WEEK 6 & 7: DIFFERENT LAND PURCHASE

SCENARIOS

Essential Readings

 T. O. Ojienda, Conveyancing: Principles and Practice (Nairobi: LawAfrica, 2007)Ch 3

 P.L. Analo, Land Law and Conveyancing in Kenya
 Auctioneers Act No. 5 of 1996
 The Land Act, 2012
 The Land Registration Act, 2012

Outline
1) Introduction
2) Standard to unique cases
a. Statutory power of sale and sale by auction
b. Attachment and sale by order of the court
c. Sale and purchase of property off-plan or through a building
developmentproject
d. Sale of property through a subdivision sale
e. Sale and purchase through a cooperative society or property selling
company
f. Sale and purchase through a time share
g. Allotment letters
h. Questions to consider

1) INTRODUCTION

Here, we will look at standard to unique scenarios in the exercise of the statutory power
of sale.

When Y has all the money needed to buy property X in whichever scenario, due
diligence has to be conducted, payment of deposit, release of completion documents,
release of balance of purchase price and registration of transfer. We will now consider
how this is done is various land purchase scenarios.

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 2) STATUTORY POWER OF SALE AND AUCTIONS

a. LAND ACT GUIDELINES ON STATUTORY

POWER OF SALE
Section 96: Remedies of a charge

(1) If a chargor is in default of any obligation, fails to pay interest or any other periodic
payment or any part thereof due under any charge or in the performance or
observation of any covenant, express or implied, in any charge, and continues to be in
default for one month, the chargee may serve on the chargor a notice, in writing, to
pay the money owing or to perform and observe the agreement as the case may be.

(2) States what the notice should contain – The notice required by subsection (1) shall
adequately inform the recipient of the following matters—

(a) the nature and extent of the default by the chargor;

(b) if the default consists of the non-payment of any money due under the
charge, the amount that must be paid to rectify the default and the time, being
not less than three months, by the end of which the payment in default must
have been completed;
(c) if the default consists of the failure to perform or observe any covenant,
express or implied, in the charge, the thing the chargor must do or desist from
doing so as to rectify the default and the time, being not less than two months,
by the end of which the default must have been rectified;
(d) the consequence that if the default is not rectified within the time specified
in the notice, the chargee will proceed to exercise any of the remedies referred
to in this section in accordance with the procedures provided for in this sub-part;
and
(e) the right of the chargor in respect of certain remedies to apply to the court
for relief against those remedies.

Note: the 3 months period of default of money payments is in acknowledgement that

the amount may be a lot and the chargor may need more time to obtain the money
outstanding/not payed.

Note: even if it is not a default relating to money, the usual practice is to give 3 months to
rectify the default, even if it is on terms which the Act provides for a 2-month period.

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 (3) If the chargor does not comply within ninety days (3 months) after the date of
service of the notice under, subsection (1), the chargee may—

(a) sue the chargor for any money due and owing under the charge;
(b) appoint a receiver of the income of the charged land;
(c) lease the charged land, or if the charge is of a lease, sublease the land;
(d) enter into possession of the charged land; or
(e) sell the charged land;

(4) If the charge is a charge of land held for customary land, or community land shall
be valid only if the charge is done with concurrence of members of the family or
community the chargee may—

(a) appoint a receiver of the income of the charged land;

(b) apply to the court for an order to—

(i) lease the charged land or if the charge is of a lease, sublease the land or
enter into possession of the charged land;
(ii) sell the charged land to any person or group of persons referred to in
the law relating to community land.

Sample of Statutory Notice of 90 days to Rectify Default

Pursuant to Clause XX of the charge instrument, you have failed to pay your
instalment in the last one month, contrary to clause XY of the charge instrument.
Unless you pay the sum of YY within 90 days, which is outstanding, we will
proceed to exercise out remedies in the charge instrument, including those in the
Land Act that include our statutory power of sale.

When does time start running?

It starts running from the date of service and not from the date of notice. The
notice applies whichever remedy you wish to pursue.

Note: the notice should be a month after default, should be in writing, should state the
nature and extent of the breach or default and the amount owed or condition to rectify.

