangi & Another v Esther Wanjiru Kabugu & Another [2006] eKLR: lease for 5
years and 1 month was not registered. The court quoted Walsh v Londsdale [1882] to say that where
a tenant holds under an agreement for a lease, equity regards him as holding a lease. The tenant had
continued in occupation after expiry of the term and the landlord had continued to accept the rent 
Section 52 RLA provided that acceptance of rent by the lessor was evidence of consent to continue
occupation.

5. COVENANTS, CONDITIONS AND RIGHTS

5.1 LESSOR’S IMPLIED COVENANTS – Section 65 Land Act
(i) Quiet enjoyment: the lessee shall peaceably and quietly possess and enjoy the land leased during the
term of the lease, without any interruption from the lessor or any person instituting a claim through
the lessor (provided that the lessee is paying rent)
(ii) Non-derogation from grant: this ordinarily occurs in situations where the landlord occupies the
property adjacent to the one that the lessee has leased, and uses this property in a manner which
interferes with use that the lessee intended to put the leased property to, thereby rendering it unfit for
the purpose it was leased
(iii) Duty to repair: this is limited to structural repairs, e.g. sewage blocks or leaks (i.e. repairs that are not
occasioned by the tenant). Internal repairs are to be handled by the tenants themselves
(iv) Fitness for habitation: the lessor must ensure that the property is fit for human habitation and must
continue to maintain it (to the best of his ability) so that this remains the status quo
(v) Suspension of rent: where the leased property has been destroyed by Acts of God, e.g. natural
disasters, there is normally a suspension of rent for a period of 6 months (or until the repairs are
completed). After these 6 months have lapsed, if the repairs are incomplete, the lessee can terminate
the lease by giving 1 months’ notice

(vi) Fitness for purpose: this governs situations where it is an express or implied term of the lease that the
property has been so leased for a particular purpose, and the land or building can no longer be used
for that purpose. In such situations, the lessee may terminate by giving 1 months’ notice
(vii) Pay all rates, taxes due and outgoings: pay all those that are due in respect of the leased land, except
to the extent otherwise specified in the lease
 5.2 LESSEE’S IMPLIED CONDITIONS – Section 66 Land Act
(i) Pay rent on time and in the manner specified (as stipulated in the contract)
(ii) Use land in a sustainable manner and in accordance with the conditions in the lease, e.g. not to cut
down any trees unless this is necessary to enable use of the land
(iii) Yield up the land and buildings in the same condition as they were when the term of the lease
began, except for deterioration caused by:
a. Reasonable wear and tear
b. Fire, floor, explosion, civil commotion, lightning, storm, earthquake, volcanic activity, other
natural disasters
(iv) Keep all boundary markers in repair
(v) Keep all buildings comprised in the lease in a reasonable state of repair

5.3 RIGHTS OF THE LESSOR – Section 65(2) Land Registration Act

(i) Either personally, or through his/her agents, enter the leased land or buildings at a reasonable time to
inspect the condition of the premises and determine whether it needs any repairs
(ii) Terminate the lease by serving a Notice of Intention to Terminate in the following situations:
a. If any rent is unpaid for one month after its due date, whether or not it has been demanded in
writing; or
b. Where there is a breach of the lessor’s covenants by the lessee for one month

6. EXPRESS COVENANTS
 These are the covenants expressed in the lease document (and usually include implied covenants)
 These may differ depending on the usage of the leased property, and they serve the purpose of
covering aspects which may not be covered by the implied covenants
 Examples of express covenants are:
(i) Users covenant
(ii) Insurance covenant: this is inserted to protect against loss of rent or property. Both the
landlord and the tenant have insurable interests, and so either or both can insure the property
by looking at the nature of the premises, existing obligations, payment of service charges, risk
in the use of property, etc.
(iii) Covenant to repair
(iv) Covenant against assignment, transfer or otherwise parting with possession
(v) Covenant for renewal
 (vi) Covenant against alteration
(vii) Covenant to deliver possession at the end of the term
(viii) Option to renew the reversion: one of the express covenants is that at the end of the lease
term, the landlord is willing to extend the lease for another period as may be agreed by the
parties. The contents of this clause are:
 Time within which the tenant must indicate his desire to renew the lease, e.g. 3 months
to expiry;
 Manner in which the lease extension will be exercised, e.g. in writing;
 Conditions to be fulfilled before the extension, e.g. repairs, compliance with covenants of
lease, etc.; and
 Terms on which new lease will be granted

7. CONSENT BY THE LESSOR

 A covenant by the lessee not to do anything without the consent of the lessor shall be construed to
mean that the lessor shall not unreasonable withhold consent if the lessee applies for the consent
 Unreasonable denial by the Lessor includes situations of:
a. Imposition of an unreasonable condition as prerequisite to consent
b. Increase in grant, premium or payment of a fine
c. Objection to transfer/sub-lease on grounds of gender or nationality

8. REMEDIES AND RELIEF

8.1 REMEDIES AVAILABLE TO THE LESSOR UNDER THE LEASE
(i) Forfeiture:
o The lessor has a right to forfeit the lease in situations where the lessee:
i. Commits any breach of the agreement or a condition therein;
ii. Is adjudged to be bankrupt; or
iii. Is a company going into liquidation
o Section 73 Land Act: the right to forfeiture of the lease can be exercised in two primacy ways:
i. If the lessee or any person claiming through him is not in occupation, by entering and
remaining in possession of the land/property; or
ii. Through court action
o Section 74 Land Act: forfeiture has the effect of determining every sublease and other
interest appearing on the register that is relating to the lease, unless the court sets it aside on
grounds that it was procured by fraud or grants relief under Section 76 of the Land Act
 o The lessor must give one months’ notice of the forfeiture under Section 75 Land Act, and the
notice must:
 Specify the breach;
 Whether the breach is capable of remedy, and if so, require the lessee to remedy the
breach within a reasonable period specified in the notice; and
 In any case other than default in rent payment, require the payment of compensation
in money for the breach
o Section 76 Land Act allows the lessee to make an application to the court for relief against
forfeiture
 This is a discretionary remedy – the court may either grant or refuse to grant the said
relief
 The court may even make an order vesting the property on the sub-lessee or sub-
chargee, so long as they are not involved in the breach (and this section applied
whether the lease is registered or not)
(ii) Distress for rent:
o This is a right given under Section 3, Distress for Rent Act (Cap. 293)
o This is the act of seizing or causing goods to be seized from a tenant who owes ren and who
is in arrests of one month, with a view to selling them to recover those arrears of rent
o This remedy must be carried out within 6 months after the expiry of the lease
o Gusii Mwalimu Investment Company Limited & Others v Mwalimu Hotel Limited, Civil
Appeal No. 160 of 1995: the court held that distrained goods must remain in situ for at least
10 days
(iii) Action for recovery of rent arrears:
o However, this is subject to the limitation period of 6 years under the Limitation of Actions Act
(Cap. 22)
o The landlord may only sue if after distraining the goods already sold it is discovered that
the proceeds are inadequate to meet the rent arrears
(iv) Action for damages: to put the landlord in the position he would have been had the breach not occurred
(restitution)
(v) Injunction: to restrain the committing of a breach

8.2 REMEDIES AVAILABLE TO THE LESSEE UNDER THE LEASE

(i) Institute proceedings for injunction or damages
(ii) To repudiate the agreement altogether
(iii) To be relieved from paying rent where unlawfully evicted (Section 77 Land Act)
 9. THE LANDLORD AND TENANT (SHOPS, HOTELS AND CATERING ESTABLISHMENT)
ACT, CAP 301
 This Act applies to:
o ‘Catering establishments’ – any premises on which is carried out the business of
supplying food or drink for consumption on such premises, by persons other than those who
reside and are boarded on such premises

o ‘Hotel’ – any premises in which accommodation or accommodation and meals are supplied
or available to five or more adult persons in exchange for money or other valuable
consideration
o ‘Shop’ – premises occupied wholly or mainly for the purposes of a retail or wholesale trade
or business, or for the purpose of rendering services for money or money’s worth
 Section 2(1) of the Act defines a ‘controlled tenancy’ as a tenancy of a shop, hotel or catering
establishment –
a) Which has not been reduced into writing; or
b) Which has been reduced into writing and which –
i. Is for a period not exceeding 5 years; or
ii. Contains provision for termination, otherwise than for breach of covenant, within 5
years from the commencement thereof; or
iii. Relates to premises of specified nature by the Minister as controlled tenancies
 Provided that no tenancy to which the Government, the Community or a Local Authority is a party,
whether as a landlord or tenant, shall be a controlled tenancy

