A snapshot of the new land laws in Kenya

Copied directly from http://www.coulsonharney.com/News-Blog/Blog/A-snapshot-of-the-new-land-laws

Introduction
The issue of land, its ownership, use and management is a highly emotive one in Kenya and was one of the key issues that drove the need for a new constitution. Following lengthy deliberations and a comprehensive public participation process, a new constitution (the “Constitution”) was promulgated on 27 August 2010. The Constitution sets out principles governing land and also requires all laws relating to land to be revised, consolidated and rationalised within certain timelines.

“….it is a very difficult exercise; a very difficult undertaking“, said Hon. James Orengo, Minister for Lands, in Parliament, following the passing of a new suite of land legislation to implement the principles governing land set out in the Constitution.

Parliament passed three bills related to land on 25^th and 26^th of April 2012. The President assented to the bills immediately and the new land laws became effective on 2^nd May 2012. The new land laws are:

• The National Land Commission Act, 2012;
• The Land Registration Act, 2012; and
• The Land Act, 2012.

Some laws repealed – not all

The new laws have repealed the following statutes:

• The Indian Transfer of Property Act;
• The Government Lands Act;
• The Registration of Titles Act;
• The Land Titles Act;
• The Registered Land Act;
• The Wayleaves Act; and
• The Land Acquisition Act.

The following are some of the laws that have not been repealed:

• The Land Control Act;
• The Landlord and Tenant (Hotels, Shops and Catering Establishments) Act;
• The Sectional Properties Act; and
• The Distress for Rent Act.

The new laws require all existing laws relating to land that have not been repealed, to be applied with the necessary alterations and adaptations to give effect to the new laws. However, in the absence of formal amendments to the existing laws that have not been repealed, the altering and adapting of these laws in order to give effect to the new laws is likely to cause some inconsistency in the practical application of the law.

Key Highlights of the New Land Laws

1. Land Administration

The administrative structures for management of land in Kenya have been changed. The National Land Commission (the “Commission“) will have wide powers in the management and administration of public, private and community land.

The chairperson and members of the Commission will be identified through a public, transparent and competitive selection process and ultimately approved by Parliament. This process was to commence within 14 days of the coming into effect of the new laws, which was 16 May 2012.

In order to carry out its functions effectively, the Commission is required to devolve the administration of land. Consequently the Commission is required to establish offices and land management boards at the county level. In the interim, employees of the Ministry of Lands in departments whose functions have been moved to the Commission are required to continue performing their services as if they were employees of the Commission. In due course, they will be required to re-apply for their jobs and undergo a vetting process to ensure their suitability to serve on the Commission.

2. Public Land

The allocation of public land to private individuals has been a concern for many Kenyans for a long time. Allocation of public land was within the control of public officers at the Ministry of Lands, who were susceptible to influence by the executive arm of the Government. The process of allocation of public land was therefore shrouded in secrecy and often, members of the public would only realize that public land has been expropriated, after a title deed has been issued to private persons.

Allocation of public land to private persons will now be managed and supervised by the Commission. This creates independence in the allocation process as the executive arm of the Government will no longer have control of the process. In addition, land available for allocation will now be Gazetted and notices published in at least two local dailies, prior to commencement of the allocation process. This will go a long way in creating transparency and public participation in the allocation process.

3. Community Land

The new laws require all land in Kenya, whether private, public or community land, to be registered. The new laws therefore make provision for the registration of community land. However, substantive provisions on the administration and management of community land will be enacted by 2015 as required by the Constitution.

4. Private Land

The new laws will have a significant impact on the administration and management of private land in Kenya and the rights of various interested parties.

Some of the key changes are as follows:

4.1. Title to land; transfer of land and connected matters

(a) What happens to existing title deeds?

Under the old land law, title deeds were issued under any one of the following statutes, which have now been repealed:

• The Registered Land Act (RLA);
• The Registration of Titles Act (RTA);
• The Land Titles Act (LTA); and
• The Government Lands Act (GLA)

Retained titles : Title deeds issued under the RLA and RTA continue to be valid notwithstanding the new laws. These are the most common title deeds in Kenya. In due course, the registrar will issue new title deeds in the new prescribed form.

