The Bill has provisions regulating the manner in which leases, charges, transfers, transmissions, land held by minors and persons of unsound mind shall be dealt with.
If passed, the proposed law shall fill a gap in land dealings since the existing laws do not adequately cater for such transactions. For example, it was unclear how land held by a minors and persons of unsound mind was to be dealt with, however, the Bill has clear provisions on this issue.
It is possible for a minor to have a title deed issued in his/her name, but the registrar shall restrict such a child from dealing with the land.
Past land transactions have largely been a matter of established practice and orders made by the Ministry of Lands from time to time. While dispositions in land such as transfers, leases and charges were provided for in various legislation, land dealings were not adequately regulated.
Stakeholders in the real estate industry have a reason to smile if this Bill is passed, as it caters for some of the grey areas. The officials at the Lands registry will benefit as much as the professionals since the Bill would regulate and legislate areas, which were previously left to established practice.
Currently, if a lawyer is faced with a complicated land dealing, which is not adequately covered for in the existing laws, registering a disposition is a nightmare.
The ministry is too rigid to deal with complicated and novel land transactions. This should not be the case, because land dealings are becoming more complicated.
Entry of experts, especially real estate finance advisers into the sector means that there shall be more complex transactions to be dealt with.
The current laws are not sufficient to support these changes. However, the Bill outlines how various land transactions should be handled.
The passing of the Bill would increase efficiency in the Lands ministry and provide guidelines for the professionals involved.
Among other provisions, the Bill protects creditors’ security. It terms any steps by a debtor to delay a creditor’s right over the security by way of disposition, as “a prejudicial disposition.”
This means that a debtor cannot sell land held as security or otherwise deal with the land in a manner to defeat a creditor’s interest.
The proposed law provides that the registrar may refuse to list any such prejudicial dealings and what’s more, the creditor can apply to court to have such a transaction set side.
The innocent buyer shall be served with court papers and the court may order the debtor to re-assign the land to the creditor.
However, where a person has bought such property from a debtor, in good faith, the court cannot make any orders against him/her.
Such a provision is welcome for banks and other lenders since their security is adequately protected.
While there has been no clear provision to cater for this, established practice minimises the risk of a prejudicial disposition.
This is because when the lawyers are drawing up the charge documents, a number of restrictive covenants are placed on the land and the landowner.
For example, the owner may not sell the property, lease it or deal with it without the consent of the bank in writing.
The bank also keeps the original title deed as well as the security in addition to having its rights registered in the encumbrance section of the title. Such that a third party wishing to buy the property is aware of the existing loan obligation and charge.
However, it is welcome that the Bill has provided for and defined a prejudicial disposition.
It is hoped that Parliament will pass the proposed law because it will provide clear guidance on how land transactions shall be dealt with.
Mputhia is an advocate with Muthoga Gaturu.