Introduction

The Constitution of Kenya, 2010 grants every Kenyan the right to own property in any part of Kenya. Article 40(6), however, places a caveat on the enjoyment of the right to own property. It provides that such right shall not be enjoyed in respect to property which has been unlawfully acquired. This position was reinforced by the Supreme Court in its recent decision in Dina Management Limited v County Government of Mombasa & 5 Others (Petition No. 8 (E010) of 2021. In this landmark decision, the Supreme Court deconstructed the doctrine of indefeasibility of title and enlarged the buyer’s role in the due diligence process.

Indefeasibility of Title

Kenya operates under the Torrens Registration System which ensures that all titles to land in Kenya are registered and such records are accurately kept. Therefore, titles issued to individuals are conclusive evidence of ownership. Hence, official search results generated by the Lands Registry are expected to be a depiction of the correct ownership of the property.

However, the Supreme Court has affirmed that search results from the Lands Registry do not always show the correct state of ownership. In the much-contested ownership of land between the Appellant and the County Government of Mombasa, the court noted that the title is an end product of a process. The Appellant in this case had acquired the disputed property from a seller who had initially acquired the property from H.E. Daniel Arap Moi. It was urged that the former president acquired the property by allocation. The Court noted that the allocation process had been irregular and illegal and as such, he could not have passed a good title. Accordingly, any person who acquired the property from H.E. Daniel Arap Moi could not have obtained a clean title. On this basis, the court denied the appellant ownership of the property, noting that it could not find refuge in the doctrine of indefeasibility of title. Moreso, the court was quick to note that irregularly acquired title cannot be sheltered by the law under the pretext of the right to property since the right can be limited by law.

If the process preceding the issuance of the title is tainted by fraud and illegality, the title cannot be protected under the doctrine of indefeasibility of title. This places a heavy burden on the Purchaser and their advocates in the investigation of title.

Investigation of Title

Due diligence is a crucial facet of a land transaction. The duty of investigating the title befalls the Purchaser to ensure that they will acquire a good title, devoid of encumbrances. This enables the Purchaser to avoid potential contestations of the title. The Supreme Court’s pronouncement has broadened the scope of due diligence. Initially, the buyer would make an application for official search at the Lands Registry and the results would suffice as the correct record of ownership.

However, there are several loopholes that may not be revealed by Official Search Results from the Lands Registry. Such loopholes include erroneous or irregular registration of property as was the case with the Supreme Court Case at hand. With the new decision, the buyer is obligated to conduct a historical search on the property to ensure that the entire process of acquisition beginning from the initial allocation of the land to the current title has been proper and legal. Failure to conduct such extensive due diligence exercise could result in the buyer obtaining an unclean title, incapable of being validly transferred.

The bona fide Purchaser for Value without notice

A bona fide purchaser is defined in the Black’s Law Dictionary as:

“One who buys something for value without notice of another’s claim to the property and without actual or constructive notice of any defects in or infirmities, claims or equities against the seller’s title; one who has in good faith paid valuable consideration for property without notice of prior adverse claims.”

The doctrine of bona fide purchaser for value without notice protects purchasers who acquire property in good faith and without knowledge of any other adverse claims. The Supreme Court cited the case of Samuel Kamere v Lands Registrar Kajiado [2015] eKLR which provided the threshold for consideration of a bona fide purchaser:

1. The purchaser must have acquired a valid and legal title;
2. The purchaser must have carried the necessary legal due diligence to determine the lawful owner from whom they acquired a legitimate title; and
3. The Purchaser must have paid valuable consideration for the purchase of the property.

Against this backdrop, the Supreme Court also found that the Appellant could equally not find solace under the doctrine of a bona fide purchaser for value without notice. This is because the Appellant had not acquired a valid and legal title and it had also not conducted historical due diligence to ascertain that indeed the property had been validly owned since the first allocation. This finding buttresses the heightened obligations on the buyer to investigate the title beyond the Official Search results issued by the lands registry.

Conclusion

A purchaser must be diligent in investigating the title by exhausting all avenues of information to ensure that they obtain a valid and legal title that can be defended against any contestation. This obligation is especially burdensome in the wake of the ongoing digitization process which has complicated access to historical records. Even though the digitization process aims to correct anomalies and make it easier for due diligence, we still have a long way to go due to system hitches. Essentially, the Supreme Court’s decision will affect land transactions and even the use of property as collateral in the lending sector.

 Disclaimer

This article is intended for general knowledge only. It does not create an advocate-client relationship between any reader and Mboya Wangong’u & Waiyaki Advocates. For particular expert advice on any matter dealt with above, please contact us through jnjoroge@lexgroupafrica.com or fgatwiri@lexgroupafrica.com