How to acquire land

IsMundu · April 22, 2015, 12:16am

Following

De_Clerk · April 23, 2015, 12:18pm

kindly read my notes herewith, on my analysis and research. they might be slightly detailed, but they will be helpful. ( am presenting the same to a forum)

LAND LAW NOTES

N/B: It is extremely important for buyers to use professional lawyers whenever they are buying land in Kenya in order to receive proper legal advice and representation in the entire sale process and thus avoid unnecessary pitfalls and dealing with cons. Equally important, the purchaser should avoid making any payment directly to the vendor or his agent, and such monies are better channeled through his lawyer so that he can take the requisite precautions.

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

[ul]
[li]The National Land Commission Act[/li][li]The Land Registration Act and[/li][li]The Land Act[/li][/ul]
Key Highlights of the New Land Laws

B Pre-emption rights on expired grants[/B]

All land held on leasehold titles will revert to the Government on expiry of the term.

B Certificates of lease to be issued over apartments, flats, townhouses, masionettes and offices[/B]

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).

B Transfer of a portion of land - new subdivisions to be registered first [/B]

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.

B Spouse deemed ownership and requirement for spousal consent [/B]

“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:

[ul]
[li]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.[/li][li]Sale or charge void, if spousal consent not obtained - 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.[/li][/ul]
A lender or purchaser is now under a duty to inquire whether the consent of the other spouse or The term ‘spouse’ could be inferred from the definition of the term ‘marriage’, which has been defined as a “civil, customary or religious marriage”…

B Evicting a purchaser in possession not as easy - statutory protections apply[/B]

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 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.

B Compulsory Acquisition - process now more just and fair [/B]

The process of compulsory acquisition of land is now more transparent and will be managed by the Commission. In addition, the award of compensation will be made prior to the Government taking possession of the land.

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.

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

B Spousal consent required for charge of land; charge may be void if no consent obtained[/B]

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.

B 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 [/B]

[ul]
[li]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.[/li][li]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.[/li][li]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.[/li][li]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.[/li][li]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.[/li][/ul]
B Matrimonial property - charge may be re-opened and terms varied [/B]

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:

[ul]
[li]the financial standing and resources of the borrower, relative to those of the lender, at the time the charge was created;[/li][li]the interest rates and any variation thereof from time to time; and[/li][li]the age, gender, health, experience and understanding of the commercial transaction of the borrower, at the time the charge was created.[/li][/ul]
4.4. Corruption and other Offences

B Corrupt Transactions - transaction may be deemed void and land forfeited [/B]

Any land acquired through a process tainted with corruption shall be forfeited to the Government.

B Offences and penalties [/B]

The new laws introduce new offences:

[ul]
[li]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.[/li][li]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;[/li][li]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.[/li][/ul]
BUYING THE LAND

Identification of the Land The process of land purchase starts with the buyer identifying a suitable land for purchase. Once the land has been identified, the buyer should endeavour to visit the site and satisfy himself or herself that the land meets the desired criteria including its physical location and boundaries.
Conducting the requisite searches and preliminary investigations The buyer or his lawyer should get a copy of title and National Indentity Card of the seller and conduct the requisite searches both for the land at the relevant lands office To conduct a search, one is required to file a search application form and attached a copy of the title deed. The search is then required to be lodged at the registry and the requisite search fees (current at KShs. 500/- paid. It takes 2-3 days to get search results from the Lands registry.

The search result should be able to reveal the following details:- (i) the registered owner of the property; (ii) its size; (iii) any encumbrances registered against the titles like prohibitions, court orders, cautions and caveats;