10. THE RENT RESTRICTION ACT, CAP 296

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

11. DUTIES OF ADVOCATES

11.1 DUTIES OF THE LESSOR’S ADVOCATE
(i) Obtain precise instructions from your client on the following, inter alia:
 a. Description of the property (obtain copy of the Title)
b. Portion to be released (if not whole)
c. Rent to be paid
d. Proposed use of the property by the lessee
e. Covenants
(ii) Draw the lease to reflect the wishes of your client, ensuring all the essentials of a lease are included
and the covenants protect your client’s interests
(iii) Obtain all requisite consents, e.g. consent to lease, consent to charge, etc.
(iv) Obtain stamp duty confirmation from the Lessee
(v) Register the lease

11.2 DUTIES OF THE LESSEE’S ADVOCATE

(i) Investigate the landlord’s title
(ii) Approve the draft lease
(iii) Advise your client on the contents of the draft lease
o Sykes v Midland Bank & Trustee [1970] All ER 471: there was a prohibition on any other use
of the premises unless permission was granted by the lessor and the head lessor. The former
gave consent while the latter did not. It was held that the Solicitor ought to have explained the
consequence of this clause to the Lessee
(iv) Collect disbursements from your client, e.g. stamp duty, registration fee, etc.
(v) Avoid conflicts of interest (applicable to advocates for both the lessor and lessee)
o Francis Mugo & 22 Others v James Muthee & 3 Others [2005] eKLR: application for
Andrew Musangi to cease acting for the plaintiff because he drew and witnessed a lease
between the defendant and other parties relevant to the suit, and would be a witness in the
suit. Rule 9, Advocates Practice Rules were quoted to say that no advocate may appear in any
matter in which he may be called as a witness to give evidence  the Advocate was ordered
to disqualify himself

12. ASSIGNMENT AND TRANSFER

 The effect of both an assignment and a transfer is more or less the same

 The subject of the transfer or assignment is the interest held in the lease and the reversion (Section 69,
70 & 71, Land Act)
 The assignor/transferor is discharged from their rights and obligations under the lease from the date
of the transfer/assignment, unless he/she remains in possession – Section 71 LA
  If the lessee vacates the land before the termination of the lease, he shall remain liable to perform all
obligations including payment of rent for the next 1 year, unless the lease provides for a shorter
period or the lessor leases the property to another person before the end of the year
 Under common law, the lessee would be liable for breaches committed after assignment or transfer,
but the liability (under the Land Act) only falls on the lessee before the assignment or transfer

13. DETERMINATION OF LEASES

(i) Forfeiture: under Section 73, Land Act – forfeiture is available where the lessee commits a breach of
covenants, is adjudged bankrupt, or goes into liquidation
(ii) Surrender: the lessee voluntarily yields up the premises to the lessor. It can be express or implied.
Under Section 64, Land Act, surrender of a lease for renewal shall not affect a sublease if the latter
will expire on or before the new head lease expires or if the sublease is periodic, which means notice
can be given for its termination
(iii) Expiry: the lease lapses because of effluxion of the term. Periodic tenancies and tenancies at will are
an exception since they do not have an agreed term
(iv) Merger: this occurs where there is a vesting of the reversion and the leasehold interest in the same
person at the same time, e.g. the lessee acquires the reversion
(v) Disclaimer: by a trustee in bankruptcy. Section 58, Bankruptcy Act (Cap. 53) states that this takes
place where the property is burdened by unnecessary covenants, making it unsellable
(vi) Notice: this is required for fixed-term leases, if the lease agreement provides as such. Under periodic
tenancies, Section 57(4) Land Act requires notice equivalent to the period of the tenancy
(vii) Frustration: Section 65(e) Land Act states that destruction of property through fire, earthquakes, civil
commotion, etc. entitles a lessee to terminate the tenancy if, after 6 months the same have not been
repaired. This is done by giving 1 months’ notice to the lessee.

CHAPTER 6: CHARGES & MORTGAGES

 Charges are generally defined as follows:

o Section 2 Land Act, LRA: a charge is ‘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’
o Simply put, a charge is security for a loan with an undertaking for repayment. As such, it
confers certain rights to the Chargee from the Chargor
o It is important to remember that a charge operates only as security, and does not transfer any
 interests or rights in land (Section 65 & 84 RLA, Section 80(1) Land Act)
 Mortgages, on the other hand, are defined as follows:
o ITPA defines a mortgage as ‘the transfer of an interest in specific immovable property for the
purpose of securing the repayment of money advanced or to be advanced by way of a loan,
an existing or future debt, or the performance of an engagement which may give rise to a
pecuniary liability’
o A mortgage is essentially a conveyance or transfer of interest in land or other properties 
this could be a 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

1. CHARGES
1.1 TYPES OF CHARGES
 The Land Act 2012 recognizes two general forms of charges:
(i) Formal charge: (Section 79(5) Land Act) – this is a prescribed instrument in the Land Register
(ii) Informal charge: (Section 79(6) Land Act) – this can come in two forms:
 A written and witnessed Professional Undertaking from the Chargor, accepted by the
Chargee, with the intention to charge; or
 Deposit of Certificate of Title or Lease document (or any other evidence of ownership
or undertaking observed by custom) with the Chargee in exchange for a sum of
money  this is because under Section 26 LRA, a Certificate of Title is conclusive
evidence of proprietorship
 However, there are also two other forms of charges that must be accounted for:
(i) Further charge – which is an additional facility by the same lender (Chargee) to the same
borrower (Chargor) on the security of the same property
(ii) Second charge – this is a separate charge over the same property, but to a different lender
(Section 57, LRA)
 The rules on priorities organize interests in ranking, so that each party can ascertain which interests
are prior and which are subordinated to his or hers. The general rule is that the charge which is made
first should be discharged first. This priority is conferred by registration, in that the first registered
charge has priority over all others (Section 81, Land Act)
 Section 2 Land Act defines a charge to include a sub-charge, i.e. ‘a chargee may charge the rights it
has under the charge, therefore create a charge out of a charge in order to raise money as an
alternative to assigning the debt. The subchargee has the double security of the original chargor and
the original charge
1.2 BASIC REQUIREMENTS OF A CHARGE
 The basic details that must be included in any charge instrument include:
(i) There must be a Chargor
(ii) Name and description of the lender
(iii) Description of the property
(iv) Amount advanced
(v) Acknowledgement of receipt of loan
(vi) Covenant to repay principal and interest
(vii) Special conditions (if any)
(viii) A charging clause
 Under Section 80(3) Land Act, every charge instrument must contain:
o The terms and conditions of sale;
o An explanation of the consequences of default; and
o The reliefs that the Chargee is entitled to, including the right of sale

1.3 INSTITUTIONS INVOLVED

 Central Bank – licenses Banks and acts as the regulator of all Banks. Regulation is under the Central
Bank Act (Cap. 491)
 Banks, financial institutions and mortgage institutions
 National Housing Corporations, e.g. the Tenant Purchase Scheme
 Employees housing schemes

1.4 DUTIES OF ADVOCATES

 It is important to remember that the process of securitization starts with an application by the
borrower to the lender for a loan
 The lender will then ensure that due diligence is conducted before progressing – i.e. a credit
assessment of the borrower, an evaluation of the property, etc.  this is an internal process, and if an
advocate is approached, they should advise the bank to seek the help of other professionals, such as
land valuers
 The bank will ordinarily involve its advocates once it has prepared and secured the execution of the
offer letter by both parties. The following details are contained in the offer letter:
o Details of the parties (borrower, lender and guarantor) – full names and addresses;
o Amount to be lent/borrowed and amount to be secured by the charge;
o The proposed repayment period and mode, e.g. is it monthly, quarterly;
 o Particulars of the property to be charged – Title number or Land Reference number; and
o Details of the intended security – is it going to be a formal or informal charge?