Titles to be examined and registered afresh: Title deeds issued under the GLA and LTA on the other hand, will have to be examined and registered afresh under the new laws. There are no specific timelines prescribed for the examination and fresh registration, save that this has to be done ‘as soon as conveniently possible‘ – as provided in the new laws. This does not mean that GLA and LTA title deeds invalid. However, they will only be recognized under the new laws after their examination and fresh registration.

The new laws are silent on whether holders of GLA and LTA title deeds will be allowed to transact with their title deeds, pending their examination and fresh registration. This appears not to be permitted and will almost certainly cause delays in ongoing transactions related to land held under such title deeds.

Some of the main characteristics of GLA and LTA title deeds are as follows:

• GLA title deeds – most of them were issued prior to independence. They contain the words “Indenture“, “Conveyance” or ” Indenture of Conveyance” as part of their heading. They were mostly issued for land that was designated as ‘farm land’ prior to independence and shortly thereafter. Such land includes some parts of Central Province, Kericho and Nairobi, especially Karen. It is uncommon to find GLA title deeds for land in other parts of the country. A few exist though.
• LTA title deeds – these were issued for land at the Coast and Lamu Island only.

(b) Pre-emption rights on expired grants

All land held on leasehold titles will revert to the Government on expiry of the term. However, where the immediate past owner of the land is a Kenyan citizen, the Commission is required to grant them the right to re-acquire the land, so long as the land is not required for public purposes.

Following the promulgation of the Constitution, foreigners who held freehold titles or leasehold titles that were for a term exceeding 99 years, had their titles reduced to 99 year leasehold titles. There has been debate on when the 99 year period is deemed to commence. One view was that the 99 year period commenced on the date the Constitution was promulgated (27 August 2010) and the other view was that the 99 year period commenced on the date the title was first granted. Unfortunately, the new laws do not provide further clarity on when the 99 year period commences.

(c) Certificates of lease to be issued over apartments, flats, townhouses, maisonettes and offices

Where a person is registered as the owner of a long term lease over apartments, flats, maisonettes, townhouses or offices, the registrar will now be required to issue them with a certificate of lease (title deed). The registrar is required to register such long term leases where the property comprised is properly geo referenced and approved by the Government’s survey department. However, the processes and timelines for approval by the Government’s survey department have not been defined.

(d) Transfer of a portion of land – new subdivisions to be registered first

Transfer of portions of land will only be completed upon undertaking a subdivision and a new register being opened for the new subdivisions. This means a new title deed for the subdivision will have to be obtained prior to completing the transfer of a portion of land.

A transfer is defined as, among other things, the passing of land from one person to another. Therefore, arguably, the passing of a long term lease from one person to another may be deemed to be a ‘transfer’. It is therefore likely that the sale of a portion of land by way of a long term lease will be deemed to be a ‘transfer of a portion of land’ and therefore require subdivision. However, the requirement for subdivision will not apply where such land comprises of apartments, flats, townhouses, maisonettes and offices (which only require geo-referencing and approval by the Government’s survey department, as opposed to subdivision).

(e) Spouse deemed ownership and requirement for spousal consent

“Are you married?”- This is a question that is likely to feature more in land transactions, following the passing of the new laws. The new land laws have created statutory rights to land for spouses. These rights affect all land and not just matrimonial property. These rights include:

• Spouse deemed owner though not on title – where land is held in the name of one spouse, but the other spouse has contributed to the productivity, upkeep or improvement of the land, the contributing spouse shall be deemed to have acquired an ownership interest in the land. These ownership rights shall be recognized as if they were registered. Case law will hopefully interpret precisely what constitutes spouse contributions.
• Sale or charge void, if spousal consent not obtained – Dispositions (including sale, transfer, lease and charges) of any land or a dwelling house held in the name of one spouse shall require the consent of the other spouse.

A lender or purchaser is now under a duty to inquire whether the consent of the other spouse or spouses has been obtained. If the spouse undertaking the disposition misleads the lender or purchaser or other transferee as the case may be, the sale, transfer, charge, lease or other disposition shall be void, at the option of the spouse who did not consent to the transaction.

The term ‘spouse’ has not been specifically defined in the new laws. However, its definition could be inferred from the definition of the term ‘marriage’, which has been defined as a “civil, customary or religious marriage”. The lack of a specific definition of the term ‘spouse’ is likely to cause practical difficulties in determining whether or not spousal consent was obtained for a transaction. In addition, Kenyan law recognizes marriages that are currently not capable of registration (due to lack of a legislative framework), such as marriages under customary law. The existence of such marriages creates an opportunity for abuse of the new legal requirements.