Section 96: Chargee’s power of sale

(1) Where a chargor is in default of the obligations under a charge and remains in default

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 at the expiry of the time provided for the rectification of that default in the notice
served on the chargor under section 90(1), a chargee may exercise the power to sell the
charged land.
(2) Before exercising the power to sell the charged land, the chargee shall serve on the
chargor a notice to sell in the prescribed form and shall not proceed to complete any
contract for the sale of the charged land until at least forty days have elapsed from the
date of the service of that notice to sell.
(3) A copy of the notice to sell served in accordance with subsection (2) shall be served
on—
(a) the Commission, if the charged land is public land;
(b) the holder of the land out of which the lease has been granted, if the charged
land is a lease;
(c) a spouse of the chargor who had given the consent;
(e) any lessee and sublessee of the charged land or of any buildings on the
charged land;
(f) any person who is a co-owner with the chargor;
(g) any other chargee of money secured by a charge on the charged land of
whom the chargee proposing to exercise the power of sale has actual notice;
(h) any guarantor of the money advanced under the charge;
(i) any other person known to have a right to enter on and use the land or the
natural resources in, on, or under the charged land by affixing a notice at the
property; and
(j) any other persons as may be prescribed by regulations, and shall be posted in
a prominent place at or as near as may be to the charged land.

Section 97: Duty of chargee exercising power of sale

(1) A chargee who exercises a power to sell the charged land, including the exercise of
the power to sell in pursuance of an order of a court, owes a duty of care to the chargor,
any guarantor of the whole or any part of the sums advanced to the chargor, any
chargee under a subsequent charge or under a lien to obtain the best price reasonably
obtainable at the time of sale.
(2) A chargee shall, before exercising the right of sale, ensure that a forced sale valuation
is undertaken by a valuer.
(3) If the price at which the charged land is sold is twenty-five per centum or below the
market value at which comparable interests in land of the same character and quality
are being sold in the open market—
(a) there shall be a rebuttable presumption that the chargee is in breach of the
duty imposed by subsection (1); and
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 (b) the chargor whose charged land is being sold for that price may apply to a
court for an order that the sale be declared void, but the fact that a plot of
charged land is sold by the chargee at an undervalue being less than twenty-five
per centum below the market value shall not be taken to mean that the chargee
has complied with the duty imposed by subsection (1).
(4) It shall not be a defence to proceedings against a chargee for breach of the duty
imposed by subsection (1) that the chargee was acting as agent of or under a power of
attorney from the chargor or any former chargor.
(5) A chargee shall not be entitled to any compensation or indemnity from the chargor,
any former chargor or any guarantor in respect of any liability arising from a breach of
the duty imposed by subsection (1).
(6) The sale by a prescribed chargee of any community land occupied by a person shall
conform to the law relating to community land save that such a sale shall not require
any approval from a Community Land Committee.
(7) Any attempt by a chargee to exclude all or any of the provisions of this section in
any charge instrument or any agreement collateral to a charge or in any other way shall
be void.

Section 98: Powers incidental to the power of sale

(1) If a chargee or a receiver becomes entitled to exercise the power of sale, that sale
may be—
(a) of the whole or part of the charged land;
(b) subject to or free of any charge or other encumbrance or charge having priority to
the chargee’s charge;
(c) by way of subdivision or otherwise;
(d) by private contract at market value;
(e) public auction with reserve price;
(f) for a purchase price payable in one sum or by instalments; or
(g) subject to any other conditions that the chargee shall think fit, having due regard to
the duty imposed by section 97(1).

(2) If a sale is to proceed by public auction, it shall be the duty of the chargee to ensure
that the sale is publicly advertised in such a manner and form as to bring it to the
attention of persons likely to be interested in bidding for the charged land and that the
provisions relating to auctions and tenders for land are, as near as may be, followed in
respect of that sale.

(3) A transfer of the charged land by a chargee in exercise of the power of sale shall be
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 made in the prescribed form and the Registrar shall accept it as sufficient evidence that
the power has been duly exercised.

(4) Upon registration of the land or lease or other interest in land sold and transferred
by the chargee the interest of the chargor as described therein shall pass to and vest in
the purchaser free of all liability on account of the charge, or on account of any other
charge or encumbrance to which the charge has priority, other than a lease easement
to which the chargee had consented in writing.

(5) In a sale by a private contract, the chargee shall be entitled to rely on a valuation
carried out by a valuer who is registered with the institute of Surveyors of Kenya
and the report shall in the absence of a manifest error, be conclusive in relation to the
market price:
Provided that the valuation report shall at the time of sale be not more than six months
old.