2.4.1 DUTIES OF THE CHARGEE’S ADVOCATES

(i) Advise the Bank on the appropriate form of security
(ii) Conduct a proper and thorough investigation of Title
(iii) Confirm the capacity of the Chargor to enter into the transaction
o If the Chargor is a company – confirm if its Memorandum and Articles of Association allow
for borrowing and charging of company property;
o If the Chargor are Trustees – confirm if the Trust Deed allows for borrowing and charging;
o If the Chargor is a spouse – confirm if the other spouse has obtained independent legal advice,
etc.
(ii) Draft the Charge and transmit the same to the borrower’s advocates for approval (ordinarily a ‘take it
or leave it’ situation)
(iii) Confirm execution and attestation of the Charge is the Advocate qualified? – Ndolo Ayah case)
(iv) Engross the charge and send it for execution and attestation
(v) Ensure execution and attestation is done in accordance with the law
(vi) Dispatch the document to the lender for execution and attestation
(vii) Procure statement of Stamp Duty (the same is obtained from the borrower)
(viii) Lodge the Charge document for registration at the Land’s Registry and Companies Registry (e.g. if it
i s a company, the Charge document must be registered within 30 days as per Sections 884 and 884,
Companies Act 2015)
o Particulars to be registered under Section 884, Companies Act 2015 are:

 If it is a charge created by a company – the ate of its creation;

 If it is a charge which was existing on property acquired by the company – the date of
the acquisition;
 The amount to be secured by the charge;
 Short particulars of the property charged; and
 The persons entitled to the charge
(ix) Forward the perfected documents to your client with a report on the title confirming the registration
(x) Confirm disbursement of loan proceeds from the Chargee to the Chargor
(xi) Follow up on payment of fee

2.4.2 DUTIES OF THE CHARGOR’S ADVOCATES

 (i) Discuss offer letter with the borrower and advise on the effect of the security
(ii) Obtain all requisite consents and clearances from the seller
(iii) Obtain a professional undertaking from the Chargee for payment upon registration of the charge (for
the seller)
(iv) Obtain original Title from the seller (usually upon a professional undertaking for payment upon
registration)
(v) Obtain a professional undertaking from the lender’s advocates that they will not use the title document
for any purpose
other than for the transaction
(vi) Approve the charge
(vii) Explain the contents of the charge to your client and their effect
(viii) Obtain adequate funds for payment of stamp duty

1.5 CONFLICT OF INTEREST

 The general rule of thumb is to avoid working for both the chargor and the chargee as this may give
rise to ethical and professional responsibility issues (King Woollen Mills Limited & Another v M/S
Kaplan & Stratton [1993]; Uhuru Highway Development Limited & Others v Central Bank of Kenya
& Others (2) [2002])
 In the case of Mortgage Express Limited v Bowerman & Partners [1996] 2 All ER 836, it was held
that when you act for both the borrower and the lender, the highest duty is to the lender
 Where third parties are involved, e.g. spouses, ensure that they have obtained independent legal
advice. A failure to follow this step may open the transaction up to challenge (BBK PLC v O’Brien
[1994])

1.6 TACKING

 This is 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 (Section 82, Land Act)

1.7 CASE LAW

 Angwenyi & Another v NIC Bank Limited [2004] eKLR: the charge was created but the loan was not
disbursed. The Bank sought to sell the property in satisfaction of a Hire Purchase agreement which
was secured by vehicles that were purchased. It was held that since there was no loan that was
disbursed, there was no consideration that would validate the contract and entitle the bank to sell the
 property
 Labelle International Limited & Another v Fidelity Commercial Bank & Another [2003] 2 EA 541:
the Advocate who signed the attestation certificate is not the one who witnessed the Chargor’s
signatures. However, this was an RTA charge that did not need to be attested, and so an injunction to
stop the sale of the security was dismissed
 Anthony Anthanus Ngotho t/a Ngotho Architects v NIC Bank Limited, HCCC No. 319 of 2003: the
Mortgage was prepared by the Mortgagee’s advocates exclusively and the Mortgagor had no counsel
representation. The Letter of offer was dated several months later than the mortgage. It was held that
the mortgage was validly executed, and the apparent defect on the mortgage (i.e. the fact that it was
created before the offer was accepted) is evidence of a prima facie case

1.8 IMPLIED TERMS

(i) To pay principal money on day appointed in the charge and interest at rates agreed upon
(ii) Pay all rates, charges, rents, taxes and other outgoings
(iii) Repair and keep in repair all buildings and other improvements
(iv) Insurance
(v) Use land in a sustainable manner
(vi) Not to lease or sublease the land for more than a year without consent of the charge
(vii) Not to transfer, assign or lease without written consent of the charge
(viii) If it is a lease to pay rent and observe all covenants in the lease
(ix) If it is a second or subsequent charge, to pay interest on each prior charge when they fall sue
(in 2, 3, 4, 5 and 8, the chargee may pay on behalf of the chargor and include the amount so paid in
the principal amount).
’

1.9 THE SECURITISATION PROCESS

(i) Borrower applies for a loan at a financial institution, e.g. the bank
(ii) The bank conducts due diligence – assessing the credit worthiness of the borrower and valuing the
immovable property (in order to ascertain the mortgage value)
(iii) If the borrower is credit worthy, the bank prepares the letter of offer, setting out the terms and
conditions under which the loan has been offered  the letter of offer contains: details of the parties;
the loan amount, the mode of repayment; the repayment period; the rate of interest; the particulars of
the property to be charged; the nature of the charge to be created, etc.
(iv) The borrower executes the letter of offer
(v) The lender’s advocate drafts the security documents (i.e. charge or mortgage)
 1.10 NOTICE
 Under Section 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
 Under Section 90(1) Land Act, where a default in payment has continued for more than a month, the
chargee may issue a statutory notice  under Section 90(2) Land Act, the notice will run for 90 days
 Notice should inform the Chargor (as per Section 90(2))
o The nature and extent of default;
o If default is non-payment of money, the amount that must be paid to rectify the default and
the time by which the payment in default must be completed (this should not be less than 3
months);
o If default consists of non-observance of covenants, what the chargor must do or not do to
rectify the default –
and the time for rectification should not be less than 2 months;
o A statement that is the default is not rectified within the time specified, the chargee will
exercise any of its remedies provided in the Act; and
o The right of the chargor to apply to court for relief against those remedies

1.11 REMEDIES AVAILABLE TO THE CHARGEE [BANK]

 Under Section 90(3) Land Act, if the Chargor does not comply within three months after service of
the (above mentioned) notice, the Chargee has the following options:
a) Sue the Chargor for money due and owing under the charge;
b) Appoint a receiver of the income of the charged land;
c) Lease the charged land, or if the charge is of a lease, then sublease the charged land;
d) Enter into possession of the charged land; or
e) Sell the charged land
 Section 90(5) Land Act states that the form which the statutory notice is to take will be prescribed by
the Cabinet Secretary in consultation with the National and Commission

(i) Action for money

 Under Section 91 Land Act: the Chargee can sue for money secured if:
a) Chargor is personally bound to repay;
b) The security is rendered insufficient (not by chargee or chargor’s fault) and chargee has given
chargor opportunity
 to provide additional security; or
c) The chargee is deprived of the whole or part of the security through a wrongful act or default of
the chargor

(ii) Appointment of a Receiver

 Under Section 92 Land Act: if 30 days have lapsed since the notice was issued under Section 90(1)
Land Act, the chargee may appoint a receiver over the income of the charged land
 The advantage of this remedy is that the Bank (i.e. chargee) does not have the administrative burden
of realization of the security, and the Receiver’s costs will too be recouped from the assets of the
chargor (Note: they are limited to not more than 5% of the money received, as per Section 92(7)
Land Act)

(iii) Leasing
 Section 93 Land Act specifies that this remedy can only follow the appointment of a receiver:
o The lease can only be granted after 30 days upon expiry of the notice
o The lease must take effect not later than 6 months after its date
o The lease must reserve the best rent
o The lease must be not more than 15 years or the length of the term of the charge, whichever is
shorter
o The lease must contain reasonable terms and conditions, having the interests of the chargor at
the forefront
o The lease must contain a declaration of appointment of a receiver by the chargee

(iv) Possession
 Under Section 94 Land Act: upon expiry of the notice, the chargee can serve notice to enter and take
possession at least one month after service of the notice
 The entry must be peaceful, and is ordinarily achieved by taking over the management of the property

 Banks usually avoid this remedy due to the administrative inconveniences involved and because they
would be liable for any damages to the property and have to account for profits and rent