(f) Evicting a purchaser in possession not as easy – statutory protections apply

It is not unusual in transactions for sale of land, for the seller to allow the purchaser to take possession of land prior to registration of the transfer, on terms agreed between the seller and the purchaser. This is especially the case where registration is delayed due to Government bureaucracy. The terms under which possession would be granted would include an agreement on circumstances when the seller would require the purchaser to vacate the premises, for example, if the transfer is not registered within a reasonable time.

Under the new laws, the terms upon which such a purchaser will take possession, will not only be regulated by what the parties have agreed, but also the provisions of the new law. Under the new law, when a purchaser takes possession of land prior to completion of the sale, the vendor can only regain possession peaceably (no resistance from purchaser) or through a court order. In addition, the purchaser is entitled to relief from court in certain circumstances.

This will almost certainly result in sellers refusing to permit any form of possession prior to completion.

(g) “Land Use Consent” may be required prior to effecting a transfer of land

An additional requirement before effecting a transfer of land is the consent of the county land management board (a branch of the Commission), as to the use of the land. Whilst it is not explicitly clear what this consent will contain, we presume it will contain a certificate to the effect that the land is being used in accordance with the designated user.

(h) Prejudicial sales of land by debtors to be set aside

The sale or transfer of land by an owner of land who owes money to any person may be restored for the benefit of unsecured creditors, where the owner of the land makes the sale or transfer in order to prejudice unsecured creditors. This will involve a court process. Such disposals of land will be deemed prejudicial if the seller will be unable to pay all their debts without recourse to the sold land and the disposal is intended to hinder or delay recourse to the land, by a creditor.

(i) Execution of documents by companies to be in the presence of an advocate

An additional requirement in terms of execution is that corporate bodies or associations effecting dispositions of land (such as agreements for sale, transfers and charges), will now be required to execute these documents in the presence of an advocate of the High Court of Kenya, a magistrate, judge or notary. Presumably, this means that for companies, in addition to having the usual two directors or a director and a company secretary witness the sealing of a document, an advocate, notary, judge or magistrate should witness the sealing of the document.

(j) Compulsory Acquisition – process now more just and fair

The process of compulsory acquisition of land is now more transparent and will be managed by the Commission. In addition, the process is more just and fair to the owner of land as the award of compensation (determination of amount payable) will be made prior to the Government taking possession of the land. The Commission is expected to promulgate rules to regulate the assessment of just compensation.

Where there is a dispute in the amount awarded, the Commission is required to place the compensation awarded in a special account, which will earn interest at prevailing bank interest rates, before taking possession of the land. This is a new requirement aimed at making the process of compulsory acquisition more just and fair.

(k) Land Sizes – a scientific study to be commissioned within one year

A scientific study to determine the economic viability of minimum and maximum land sizes will be commissioned within one year, which is by 01 May 2013. The findings of the study will be subjected to public comments and thereafter debated and if deemed fit, adopted by Parliament. Rules prescribing the minimum and maximum acreages, based solely on the report adopted by Parliament, will then be published by the Cabinet Secretary in charge of matters related to land.

(l) Government Fees – to be a percentage of value

Presently, save for stamp duty and exceptional matters such as annual rent which are based on the value of the land, fees payable to the Government for all matters related to land are nominal.

Under the new laws, all fees payable to the Commission for any application made under the new laws will be based on a per centum of the value of the subject matter. Furthermore, the new laws do not permit the Commission to prescribe a cap or collar for such fees. We would hope that the Commission will be permitted to prescribe a cap or collar in the rules to be issued under the new laws by the Cabinet Secretary in charge of land matters.

4.2. Leases over private land

(a) Mandatory provisions?