If the search results are satisfactory, once should also check whether the land is included on the Report by the Commission of Inquiry on the Illegal and Irregularly Allocated Land, commonly known as the Ndungu Land Report. Moreover, it is usually prudent for the owner to enlist the services of a registered surveyor who shall be able to confirm the beacons on the land and conduct further preliminary checks at the Survey Department. 3. Price and terms negotiation and the sale Agreement If the proposed buyer is satisfied by the preliminary investigation, he should, together with his advocates, or alone, engage the vendor or his agent for purposes of discussion and agreeing on the terms of sale including the price and the terms of payment. Usually, the buyer is required to pay 10% deposit and the balance of the purchase price upon completion of the sale transaction. Once the parties have agreed on the terms of sale, the Vendor’s advocates should prepare the sale agreement and send the same to the vendor for his approval. The sale agreement will set out the terms of sale including the name of the parties, the purchase price and mode of payment, the completion period (which is usually 90 days) and the completion documents to be furnish by the seller/ vendor to enable registration of the transfer of property in favour of the purchaser. Invariably, the sale agreement will incorporate the Law Society Conditions of Sale (1989 Version), which is a codification of the customary terms of sale adopted by the Law Society of Kenya, and these terms will apply, by reference, to the agreement of the parties unless otherwise excluded or varied by the parties in their agreement. It is also common for the sale agreement to incorporate a suitable arbitration clause, which provides for a mechanism of ease dispute resolution. Once the terms of the sale agreement have been agreed between the parties, the agreement is engrossed and executed by the parties or their power of attorney. The purchaser should be the first to sign the sale agreement, which should be forwarded to the vendor’s advocates for the vendor’s execution accompanied by the deposit cheque or evidence of the payment of the same. Once the vendor has executed, the vendor’s advocates should note to present it for stamping with duty (currently KShs. 200 for the original and KShs. 20 for each counterpart) at the lands office. This is important because of the rule that unstamped documents cannot be accepted by a court of law as evidence in the event of a dispute. 4. Preparation of the Transfer and Getting the Completion Documents the transfer is usually prepare by the purchaser’s advocate and approved the vendor’s advocate. It should also be signed by both parties. Unless otherwise stated in the sale agreement between the parties, it is usually the vendor’s duty to obtain all the requisite completion documents, which are required to effect the registration of the property in favor of the purchaser) at his own costs. These documents include:- (a) The original title for the property (b) The transfer of property duly executed by the vendor/ seller (in triplicate); (c) Identity Card/ Certificate of Registration of the vendor/ seller and Pin Certificate; (d) Three(3) passport sized photographs of the seller/vendor. If the seller is a company, photographs of two of its director or a director and company secretary and their Pin Certificate will also be required; (e) Land Rent Clearance Certificate for the Property, where the land is a leasehold from the Government; (f) Rates Clearance Certificate for the Property issued by the relevant local authority (if applicable); (g) original receipts evidencing the payment of rates and rates; (h)(h) Consent to transfer the property issued by the Commissioner of land, the relevant land control board or where the land is a leasehold from a local authority, the consent is issued by the Town Clerk of the relevant local authority. (i)Valuation form duly completed by the Vendor or his advocate; If the property is a flat/apartment or office space, and comprised the in a lease, additional completion documents will include: (a) the original lease for the property and the transfer of lease duly executed by the parties, as appropriate; (b) the consent by the lessor and/or the management company, incorporated in the transfer of lease, (c) the letter from the management company confirming that the seller has paid all the outgoings; (d) the original share certificate in the management company; (e) the transfer of share form duly executed by the parties; (f) Form D in respect of the share transfer duly signed by the company’s auditors; 5. Stamping and Registration Formalities The purchaser is usually responsible to cater for the costs of the stamp duty on the transfer of property and registration charges Before duty is determined, the vendor’s advocates must apply for the valuation of the property at the Land Office, which is undertaken by the government valuers, who are required to determine the market value of the property. This application is done by lodging the duly signed transfer of property and the valuation for stamp duty form duly signed by the vendor or his advocates (referred to above). Once the valuation has been completed, the market value of the property (not necessarily the value indicated by the transfer) will be indicated on the original transfer of property by the collector of duties. Thereafter, the vendor’s advocates will need to present the documents to the lands office for assessment of the duty payable. This is one by filling a form known as the stamp duty Declaration, Assessment and Pay-in Slip, which is completed in quadruplicate. Once the duty has been paid over the counter through the collecting either of the collecting agent banks, the documents are then lodged at the lands office for stamping with duty. The collector of stamp duties will normally stamp the documents once he is satisfied that the collect amount of stamp duty has been paid. The following are the rates applicable on transfer of land:-

[ul]
[li]Where land is in a municipality- the duty is 4% of the market value of the land as determined by the Government valuer. The market value may be higher that the value indicated by the parties in the transfer documents.[/li][/ul]
[ul]
[li]Where land is agricultural or outside a municipality- the duty is 2% of the market value of the land as determined by the Government valuer. [/li][li]In respect of a charge or mortgage – the duty payable is 0.1% of the mortgage amount. [/li][/ul]

Once the transfer of land or charge over the property has been stamp duty with duty, the transfer documents accompanied by the original titles, land rent and rates clearance certificate, consent to transfer, the duly completed valuation for stamp duty form, and the stamp duty declaration, assessment and pay-in-slip should be booked of registration. 6. Registration The final process of land purchase is the registration of the transfer in favour of the purchaser, or the transfer of property/lease and the charge in favour of the purchaser and the financier, as the case may be. Once the duly registered transfer has been released to the purchaser or his advocate, it is important to verify registration by conducting a search over the property. 7. Development Permission Where the property is intended for use in construction or erection of a building, after the purchase, the owner will be required to obtain the requisite development permissions from the relevant local authority. If the proposed development is likely to have any adverse impact on the environment, the owner will also be required to commission an environmental impact assessment report and obtain an environmental license from NEMA before undertaking any development on his property.

Here is a checklist to help those selling land in Kenya;

Checklist

Check if title RLA/RTA/GLA; (Registered Land Act, Registration of Titles Act or Government Lands Act, Chapters 300, 281 and 280 of the Laws of Kenya, respectively. These statutes have now been repealed and replaced by the Land Act, 2012 and the Land Registration Act, 2012, although the titles and registry under the former laws are still in place.
Conduct search at lands office (for all transactions) and company registry (if necessary);
Check user of the property – if user agricultural (as freehold titles tend to be) land board control consent will be required. After the sale has been concluded, the change of user should be applied for and obtained if the property if intended to be used for another user other than that stated in the title document;
If property is a leasehold, check the conditions endorsed on the original title or lease especially if there are development conditions. It is also important to check the terms of the leasehold title. If only a few years are remaining for the leasehold title to expire, the vendor may be required to apply and obtain an extension of lease.
When preparing the sale agreement, check if the purchaser is getting a charge over the property in which case the entire amount/balance of purchase price will be secured by an undertaking from the bank Other factors:When you are about to buy a commercial land, the first thing you should evaluate is the accessibility of communication (telephone or mobile phone signal), electricity and water.