(v) Chargee’s Power of Sale

 This is governed by Section 96(1) Land Act
 Section 96(2) Land Act states that before exercising the power to sell, the chargee must serve a
 notice of at least 40 days on the chargor. This copy of the notice to sell is to be served on:
i. The Commission
ii. The holder of the land out of which the lease has been granted, if the charged land is a
leasehold
iii. The spouse of the chargor
iv. The co-owner of the chargor
v. Any other chargee
vi. The guarantor
vii. Any other person with the right to enter on and use the land or natural resources on it
viii. Any other person to be prescribed by regulations in force at the time
 In summary, the following notices must be served:
o Section 56(2) Land Act: 3 months demand – only applicable if date of repayment is not
provided, or demand was not made on the repayment date
o Section 90(1) Land Act: 90-day Statutory Notice – if default continues for 1 month
o Section 96(2) Land Act: 40-day Notice to Sell
o Auctioneers Act: 45-day Auctioneers Notice

 Section 98 Land Act imposes some conditions on the manner in which the sale may be conducted:
o It may cover the whole or part of the land;
o It may be subject to or free of any charge or encumbrance, having priority to the chargee’s
charge;
o It may be by way of subdivision;
o It may be by way of private contract at market value;
o It may be by way of public auction – with reserve price;
o The purchase price may be payable in one lump sum or by instalments; and
o May be subject to any other conditions of the chargee
 There are certain duties of the chargee to be borne in mind when exercising its power of sale:
i. Duty of care owed to the chargor, guarantor, any chargee under a subsequent charge;
ii. Duty to chargor to obtain best price, and in any event not more than 25% below market value
or the sale may be declared void; and
iii. Duty to value the property prior to the sale to determine its forced sale value, or else the
chargor may apply to
the court to declare the sale void if it was sold at a value that doesn’t meet this threshold
 Section 99 Land Act confers protection to the purchaser if there has been irregularity in the same of the
 charged property, i.e. the purchaser can claim damages against the person exercising the power of sale
 Section 79(9) Land Act states that 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

1.12 RELIEF
 Under Sections 103 – 106 Land Act, a chargor, spouse, guarantor, lessee or a trustee in bankruptcy
may apply to the court for relief against the exercise by the chargee of any of the above remedies
 The court has wide ranging powers, including widening the scope of orders by the court, e.g. to
extend the time for the chargor to rectify default (Section 102 Land Act)
 E.g. the court has power to re-open charges secured on a matrimonial home:
o Under Section 105(1) Land Act, the court has the power to re-open charges secured on a
matrimonial home in the interest of doing justice between the parties
o Section 106 Land Act specifies that charges can be re-opened in 3 instances, on application by:
a) Chargor or chargee to enforce a charge or commence an action under Section 90;
b) Chargor for relief against exercise of any remedy by the chargee; or
c) Registrar where there is evidence of unfair dealing by the chargee, or the chargee is a
corporate body that discriminates against certain classes of chargors, e.g. on the basis of
gender
 When re-opening a charge, the court may:
o Direct that the charge shall have effect subject to certain modifications
o Require the chargee to repay the whole or part of the sum paid by the chargor
o Require the chargee to compensate the chargor
o Direct the chargee, which is a corporate body, to stop acting in a discriminatory manner

1.13 DISCHARGE OF CHARGE

 A discharge of charge means that 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, the right to discharge of charge should not be clogged or fettered
 The right to discharge occurs in two forms:
(i) Section 85(1), 102 Land Act: gives the 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 the chargee or a receiver appointed. This right is in mandatory terms
(ii) Section 85(3) Land Act provides 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 as payable, as well as pay all
other monies secured by the charge

2. MORTGAGES
 Mortgages deal with the transfer of interest in land as security for a loan advanced
 The transferor of interest is the ‘mortgagor’ (borrower), the transferee of interest is the ‘mortgagee’
(lender), while the sum of money advanced is known as the ‘mortgage sum’
 Though the transaction is between two parties – mortgagor and mortgagee – a third party called a
‘guarantor’ may be involved, or even a ‘head lessor’ to give consent to assignment or sublease of a
leasehold interest as security for a loan

2.1 NATURE OF MORTGAGES

 It is a conveyance or transfer of interest in land or other properties – this could be a 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 is paid from the mortgagee to the mortgagor in terms of the loan that is advanced
 However, the conveyance of the interest is not absolute – i.e. it is subject to redemption upon payment
of the loan

2.2 TYPES OF MORTGAGES

(i) Simple mortgage: no delivery of possession but the mortgagor binds himself to pay back the loan or
else the property will be sold
(ii) Mortgage by conditional sale: the mortgagor sells the property to the mortgagee on the condition that
the sale will become absolute upon default in repayment of loan facilities
(iii) Usufructuary mortgage: possession is delivered with authority to retain it until payment. The
mortgagee also obtains the rights to secure rent and profits to repay
(iv) English (i.e. legal) mortgage: the mortgagor transfers the property to the mortgagee with a proviso
that upon payment of the mortgage money, the latter will return it (the best and most popular form of
a mortgage)
o This is based on pre-1926 English Mortgages
o Section 58(c) ITPA stated that the mortgagor bound himself to repay the mortgage money on
a certain date and transfers the mortgaged property absolute, subject to the proviso that the
mortgagee will transfer is back to him on the repayment of the mortgage money
(v) Equitable mortgage: this is a creature of equity, and traditionally there are 4 ways to create an
 equitable mortgage:
a) Where money has been advanced and the mortgagee agrees to execute a legal mortgage;
b) Through deposit of title with the mortgagee (recognized by: Equitable Mortgages Act (Cap.
291), Section 100(2)(g) ITPA, Section 66 RTA);
c) Where the estate or interest is equitable; or
d) Where there is a written memorandum identifying the property and indicating the intention to
charge the property.

CHAPTER 8:
SERVITUDES
[RIGHTS IN
ALIENO SOLO]

 Right in alieno solo are defined as rights enjoyed in/over the land of another person, other than the
one entitled to enjoy these rights. These include: cautions/inhibitions/restrictions; easements; profits
a pendre; restrictive agreements; and wayleaves
 Servitudes ordinarily involve the right to do something (and not the right to control something), e.g.
can cross someone’s land; can lay a utility line across the lane; can use a parking lot on someone’s
land; cannot paint the house purple – can only paint the house white; cannot block airflow and light;
must not block the scenic view, etc.

1. RIGHTS IN ALIENO SOLO

1.1 CAUTIONS/INHIBITIONS/RESTRICTIONS

 A caution is a document sent to the Lands Registry by someone who may have a right over the land
 A caution ordinarily demands that no dealings in the land are registered until the person with the right
has been informed
 Section 71 LRA states that a caution may be lodged by a person who:
(i) Claims a right to obtain an interest in the land/lease/charge, which is capable of creation
by an instrument registrable under the Act;
 (ii) Is entitled to a license; or
(iii) Has presented a bankruptcy petition against the proprietor of the registered land/lease/charge.
 The effect of lodging such a caution is to forbid registration of dispositions over that land/property
and the making of entries affecting that land/lease/charge

1.1.1 PROCEDURE FOR LODGING A CAUTION

(i) To be lodged in the prescribed form (i.e. Form LRA 67) and the Registrar may require an affidavit to
accompany it
(ii) Registrar to give written notice to the registered proprietor after having registered the caution
(iii) Withdrawal of the caution can be done by the cautioner themselves, or removal effected by the Court
or Registrar
(iv) Any interested party may apply for the caution to be removed and the Registrar shall serve a
written notice on the cautioner, notifying him or her of the time of expiry of their caution
a. If no objection is raised to the expiry of the caution by the cautioner, the same will be removed
b. If the cautioner wants to object, he shall notify the Registrar in writing within the time given in
the notice
c. After hearing the parties, the Registrar will make such orders in relation to the caution as he
deems fit and will provide for costs
(v) The Registrar may refuse a further caution from the same person in relation to the same matter as in a
precious caution
(vi) The punishment for wrongful cautions is liability in an action for damages (Section 75 LRA)
(vii) The court may order an inhibition forbidding registration in land under Section 68 LRA
(viii) A restriction on the title is placed by the Registrar under Section 76 LRA to prevent fraud or
improper dealings over the land
 INHIBITION CAUTION RESTRICTION
Section 68 – Section 70 Section 71 – Section 75 LRA Section 76 – Section 78
LRA LRA
Order made by the Court Lodged for registration by Registered by the registrar to
and registered by the anyone with an prevent fraud or improper
Registrar interest capable dealing over/in the
of land
registration
No notice is required to be No notice is required to be Notice requires to be given and
given to the proprietor given to the proprietor before hearings held with both the
before its registration its registration parties before
registration
May endure for a particular Unless removed, it forbids May endure for a particular
period or until the registration of dispositions in period, until the occurrence of an
occurrence of a particular land/leases/charges and event or the making of a further
event or the making of a making of entries order
further order affecting
such
land/leases/charges