The new laws now prescribe what appear to be mandatory provisions governing all transactions relating to leases. Part VI of the Land Act deals with leases. This part begins by allowing parties to a lease to vary the application of any of the provisions in Part VI, at their discretion. However, certain provisions within Part VI are deemed to be mandatory. This appears to have been a drafting error. We think the intention was to allow parties to vary the application of the part, save for those provisions deemed to be mandatory. The provisions that are deemed to be mandatory include:

• Forfeiture of leases – landlords cannot forfeit a lease without giving notice to the tenant (such notice to be for a minimum of 30 days) requiring the tenant to remedy the breach within a reasonable time (if capable of remedy). In addition, upon issuance of the notice, the tenant has a statutory right to seek the court’s relief from forfeiture. In considering such an application, the court shall look into the conduct of the parties and the circumstances of the case.
• Retrospective effect – tenants who are presently undergoing a forfeiture process, which begun prior to the enactment of the new laws, may go to court and stop the ongoing process and require that the forfeiture process be commenced under the new laws.The exercise by landlords of their right of forfeiture will now take longer. In addition, tenants will almost certainly invoke their rights for relief in court, in which case the conduct of the parties will be considered by the court. In effect, this means that before seeking to exercise the right of forfeiture, landlords should consider all other remedies available to them and afford the tenant sufficient time and opportunity to remedy the breach.

• Obligation not to withhold consent unreasonably – Where there is an obligation for the tenant to obtain the consent of the landlord before doing something (or not doing something), there is now a deemed obligation on the part of the landlord not to unreasonably withhold consent. The landlord is also required to give or refuse consent within a reasonable time. Actions that will be deemed unreasonable include:
  • Requesting payment of a fee (other than to cover landlord’s costs in granting consent); and
  • Imposing an unreasonable condition

(b) Certificates of title to be issued for certain leases

Under the Land Registration Act, certificates of title will be issued for leases for a period exceeding 25 years. However, under the Land Act, long term leases for 21 years are deemed to confer title and title deeds should ideally be issued over such leases as well. There appears to be an inconsistency between the two laws.

4.3. Charges over private land – mandatory provisions and retrospective effect

There are now new provisions on regulating charges over land. These provisions are mandatory and have retrospective effect, which means that they will apply to charges created before the new laws came into force.

Enacting laws with a retrospective effect is unusual, particularly where the retrospective effect is likely to cause detriment. In our view, retrospective legislation that leads to any form of arbitrary expropriation of a right or interest in land may be challenged for being unconstitutional.

Some of the key provisions regulating charges over land, including charges created prior to the commencement of the new laws, are as follows:

(a) Variation of interest rates – notice required together with simple explanation to the borrower

Where parties have agreed to a variable interest, any increase or decrease may only be effected upon giving a 30 days’ notice to the borrower and stating clearly ‘in a manner that can be readily understood‘ the new interest rate to be applied.

(b) Alternative to further charges? – memorandum of increase or decrease in amount secured

The amount secured by a charge may be increased or decreased by a signed memorandum endorsed or annexed to the charge instrument. The memorandum may also vary the terms and conditions of the charge, including the term of the charge.

(c) Spousal consent required for charge of land; charge may be void if no consent obtained

As discussed above, spousal consent will be required in order to validly charge any land held by a person who is married. If spousal consent is not obtained or if the borrower gives misleading information on the lenders inquiries regarding spousal consent, the charge will be deemed void at the option of the spouse or spouses whose consent was not obtained. This provision does not have retrospective effect.

(d) Chargee’s statutory power of sale – longer process and more notices required; duty to obtain best price; ongoing sales by chargees over any land may be stopped

• Longer process – the process of exercising the chargee’s statutory power of sale is now more procedural with the addition of at least 40 days on the notice periods previously applicable.
• Forced sale valuation required – a forced sale valuation must be undertaken before exercising the statutory power of sale. The valuation shall be undertaken by a registered and licensed valuer (under the Valuers Act).
• Duty of care to obtain best price – secured lenders are now under a statutory duty of care to “obtain the best price reasonably obtainable at the time of sale” in exercising their statutory powers of sale over the charged land. This duty of care is owed to the borrower, guarantors and subsequent lenders secured on the same land.
• More ways in which sale may be concluded – statutory power of sale may be by way of private contract at market value or public auction at a reserved price. In addition, the sale may be of the whole or part of the land, by way of subdivision, for purchase price to be payable in one sum or by instalments or such other conditions as the lender may think fit taking into account their duty of care to obtain the best price reasonably possible.
• Retrospective effect on ongoing sales by chargees – where a secured lender had initiated “any steps to foreclose a charge” before the enactment of the new laws, the borrower may apply to court for an injunction to stop the continuation of any such step. If such an injunction is issued, the lender may commence fresh proceedings under the new laws in order to exercise their statutory power of sale.

