Challenges that may face developers

By Mumbi Mionki- Swao

The new land laws have ushered in a new era in land and property ownership in Kenya, which is a great leap forward for us as a country. However, confusion and debate abound, due to lack of clarity in the new laws.

In consolidating the Kenyan land laws, a number of Acts that previously governed land and property ownership were repealed and in their place we have the new land laws namely: The National Land Commission Act (NLCA), the Lands Act (LA) and the Land Registration Act (LRA).

The Acts repealed include: The Registration of Titles Act (RTA), the Registered Lands Act (RLA), the Government Land Act (GLA), the Land Titles Act (LTA), the Indian Transfer of Property Act (ITPA), the Wayleaves Act (WA) and the Land Acquisition Act (LAA).

Some of the questions developers (as indeed many land owners) are posing include:

What happens to my RLA/ RTA/ GLA/ LTA title?

The LRA provides that a grant or certificate of title under the RLA or RTA shall be considered to be a certificate of title or certificate of lease under the LRA from the effective date.

The process is more difficult if the title one holds is a GLA or LTA title, as the LRA provides that the Registrar shall as soon as conveniently possible cause the title “to be examined” and prepare a register in which shall be registered all registrable particulars affecting the particular title, serve upon the proprietors of any leases or charges there under a notice of intention to register then issue to the proprietor upon request, a certificate of title or certificate of lease in the prescribed form.

What happens to the incomplete transactions already entered in to under the previous land regime?

As regards transactions commenced before the new laws came into effect, the LRA provides that: an instrument executed before the commencement of the LRA for a disposition permitted under the LRA may be presented for registration in the laid down register and the registrar shall determine by reference to the laws in force at the time of execution whether or not that instrument shall be registered and subject to the provision just stated, the provisions of the LRA shall apply to that instrument as if it had been executed after the commencement of the LRA.

Another clause states that unless the contrary is specifically provided for in the LRA, where any step has been taken to create, acquire, assign, transfer or otherwise execute a disposition, any such transaction shall be continued in accordance with the law applicable to it immediately prior to the commencement of the LRA. It is not clear for these purposes what constitutes “any step”.

There are clauses that are contradictory in this regard. For example one states that on the effective date, the repealed Acts shall cease to apply to a parcel of land to which the LRA applies, whereas another states that any right, interest, title, power or obligation acquired, accrued, established, coming into force or exercisable before the LRA shall continue to be governed by the law applicable to it immediately prior to the commencement of the LRA. It therefore seems like a lot at this point has been left to the registrar’s discretion and is subject to interpretation.

How do I, under the new laws, confer title to the apartments/ maisonettes/ townhouses/ office suites that I have developed?

Subdivision— This has always been an option for developers, where the development comprises maisonettes or townhouses, albeit not a very attractive option due to the lengthy procedure involved as well as cost implications. Each unit purchaser would be issued with a separate title.

The register relating to the main title would be closed and new registers opened in respect of the parcels resulting from the subdivision. It has been provided for in the LRA but what the process entails has not been described in detail.

Sectional Properties Act- This continues to be in force and the LRA provides that the registration of interests in land under the Sectional Properties Act shall be carried out as prescribed in the Sectional Properties Act and the register under the LRA shall be deemed to be the land register for purposes of the Sectional Properties Act. Therefore the Sectional Properties Act is consistent with the LRA.

Long-term leases— The LRA provides that the registrar shall register long- term leases and issue certificates of lease over apartments, flats, maisonettes, townhouses or offices conferring ownership if the property is properly geo- referenced and approved by the Department of Survey.

Issuance of Certificates of lease over apartments, flats, maisonettes, townhouses or offices is a great new provision because there has been a general sentiment that long- term leases on their own are not sufficient title. Being able to confer title to purchasers will definitely make them less sceptical of and more attracted to these types of property.

However, some issues arise. The first is an inconsistency between the LRA and the LA where the LRA provides that “no certificate of title or certificate of lease shall be issued unless the lease is for a certain period exceeding twenty- five years”; the LA provides that title to land may be acquired through long- term leases exceeding 21 years created out of private land. It is unclear why the inconsistency and whether it was due to an oversight or was deliberate.

Secondly, the condition that the registrar shall register long- term leases if the property is properly geo- referenced poses problems such as- what does the process of geo- referencing entail and is it one that will cause undue delay to the registration of long- term leases?

What else does a developer need to know?

Some of the other provisions that developers should note include:

Rescission of Contract

The Lands Act provides that if under a contract for sale of land, possession has been granted to the purchaser and then he breaches the contract, the Vendor may rescind the contract in two ways: resuming possession of the land peaceably or obtaining a court order for repossession of the land.

This does not preclude the vendor from suing for damages. The Act provides the procedure for obtaining an order for possession as well as the Purchaser’s relief against such rescission of contract. It is advisable to avoid all this by giving possession only against full payment of purchase price or at least a professional undertaking from a financier’s advocate.

Overriding interests: Along with all the usual overriding rights of way, air, light, water and profits that a proprietor’s interest in land is subject to, there is an interesting new one which is spousal rights over matrimonial property. This will definitely raise debate as the term spouse is not defined especially in a country where common law marriages and polygamy are legally institutionalised.

The upshot of this is that there is need to obtain spousal consent when dealing with matrimonial property. This is particularly important in cases of joint ventures between developers and land owners. How to determine what constitutes matrimonial property is debatable and whose consent to obtain in a case of polygamy is the difficult part.

Consent by lessor

Where a sublease provides that certain actions can only be taken by the lessee with the consent of the lessor, the lessor cannot unreasonably withhold such consent.

Unreasonably withholding such consent includes; requiring the lessee to pay a fee other than the payment of the lessor’s reasonable expense to give consent; imposing any reasonable conditions upon the lessee; denying consent to transfer or assign lease on the basis that the assignee or transferee is of a particular gender, race, nationality or personal characteristic.

In practice, the lessor’s right to give consent to the lessees intended dealings with their leases is usually transferred to the directors of the management company together with the reversion.

Prescribed fees: These will be prescribed by the Cabinet Secretary and will be a percentage of the value of the land.

There is a lot more that developers and land owners generally need to acquaint themselves with in the new laws to ensure compliance.

The writer is an Advocate of the High Court of Kenya practising Property Law/ Conveyancing in Nairobi. [email protected])