1.2 EASEMENTS

 An easement is a non-possessory interest in another’s land, allowing the holder of the right to:
o Use the land to a particular extent;
o Require the proprietor to take an act relating to the land; or
o Restrict the proprietor’s use to a particular extent
 There are 2 pieces of land involved in the creation of an easement:
(i) Dominant tenement: the land for the benefit of which any easement is created
(ii) Servient tenement: the land of the person over which an easement is created
 HOME ON
THE
DOMINANT
TENEMENT
NEEDS

P
EASEMEN
DRIVE WAY U
T
SITE/RIGH
B
DOMINAN SERVIENT T OF WAY
T TEMEME L
TEMEME NT
I
C

 There are two types of generally recognised easements:

(i) Easement in gross: these are easements which are attributable to a particular
person/individual. They involve access through an individual’s property for a particular time
and for a particular purpose. When the property is sold, the easement is ordinarily re-
negotiated with the new owners
(ii) Easement appurtenant: these are easements which are formally created and formally
removed. They are attributable to the land, and it will not matter who owns the land as the
owners will have to respect the right of way created for/by the easement
 In order to qualify as an easement, it must be the only way in which the dominant tenement may be
accessed  it cannot simply be a short cut or a simpler route to access the dominant tenement, or else
the owner can close it (cease access) without being answerable
 There are both positive easements and negative easements: (nature of easements – Section 138 Land
Act)
o Positive easements are the right to do something over, under or upon the servient tenement, e.g.
a right of way,
a right to run telephone lines on another’s land, a right to access a water source, etc.
o Negative easements connote something that should not be done over, under or upon the
servient tenement, e.g.
not being allowed to constrict a building that will block a view/block someone else’s right to
entry

2.1.1 RIGHTS OF WAY

  Section 139 Land Act – Entry order:
o This is where the owner of the dominant land may seek an entry order from court to enable
him to enter the servient land for purposes of doing anything on the dominant land
o Under the Public Roads Access Act (Cap. 299), a land owner may apply to have a road of
access over another
person’s property to a public road or railway line
 Section 140 Land Act – Access order: this is where the owner of landlocked land makes an
application for an access order (carries analogous rights to an entry order)

2.1.2 CREATION OF EASEMENTS

a. Ƒchange
(ii) Creation by implication:
a. Prior use: if property that is owned by a single person is split by a grant of part of that
property to someone else, or by grants of pieces of that property to different grantees, and it is
apparently that an easement would be required for the continuing use of the property in the
manner that it has been used until now, an easement may be implied
b. Necessity: where the owner of a parcel divided the parcel in a manner that deprives one of the
resulting subdivisions of access to something that is absolutely necessary for the use and
enjoyment of the property
(iii) Easement by prescription: equivalent to acquiring a parcel of land by adverse possession, i.e. an
easement can be acquired if a person uses property that does not belong to him or her in a manner
consistent with the existence of an easement for a period longer than the jurisdiction’s statute of
limitations (20 years)
(iv) Easement by necessity: these types of easements are typically not registered

2.1.3 CANCELLATION OF EASEMENTS

 Governed by Section 99 LRA
 Cancellation can be effected by the owner of the dominant land or the servient land (if the Registrar
is satisfied that the period of the easement has expired or it has served its purpose)
 Alternatively, an easement can be cancelled through a merging of the dominant and servient
tenements (to be owned by the same person) thereby eradicating the need for an easement to be
registered at all

1.3 WAYLEAVES
  A wayleave is a right of way over another’s land, usually for installation of sewer, drain, power lines
or pipelines (examples
are contained at Section 28(i) LRA)
 Section 144 Land Act states that the application for a wayleave is ordinarily made by the relevant
state department, county government, public authority or corporate body to the commission
 The Government gives notice of wayleave creations and compensates the owner of the land (the
servient tenement)
 A wayleave (created on the servient land) is a terminable licence which does not automatically bind
future owners of the property
 It grants you access to the way leave for purpose of development, restricting, etc.
 A way leave will normally contain provision for termination at the expiry of a notice period
(commonly 6 or 12 months)
 In an easement we have two properties concerned, but with a wayleave you are concerned only with
one property and with creation/enjoyment of certain rights that are created over that property

1.4 PROFITS A PENDRE

 Profits a pendre (French for ‘right of taking’) is a right to enter another’s land and take something,
usually natural resources,
from that land
 The natural resources are capable of ownership, e.g. the right to catch fish, to graze, to hunt, to cut
trees, to fetch clay, to extract petroleum/other minerals, etc. (Note: you cannot have a profit to take
minerals and water)

1.5 RESTRICTIVE AGREEMENTS

 Section 2 LRA, Land Act define restrictive agreements as:
o A restrictive covenant; or
o An agreement by an owner of land, restricting the building on, use of, or other enjoyment of
that land for the benefit of the owner or the neighbouring parcel
 Section 42(1) LRA states that no transfer shall contain a direction that the land shall be used or
enjoyed by the transferee in a particular manner
 Section 69 LRA states that the burden and benefit of covenants run with the reversion, i.e.:
o There are no further provisions on restrictive covenants in new land laws
o Restrictive covenants confer a negative duty on neighbouring land, e.g. to maintain a certain
standard of design
CHAPTER 9: TRANSFERS

 ‘Transfer’ means the passing of land, a lease or a charge from one party to another by an act of the
parties and not by operation of law, and includes the instrument by which such passing is affected
(Section 2 Land Act, Section 2 LRA)
 Section 44 Land Act: transfers take effect immediately upon registration, and not on the
happening of a future event/fulfilment of any condition or at any other future time

APPLICABLE PROVISIONS OF THE LAND REGISTRATION ACT

PROVISIONWHAT IT STATES
SECTION A transfer is to be affected by an instrument in the prescribed form
43(2)
SECTION Completion of the transfer process is only after registration of interests at the
43(3) Land’s Registry
SECTION All dealings in land must be in accordance with the provisions of the Land
36(1) Registration Act
SECTION Transfer by an instrument in the prescribed form or form approved by the
37 Registrar. Filing in the
prescribed form and registration of the same completes the transfer
SECTION Contingency or conditional transfers are prohibited
40
SECTION Transfers are effective only upon registration
43(2)
SECTION There is a requirement for endorsement (in the prescribed manner) of signatures of
44(4) persons outside
the country at the time they signed the document
SECTION Other required documents when effecting a transfer include: copy of
44(5) ID/passport; copy of PIN
certificate; 3 coloured passport size photographs; marriage certificate (where
applicable); and a copy of Certificate of Incorporation + Board resolution (where
applicable)

1.1 TRANSFER OF A LEASE

 Section 45 Land Act, Section 71 LRA
 When transferring a lease, there is an implied warranty that the rent, agreements and conditions in
the Lease have been met by the transferor as at the transfer date, and that these obligations shall be
met by the transferee from the said date
 Under Section 72 LRA, the transferee becomes the lessee after the transfer of lease has been registered

1.2 TRANSFER OF A CHARGE

 Section 86(1) Land Act

 The Chargor (or anyone with an interest in the 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
 The Chargor’s consent to transfer the charge is required if the charge instrument expressly or
impliedly says so (Section 87 land Act)

1.3 FREEDOM (RIGHT) TO TRANSFER

 The freedom to transfer interests in land is enshrined under the Constitution 2010
o Article 40: subject to Article 65, every person has the right to acquire and own property of
any description and in any part of Kenya
o Article 65: one can only transfer freehold property or leaseholds of over 99 years to Kenyan
citizens. Any transfers of freehold properties or leaseholds of over 99 years to non-Kenyan
citizens are deemed to be a leasehold of 99 years