(e) Matrimonial property – charge may be re-opened and terms varied

The court may re-open a charge of any amount secured on matrimonial property, “in the interest of doing justice between the parties“. We presume the parties referred to by this provision are the lender, the borrower, the borrower’s spouse and any guarantors.

The power to re-open a charge may only be exercised by the court, on an application made by the borrower, the lender or the registrar (in certain circumstances). The court has wide powers in considering an application to reopen a charge on matrimonial property. Furthermore, the court is required to consider, among other things:

• the financial standing and resources of the borrower, relative to those of the lender, at the time the charge was created;
• the interest rates and any variation thereof from time to time; and
• the age, gender, health, experience and understanding of the commercial transaction of the borrower, at the time the charge was created.

4.4. Corruption and other Offences

(a) Corrupt Transactions – transaction may be deemed void and land forfeited

Where the granting of public land or issuance of certificates of ownership is induced or obtained through corruption on the part of any government official or employee of the Commission, the transaction shall be void and of no legal effect.

Any land acquired through a process tainted with corruption shall be forfeited to the Government. The term “corruption” shall be construed as defined in the Anti Corruption and Economic Crimes Act, 2003. This definition is wide and includes ‘abuse of office’ and ‘breach of trust‘.

(b) Offences and penalties

The new laws introduce new offences:

• There are several offences related to the giving of false information and other fraudulent practices and these are punishable by a fine of up to KES 10,000,000; imprisonment for up to 10 years, or both. Interestingly, the Land Registration Act has a more lenient punishment for the same offences, being a fine of up to KES 5,000,000 and imprisonment of up to 5 years or both. These provisions may need to be harmonized.
• Unlawful occupation of public land is now an offence which will attract fines of up to KES 500,000 and if a continuous offence, a sum not exceeding KES 10,000 for every day the offence is continued;
• Wrongful obstruction of a public right of way is now an offence and will attract a fine of up to KES 10,000,000 and if a continuous offence, a sum of up to KES 100,000 for every day the offence is continued.

In addition to these criminal sanctions, any rights over land that were obtained by virtue or on account of an offence may be cancelled or revoked.

4.5. Other matters: Savings and transitional provisions; rules to be published and land court

(a) Rules to be approved by Parliament in certain instances

• The Commission and the Cabinet Secretary will have powers to make regulations to better carry into effect the provisions of the Land Act and Land Registration Act. The matters to be regulated by the regulations have been outlined and include, with respect to squatters, regulations that “facilitate negotiations between private owners and squatters” and also those that deal with the ” transfer of unutilized land and land belonging to absentee land owners to squatters“.
• Where the Cabinet Secretary (as opposed to the Commission) makes regulations under the Land Registration Act, these have to take into account the advice of the Commission and be tabled before Parliament for approval. This is meant to allow for public scrutiny and introduce transparency in the creation of the regulations. More importantly, this is meant to ensure that the regulations are consistent with the general objectives of the Commission.

(b) Savings and Transitional Provisions – unclear

There is a lack of clarity and depth in the transitional provisions of the new laws. In addition, there are vacuums created by the repeal of most of the previous land laws which are not addressed in the new laws. We expect these gaps and the resultant uncertainties to cause substantial delays in land transactions.

(c) Environment and Land Court

The Environment and Land Court will have jurisdiction to hear and determine disputes related to land.

Conclusion

The task of enacting new land laws is Kenya is by no means an easy one, not least because land has always been an emotive subject in Kenya, eliciting views from persons across the economic divide. Our law makers have spent a lot of time trying to balance the views of Kenyans.

In our opinion the new land laws are a start to bringing about change, consistency and consolidation of land laws in Kenya. A key achievement is the enactment of the National Land Commission Act which provides a framework for the Commission to become operational and is one of the very positive highlights of the new laws. Ideally, this should bring about positive change in land management and administration. However, the new laws were undoubtedly passed in haste in an attempt to meet the (extended) deadline set by the Constitution. This is evident in their lack of clarity and substance and is likely to cause much more than just ‘teething problems’ in the implementation of the new land regime. As noted by one Member of Parliament immediately after passing the new laws “there are many areas to be polished as we continue with this long journey towards true land reforms“.