(6) A transfer by charge shall have priority over all entries made after the transfer of
the charge undertaking the sale and the chargee shall stand discharged upon the
registration of the transfer.

(7) Where it is noted in the register that a second charge by the chargor ranks pari passu to
the charge submitting the transfer, the instrument of transfer by the charge shall
include a duly executed consent of the charge with a pari passu charge consenting to
the sale.

(8) For the purposes of this section, land, a lease, or a charge shall be deemed to have
been sold when a bid has been accepted at the auction sale.

(9) If at any time the chargor is entitled to and wishes to repay the money secured by
the charge, and the charge is absent, cannot be found or if the registrar is satisfied that
the charge cannot be discharged otherwise, the chargor may deposit the amount due
with the Court, in trust, for the person entitled to the money, and after which the
obligations of the chargor under the charge shall cease.

(10) Upon the deposit referred to in subsection (9), the Registrar shall cancel the
registration of the charge and the Court shall pay the amount deposited to the chargee
if the charge applies for it within six years of the deposit, and where the chargee does
not apply for the amount within the stated period, it shall be deposited with the
Unclaimed Financial Assets Authority as an unclaimed asset.
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 Section 99: Protection of purchaser
(1) This section applies to—
(a) a person who purchases charged land from the chargee or receiver, except where
the chargee is the purchaser; or
(b) a person claiming the charged land through the person who purchases charged land
from the chargee or receiver, including a person claiming through the chargee if the
chargee and the person so claiming obtained the charged land in good faith and for
value.

(2) A person to whom this section applies—

(a) is not answerable for the loss, misapplication or non-application of the purchase
money paid for the charged land;
(b) is not obliged to see to the application of the purchase price;
(c) is not obliged to inquire whether there has been a default by the chargor or whether
any notice required to be given in connection with the exercise of the power of sale
has been duly given or whether the sale is otherwise necessary, proper or regular.
(3) A person to whom this section applies is protected even if at any time before the
completion of the sale, the person has actual notice that there has not been a default by
the chargor, or that a notice has been duly served or that the sale is in some way,
unnecessary, improper or irregular, except in the case of fraud, misrepresentation or
other dishonest conduct on the part of the chargee, of which that person has actual or
constructive notice.
(4) A person prejudiced by an unauthorised, improper or irregular exercise of the
power of sale shall have a remedy in damages against the person exercising that
power.

Section 100: Purchase by chargee

(1) Other than in the circumstances provided to in subsection (3), a chargee exercising
the power of sale may, with leave of the Court, purchase the property.

(2) A court shall not grant leave unless the chargee satisfies the court that a sale of the
charged land to the chargee is the most advantageous way of selling the land so as to
comply with the duty imposed on the chargee by section 97(1).

(3) If the charged land is to be sold by public auction, the chargee may bid for and
purchase the charged land at that public auction so long as the price bid for the charged
land by the chargee is the greater of—
(a) the highest price bid for that land at the auction; and
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 (b) an amount equal to or higher than the reserve price, if any, put upon the land
before the auction, whichever amount is the greater.
(4) If a chargee who has sold charged land to the chargee applies to the Registrar to be
registered as the lawful owner of land under a land or lease, the Registrar may require
that chargee to provide any evidence that the Registrar may specify showing that the
provisions of this section have been complied with and the Registrar shall not be obliged
to register any such land or lease until the chargee has so satisfied the Registrar.
(5) Section 101: Application of proceeds of sale of charged land
The purchase money received by a chargee who has exercised the power of sale shall
be applied in the following order of priority—
(a) first, in payment of any rates, rents, taxes, charges or other sums owing and required
to be paid on the charged land;
(b) second, in discharge of any prior charge or other encumbrance subject to which the
sale was made;
(c) third, in payment of all costs and reasonable expenses properly incurred and
incidental to the sale or any attempted sale;
(d) fourth, in discharge of the sum advanced under the charge or so much of it as
remains outstanding, interests, costs and all other money due under the charge,
including any money advanced to a receiver in respect of the charged land under
section 92; and
(e) fifth, in payment of any subsequent charges in order of their priority, and the
residue, if any, of the money so received shall be paid to the person who, immediately
before the sale, was entitled to discharge the charge.

Section 102: Right of chargor to discharge charge on payment of any sum due any time
before sale
(1) At any time before the charged land is sold, or withdrawn from sale, the chargor or
any other person entitled to discharge the charge may discharge the charge in whole or
in part by paying to the chargee all money secured by the charge at the time of
payment.