1.4 CONSIDERATION IN TRANSFERS + GIFTS

 Ordinarily, the requirement of consideration is a requirement for a contract to be valid. However,
there is an exception to this rule where the consideration is not valuable (i.e. no actual money has
been paid)
 Under Section 27(2) LRA, a contract for a disposition of an interest in land that has no valuable
consideration attached to it will have the same effect as a transfer with valuable consideration
 However, a transfer without consideration is only applicable for transfers to:
o To oneself – e.g. where there has been a change of name;
o To one’s spouse;
o To one’s beneficiaries; and
o When the transfer is a gift
 For transfer of land as a gift to be exempt from the requirement of consideration, the gift must be
accepted by the donee (recipient) during the lifetime of the donor (diver)
 The transfer of land as a gift must be effected by a registered instrument and the donor must comply
with all the statutory requirements relating to the transfer, e.g. obtaining of LCB Consent where
necessary
 Registered Trustees of the Anglican Church, Mbeere Diocese v Reverend David Waweru [2007]
eKLR, Civil Appeal No. 108 of 2002: The Respondent (Revered Waweru) had donated his land to the
church. He obtained LCB Consent and executed the transfer, but it was not registered due to a court
matter over the property. He later sought to reclaim is from the church through court action after he
resigned from the church service. The superior court held in his favour, but the Court of Appeal held
in favour of the church using the above principles – i.e. where the donor has fulfilled all legal
obligations of a transferor, the property belongs to the donee

2. TRANSMISSION
 ‘Transmission’ is the passing of land, a lease or a charge from one person to another by
operation of law on death, insolvency or otherwise (Section 2 Land Act, Section 2 LRA)
 These are also known as ‘involuntary transfers’/‘transfers by operation of the law’, and happen in the
following situations:
a. Death;
b. Court attachment and sale;
c. Vesting orders;
d. Bankruptcy or insolvency;
e. Adverse possession; and
f. Compulsory acquisition

2.1 Transmission – COMPANY LIQUIDATION

 The Registrar is presented with a resolution or order appointing a liquidator, which he enters in the
register
 Instruments lodged for registration shall be sealed with the company’s seal and attested to by the
liquidator
 See: Section 53 Land Act, Section 64 LRA, Companies Act and Insolvency Act

2.2 Transmission – BANKRUPTCY

 The debtor commits an act of bankruptcy, at which point either the debtors or the creditors file a
petition for the debtor to be adjudged bankrupt
 A court makes a receiving order, placing the property in the control of an official receiver appointed by
 the court
 An adjudication order is made and the property of the debtor who has been adjudged bankrupt 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
 See: Section 52 Land Act, Section 63 LRA and Insolvency Act

2.3 Transmission – VESTING ORDERS

 This is a court order that creates or transfers legal ownership of a property in place of a legal
conveyance. This happens in:
a) Court ordered purchases/sales of mortgaged land
b) Specific performance of a contract where parties are trustees
c) Trustee has not exercised their duty in the disposition of interests of property
d) Interests in land are subject to a contingent right of an unborn person, and when born the
court may make an order
e) Infant mortgagees
 See: Sections 45 – 46 Trustee Act (Cap. 167)

2.4 Transmission – DEATH

2.4.1 Sole Proprietor or Proprietor in Common
 The applicable sections of the law here are: Section 61(1) LRA, Section 50 Land Act
 The personal representative shall, on application for and production of a grant, be registered by
transmission as the proprietor in place of the deceased  “As executor of the will of [insert
deceased’s name]” or “As administrator of the estate of [insert deceased’s name]”
 The Registrar is to register by transmission, upon confirmation of a grant and on the production of the
same thereof:
a) Any transfer by the personal representative; and
b) Any surrender of a lease or discharge of a charge by the personal representative
2.4.2 Joint Proprietors
 The applicable sections of the law here are: Section 49 Land Act, Section 60 LRA
 The property automatically passes to the surviving tenant under the doctrine of jus ascrendi
 When one of the joint tenants of any land, lease or charge dies, the Registrar shall, upon proof of the
death, delete the name of the deceased tenant from the register by registering the death certificate
 2.5 Transmission – ADVERSE POSSESSION
 Adverse possession is a situation where a person takes possession of land and asserts rights over it,
and the person having title to it omits or neglects to take action against such person in assertion of
his title for a certain period
 In Kenya, the relevant period for adverse possession to take effect is a period of 12 years
 Section 7 and 17, Limitation of Actions Act provides for a 12 -year limitation period for the recovery
of land
 Section 37 and 38, Limitation of Actions Act states that if land is registered, then it is held in trust
for the adverse possessor until he obtains a vesting order from the High Court
 The procedure for acquisition of title by the adverse possessor is under Order 37, Rule 7(1) Civil
Procedure Rules:
1) “An application under section 38 of the Limitation of Actions Act shall be made by originating
summons
2) The summons shall be supported by an affidavit to which a certified extract of the title to the
land in question has been annexed
3) The court shall direct on whom and in what manner the summons shall be served”

1.5.1 THE ESSENTIAL ELEMENTS OF ADVERSE POSSESSION

 Possession of the property/land in question adverse possessor is neither by force, stealth or under
the license of the registered owner of the land
 There must be adequate continuity, and publicity (i.e. to the extent which shows that the possession
is adverse to the title of the registered owner)
 There must be:

o Open and notorious use;

o Intention to possess;
o Continuous use;
o Exclusive use – to the exclusion of the registered owner;
o Actual possession; and
o Non-permissive, hostile/adverse use – without owner’s permission and inconsistent with his
rights
 This may be summarised by the Latin maxin – “nec vi nec claim nec precario” (neither by force, nor
secretly, and without permission)
 The basis of adverse possession is that leaving land abandoned would be contrary to the policies
enshrined under Article 60, Constitution 2010
1.6 Transmission – COMPULSORY ACQUISITION
 This is acquisition of land for public purpose or in the public interest
 Article 40(3) Constitution 2010 stipulates that the right to own property is limited for reasons in the
public purpose/public interest, provided there is prompt payment in full of just compensation
 Section 132 Land Act stipulates that compulsory acquisition transactions are exempt from stamp duty
 There are 3 clear cut stages in compulsory acquisition: pre-inquiry, inquiry and pose-inquiry
COMPULSORY ACQUISITION
STAGE ACTION
PRE- The National Land Commission (NLC) receives a request for acquisition from the
INQUIRY acquiring authority. The request is authored by either a Cabinet Secretary or a
County Executive Member (Section 107(1) and 107(5) Land Act).
See: Mohammed v Commissioner of Lands and Others [2006] eKLR (E&L) 217.

(i) Preliminary requirements

 This Commission shall prescribe a criteria and guidelines to be adhered to
by the acquiring authorities in the acquisition of the land – Section 107(2)
Land Act
 A list shall be prepared of the affected parcels of land and the owners, title
search details, cadastral maps of the affected areas, a Resettlement Action
Plan, and a list of persons affected by the project

(ii) Notice of Intention to Acquire

 Section 107(5) and Section 110(1) Land Act
 This is published in the Kenya Gazette after the Commission is satisfied
and confirms in writing that the land is required for public purposes or in
furtherance of the public interest
 The Commission publishes notice of intent and delivers a copy of the
notice to the Registrar and to every person who appears to have an interest
in the land
 If the public purpose or interest ceases to exist, the Commissioner may
offer the original owner pre-emptive rights to reacquire the property
(Section 110 Land Act)

(iii) Ascertainment of suitability of land

 This is a survey – Section 107(8) and 108 Land Act
  All land to be compulsorily acquired shall be authenticated by the
authority responsible for survey, both at the national and county
governments
INQUIRY (i) Notice of Inquiry
 Section 112(1)(a) Land Act
 The Commission appoints a date for inquiry which should be at least 30
days after publishing the notice of intention to acquire, and at least 15
days before the actual date of the inquiry
 A copy of the notice is served on every person who appears to have an
interest in the land

(ii) Receipt of Claims

 Section 112(2) Land Act
  Written claims for compensation are delivered to the Commission not later
than the date of inquiry, for determination of the persons interested in the
land

(iii) NLC’s Powers for Purposes of Inquiry

 To summon and examine witnesses, including persons with interest in the
land
 To administer oaths and affirmations
 To compel production and delivery of title documents
POST- (i) Award of compensation
INQUIRY  Section 113 and 114(1) Land Act
 This is done upon conclusion of the inquiry
 A separate award of compensation is drawn up for every person
determined to be interested in the land
 There is then service on each person of a notice of the award and offer of
compensation
 Courts have held that the compensation should be market value + 15%
(Eunice Grace Njambi Kamau & Another v AG & Others [2013] eKLR)

(ii) Land in lieu of compensation

 Section 114(2) Land Act
 Land in lieu of monetary awards – this is possible where the value of
the land is commensurate with the award
 Such award shall be deemed to be all the compensation conclusively to
which the person is entitled to in respect of the interest in that land

(iii) Payment of compensation

 Sections 115, 118 and 119 Land Act
 Payment is promptly settled upon the exercise of due diligence, which
shall include a final survey and the determination of acreage, boundaries,
ownership and value
 If the award is not accepted or in the case of a dispute, the amount is paid
into a special compensation account held by the Commission

(iv) Payment of interest

 Section 117 Land Act
  Interest is paid at the prevailing base lending rate set by Central Bank on
any amount not paid promptly
 It is calculated from the time of taking possession until the time of payment

(v) Taking of possession (Section 120, 121 Land Act)

CHAPTER 10: SECTIONAL PROPERTIES AND SUBLEASES
1. SECTIONAL PROPERTIES
 Sectional properties are governed by the Sectional Properties Act No. 21 of 1987 (‘SPA’) – this act
was formulated to enable the acquisition of flats in high-rise buildings as a consequence of the
diminishing stock of land in the country and the corresponding increase in the price of available land
 The SPA aims at providing for the division of buildings into units to be owned by individual
proprietors and common property to be owned by proprietors of the units as tenants in common. It
also provides for the use and management of the units and common property and for connected
purposes
 This process allows individuals wishing to purchase the units the ability to access financing for the
same because such titles can be used as collateral

1.1 TRANSFER OF SECTIONAL PROPERTY

(i) Preparation and registration of a sectional plan  This sectional plan must:
a) Describe two or more units;
b) Be described in the heading of the plan as a ‘sectional plan’;
c) Delineate the external surface boundaries of the parcel and the location of the building in
relation to them;
d) Bear a statement containing those particulars as may be necessary to identify the title to the
parcel;
e) Include a drawing illustrating the units and distinguishing the units by numbers or other
symbols;
f) Define the boundaries of each unit;
g) Show the approximate floor area of each unit;
h) Have enclosed on it a schedule specifying in whole numbers the unit factor for each unit in the
parcel;
i) Be signed by the proprietor;
j) Have endorsed on it the address at which the documents may be served on the corporation
concerned; and
k) Contain any other particulars prescribed by the regulations
(i) Presentation of sectional plan for registration, in quadruplicate  the sectional plan must be endorsed
by the following (Section 11 SPA):
a) A Certificate of Survey  stating that the structure that is shown in the plan is within the
external surface boundaries of the parcel which is the subject of the plan, and if guttering’s
project beyond those external boundaries, that an appropriate easement has been granted
 b) A Certificate of the Local Authority  stating that the proposed division of the structure as
illustrated in the plan has been approved; and
c) Certificate of Surveyor  stating that units shown on the plan correlate with the existing
structure
(ii) As soon as the sectional plan is registered, a Title to the unit comprised in the plan shall be deemed to
be issued under the RLA (with effect from the date of registration of the sectional plan)
(iii) Delivery of registered copy of the plan to local authority of area in which parcel is located within 21
days (Section 9(3) SPA)

(iv) Register for parcel described in the sectional plan is closed and Registrar opens a separate register for
each unit that has been described in the plan
a) Register for each unit includes the share in the common property apportioned to the owner of
that unit
b) Common property includes: all rights of support, shelter and protection, passage and provision
of water, etc.
c) SPA provides that common property shall be held by the owners of all the units as tenants in
common in shares proportional to their respective unit
(v) Upon payment of prescribed fee, a Certificate of Sectional Property in respect of each unit is issued
a) Using this certificate, each unit may be transferred, leased, charged or dealt with in the same
manner as land held under the RLA

Radhika owns a leasehold She presents a sectional Once presented to the

property of 1 acre and plan + the title + other Registrar, the Certificate
wants to construct 50 documents to the of Lease pertaining to
units under the SPA Land Registrar the 1 acre is closed

Each unit is then allocated

The Corporation Simultaneously, another
a separate register under
automatically comes in to 50 registers are opened -
the SPA and each unit gets
force for management of one for each unit in the
its own individual Title
the building new building
Deed

1.1 SALE OF INDIVIDUAL UNITS

 The SPA provides comprehensive details about how a developer is to sell a unit or a proposed unit to a
purchaser
 Section 46(i) SPA provides that a developer shall not sell/agree to sell a unit or proposed unit unless
he has delivered to the purchaser a copy of the:
a) Purchase agreement;
b) By-laws or proposed by-laws of the corporation;
c) Management agreement or proposed management agreement;
d) Recreational agreement or proposed recreational agreement;
e) Lease of the parcel – if the parcel on which the unit is located is held under a Lease and
Certificate of Sectional Property in respect of the unit/proposed unit;
f) (Any) charge that affects or proposed charge that will affect the title to the unit or proposed
unit, or, in respect of that charge or proposed charge, a notice prescribed under Section 46(2)
SPA; and
g) The sectional plan or proposed sectional plan

1.2 MANAGEMENT OF SECTIONAL PROPERTIES

 The SPA provides for a unique method in managing property
 Upon registration and declaration of a particular parcel as a sectional property, a body known as the
Corporation comes into being, constituted under the name “The Owners, Sectional Plan No. [insert
number given to plan on registration]”
 Important points to note about the Corporation are:
o It consists of all persons who are owners of units in the parcel or who are entitled to the
parcel when the sectional arrangement is terminated under the Act
o It shall have perpetual succession and a common seal, but the provisions of the Companies
Act shall not be applicable to it
o Its core function is to control, manage and administer the common property – including
payment of any insurance premiums, land rent, etc.  to perform these obligations the
corporation is required to set up a fund and raise money for the fund by levying contributions
on the proprietors in proportion to the unit entitlement of their respective units
 The Corporation must also have a Board of Management – this is compulsory under Section 26 SPA
o It will be the Board that exercises the powers and duties of the corporation
o When the developer registers a sectional plan, he shall within 90 days from the day that 50%
of the residential units are sold, or 180 days from the day that the first residential unit is sold
(whichever is sooner), convene a meeting of the Corporation at which the Board will be
elected

o The Board, once elected, shall have 28 days to appoint an Institutional manager to manage
the units, the common property and the immovable property of the corporation  the
 institutional manager must be either an accountant with a practicing certificate for a period of
not less than 5 years; a registered agent; or an advocate

1.3 TERMINATION OF SECTIONAL PROPERTY STATUS

 This can be through a unanimous resolution of the Corporation
 Alternative, an application to terminate the sectional status of the building may be made to the court
by the Corporation, an owner, a registered chargee of a unit, or a purchaser under an agreement for
sale of a unit  if, having regard to all factors, the court considers it just and equitable to do so, then
it may terminate the sectional status of the building ( Section 55 SPA)
 Upon termination, the Corporation files a notice with the registrar in the prescribed form , who then
registers the notice
 the unit owners become entitled to the parcel as tenants in common, in shares proportionate to the unit factors
of their respective units (Section 56 SPA)

2. SUBLEASES
 A landowner holding a freehold or leasehold interest from the government may grant a sub-lease out
of the leasehold or freehold interest (Section 63 Land Act)
 The property may also be leased by third parties, conveying some or all of the leased property for a
shorter term than that of the head lease
 Sub-leases may be sanctioned by the head lessor
 The concept of sub-leases is common with ownership of flats and apartments  the owners of
apartments ordinarily constitute themselves into a management company (with the owners being
shareholders) purposefully to manage the estate
 Owners of all the apartments enjoy equal enjoyment of the common amenities
 The management company is mandated with purchasing the reversionary interest from the head lease
to ensure that upon expiry of the sub-lease, the sub-lease can be renewed in the name of the
management company with the shareholders continuing to own common areas
 The management company also collects a monthly service charge from its shareholders to pay for
land rates, water, electricity, etc. in the common areas and to maintain the compound

2.1 CHARACTERISTICS OF A SUBLEASE

 The term granted on the sublease must be less than that of the head lease
 The management company is registered under the Companies Act:
o To manage the property upon which the sublease is created;
o For acquisition of the reversionary interest;
 o Due to the fact that owners of the subleases are entitled to a share of the management
company, as the same entitles them to a reversionary interest
 The building/architectural or site plans will be annexed to the sublease and properly marked
 The unit sold must be properly described, together with ownership of the common areas
 There is a monthly service charge for payment of rents, rates, maintenance of common areas, etc.

2.2 SECTIONAL PROPERTY TITLE v SUBLEASE TITLE

SECTIONAL PROPERTY TITLE SUB-LEASE TITLE

Protects the purchase process Does not govern the purchase process
On registration of the sectional plan, the Registration is under the same registers, in line
register is with section
closed and a new one is opened for the 54 LRA
Title Deeds
No title is issued for the common Title is issued for the common property (which
property, but the may lead to
same is registered duplicity of titles)
Common property is defined and owned as The common property is not defined and
part of the owned by unit
unit in the title owners as shareholders in the management
company
Corporation is formulated automatically Management company is manually
formulated and this is
discretionary, dependant on the lessor
The sectional plan to be used for The sublease to be used for registration is not
registration is prescribed
prescribed

CHAPTER 11: TAXATION ON DOCUMENTS

1. STAMP DUTY
 Stamp Duty is revenue raised by the Government by requiring that stamps sold by the Government
be affixed to designated documents
  The stamps are affixed/embossed/impressed by means of a red dye, franking or use of adhesive
revenue stamps
 Section 5 Stamp Duty Act (‘SDA’): the conveyancing instruments subject to this rule (i.e. require to
be stamped) are: transfers, leases, partitions, charges and mortgages, discharges of charges, re-
conveyances of mortgages, powers of attorney and debentures
 A document that has yet to be stamped will not be registered until the requisite stamp duty has been
paid (Section 46 LRA) and a failure to pay stamp duty is an offence (Section 113 SDA)
 Section 6 SDA states that stamp duty is to be paid within 30 days of the document being executed (if
the document is executed within Kenya), or alternatively, within 30 days of receipt (if executed
outside of Kenya)
 Section 10A SDA states that reference shall be made to the Chief Government Valuer to determine
the true open market value of a property to be transferred, as at the date of the conveyance/transfer,
to ascertain whether there is the need for any additional stamp duty
 Failure to pay stamp duty is equivalent to tax evasion and as such is a criminal offence under Section
113 SDA. Moreover, Section 20 SDA stipulates that the effects of non-payment of stamp duty
include:
a. Non-admissibility of documents as evidence in court;
b. Non-registration of documents; and
c. A possible penalty of Kshs. 1/= for every Kshs/ 20/=, and if every fractional part of Kshs.
20/= of the duty chargeable in each quarter of the year

1.1 PROCEDURE FOR PAYMENT OF STAMP DUTY

(i) Applicant presents document for assessment by the Collector/Valuer
(ii) The Assessor confirms if duty is payable, counterchecks information on the form and related
documents, ascertains the amounts, and then endorses both the Form and the documents
(iii) The applicant then generates a KRA PIN Form on the iTax Platform

(iv) Applicant pays the amount in the desired bank (procedure below)
(v) Applicant returns document, together with proof of the payment, to the Collector
(vi) The Collector reconciles records and stamps document by franking
(vii) The document is then audited by the Government accountant and dispatched
 1.2 PROCEDURE FOR PAYMENT OF AMOUNT ON iTAX PORTAL
(i) Register and/or log on to the iTax Portal through www.itax.kra.go.ke
(ii) Go to the ‘payments’ menu  select ‘payment registration’  click ‘next’
(iii) On the payment’s registration form, select ‘Agency Revenue’ as the Tax Head and ‘Stamp Duty’ as the
Tax Sub-head
(iv) Select the type of instrument you are dealing with, e.g. a charge  enter the declared value and the
date of the instrument, then fill in the fields that will be populated as a result of the choice of
instrument
(v) Declare the PIN of the vendor + click ‘add’  Declare the PIN of the purchaser + click ‘add’
(vi) Select ‘Mode of payment’ and enter the ‘Receiving bank’s name’
(vii) Submit the form  download the payment slip & print 2 copies  Make payment at selected bank
(viii) If payment is through mobile money, select ‘Mode of Payment’ as ‘Cash’ and ‘Receiving Bank’s
name’ as ‘M-Payment’, then make the payment through the pay-bill instructions given

1.3 RELIEFS AND EXEMPTIONS UNDER THE STAMP DUTY ACT

 Adjudication of stamp duty is to the discretion of the Collector. Generally, all documents are to
be stamped unless specifically exempted under Section 17 SDA:
a) Where there is an instrument executed by or on behalf of the Government, or in favour of the
Government, it is the Government that is to pay the stamp duty payable;
b) A bond given by a public officer in exercise of his duties;
c) A will, codicil or testamentary disposition;
d) Instruments on the sale/transfer of land for the construction/expansion of educational
institutions;
e) Family investment companies;
f) Research institutions;
g) Charitable institutions;
h) Subsidiary companies
 There are general ministerial recommendations for reliefs from stamp duty or exemptions on the
interest of the public (Section 106 SDA)  e.g. development partners, research institutions, etc.
 There are also some general statutory exemptions from stamp duty (Section 117 SDA), including to:
Educational institutions; family investment companies; charitable institutions; subsidiary companies,
etc.
 2. CAPITAL GAINS TAX
 Capital Gains Tax (‘CGT’) was reintroduced by the Finance Act 2014 after having been suspended
in 1985, and the Finance Act 2019 has proposed an increase of capital gains tax
 Section 3(2)(f) Income Tax Act stipulates that gains accruing on the transfer of property on or after
January 2015 shall be chargeable to ‘CGT’ at a general rate of 5% on the net gain
 CGT, in contradiction to Stamp Duty, is payable by the person who has transferred the interest in the
property and not by the person who the interest in the property is transferred to
 A transfer takes place:
o Where a property is sold, exchanged, conveyed or disposed off in any manner, including by
way of a gift;
o On the occasion of loss, destruction or extinction of the property; or
o On the abandonment, surrender, cancellation or forfeiture, expiration of rights to property

2.1 METHOD OF COMPUTING CGT

 The rate of Capital Gains Tax is 5% of the net gain

NET GAIN = TRANSFER VALUE –

ADJUSTED COST

 Transfer value: this is the value of consideration/compensation for the property transferred MINUS
the incidental costs incurred in transferring the same
 Adjusted cost: the cost of acquisition/construction + enhancement costs + preservation costs + costs of
defending the Title
+ incidental costs to acquiring the property

2.2 EXEMPTIONS AND EXCLUSIONS FROM CGT

(i) Individual residence occupied at least 3 years immediately before the transfer
(ii) Sale of land by an individual, where the proceeds of the sale are less than Kshs. 3 million
(iii) Agricultural land that is less than 50 acres in size
(iv) Transfer of property for securing a debt or loan
(v) Transfer of assets between spouses, former spouses or immediate family
(vi) Transfer or sale of a property for the purpose of administering the estate of a deceased person (must
be within 2 years of the death and with a court order)
(vii) Income that is taxed elsewhere
(viii) Issuance by a company of its own shares or debentures
(ix) Disposal when administering the estate of a deceased person
(x) Vesting property to a liquidator or receiver
(xi) Exchange of property during company restricting
(xii) Transfer of securities traded at NSE

2.3 PROCEDURE FOR PAYMENT OF CGT

(i) Register and/or log on to the iTax Portal through www.itax.kra.go.ke
(ii) Go to the ‘payments’ menu  select ‘payment registration’  click ‘next’
(iii) On the payment’s registration form, select ‘Income Tax’ as the Tax Head and ‘Capital Gains Tax’ as
the Tax Sub-head
(iv) Fill in details on the type of CGT (if it is a CGT exemption, select the option on ‘exemptions’ and
choose the relevant
exemption applicable from the list)
(v) Declare the PIN of the vendor + click ‘add’  Declare the PIN of the purchaser + click ‘add’
(vi) Fill in details on the Land Reference Number + year of purchase + date of instrument + declared value,
etc.
(vii) Calculate the incidentals incurred
(viii) Select ‘Mode of Payment’ and enter the ‘Receiving Bank’s name’
(ix) Submit the form  download the payment slip & print 2 copies  Make payment at selected bank
 REPLACING CERTIFICATE OF TITLE
LOST OR STOLEN Prevents land grabbing and secures tenure of proprietor
TITLE S. 33 of the LRA: provides for replacement of documents
Process
● report loss or theft to police
● get abstract
● go to lands office to apply for search
● get certificate of search showing status of land
● contact advocate to draft statutory statement stating
i. how the document was lost
ii. committing to recover lost title and take it to registrar for cancellation
● proprietor applies to registrar for issuance of duplicate certificate of title
● Produce abstract and statutory statement to show the loss or destruction
● Pay fees
● If registrar satisfies, publishes notice in gazette and in two newspapers of nationwide
circulation inviting objections
● After 60 days + no objection, registered owner takes copy of gazette to land registry
● Registrar issues new title after fees paid
● Entries made into the register and then title sent to owner

N.B statutory declaration by all registered proprietors or directors (company) or chargee

(when land is charged)