(2) If payment is made under subsection (1), the chargee shall deliver to the chargor—
(a) a discharge of the charge in the prescribed form over the whole or that part of the
charged land to which the payment relates; and
(b) all instruments and documents of title held by the chargee in connection with the
charged land.

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 Section 103: Application for relief by chargor
(1) An application for relief against the exercise by the chargee of any of the remedies
referred to in section 90(3) may be made by—
(a) the chargor;
(b) if two or more persons are joint chargors, by one or more of them on their own
behalf;
(c) a spouse of the chargor to the extent that the spouse was required to give consent to
the creation of the charge but did not give consent; or
(e) if the chargor has been adjudged bankrupt, the bankruptcy trustee of the estate of
the chargor.

(2) If an application made in accordance subsection (1)(b) is not made by all the joint
chargors, then, unless the court orders otherwise, it must be served on all the joint
chargors.

(3) An application for relief may be made at any time after the service of a notice under
section 90(1), section 91(2), section 94(1), section 95(1), or during the exercise of any of
the remedies contemplated in those sections.

(4) An application for relief is not to be taken as an admission by the chargor or any
other person applying for relief that—

(a) there has been a breach of a covenant of the charge by the chargor;
(b) by reason of such a breach, the chargee has the right to exercise the remedy in
respect of which the application for relief has been made;
(c) all notices that were required to be served by the chargee were properly served; or
(d) the period for remedying the breach specified in the notice served under section 90
was reasonable or had expired,

and the court may grant relief without determining all or any of the matters described
in paragraphs (a), (b), (c) or (d).

Section 104: Power of the court in respect of remedies and reliefs

(1) In considering whether to grant relief as applied for, a court—
(a) shall, have regard to whether the remedy which the chargee proposes to
exercise is reasonably necessary to prevent any or any further reduction in the
value of the charged land or to reverse any such reduction as has already
occurred if the charged land consists of agricultural land or commercial premises,

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 and the remedy proposed is to appoint a receiver, or to take possession of or
lease the land or a part thereof;
(i) shall, where the charged land consists of or includes, a dwelling-
house, and the remedy proposed is to appoint a receiver, or take
possession or lease the dwelling house or a part of it, have regard to the
effect that the appointment of a receiver or the taking of possession or
leasing the whole or a part of the dwelling house would have on the
occupation of the dwelling house by the chargor and dependants and if
the effect would be to impose undue disturbance on those owners,
whether it is satisfied that—
(ii) the chargee has made all reasonable efforts, including the use of
other available remedies, to induce the chargor to comply with the
obligationsunder the charge; and
(iii) the chargor has persistently been in default of the obligations under
the charge; and
(iv) if the sale is of land held for a customary land, the chargee has had
regard to the age, means, and circumstance including the health and
number of dependants of the chargor, and in particular whether—
(aa) the chargor will be rendered landless or homeless;
(bb) the chargor will have any alternative means of providing for the
chargor and dependants;
(v) it is necessary to sell the charged land in order to enable the chargee
to recover the money owing under the charge;
(vi) in all the circumstances, it is reasonable to approve, or as the case may
be, to make the order to sell the charged land.

(2) A court may refuse to grant an order under subsection (1) or may grant any relief
against the operation of a remedy that the circumstances of the case require and witho ut
limiting the generality of those powers, may—
(a) cancel, vary, suspend or postpone the order for any period which the court
thinks reasonable;
(b) extend the period of time for compliance by the chargor with a notice served
under section 90;
(c) substitute a different remedy or the one applied for or proposed by the
chargee or a different time for taking or desisting form taking any action specified
by the lessor in a notice served under section 90;
(d) authorise or approve the remedy applied for or proposed by the chargee,
notwithstanding that some procedural errors took place during the making of
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 any notices served in connection with that remedy if the court is satisfied that—
(i) the chargor or other person applying for relief was made fully
aware of the action required to be taken under or in connection with the
remedy; and
(ii) no injustice will be done by authorising or approving the remedy,
and may authorise or approve that remedy on any conditions as to
expenses, damages, compensation or any other relevant matter as the
court thinksfit.

(3) If under the terms of a charge, the chargor is entitled or is to be permitted to pay
the principal sum secured by the charge by instalments or otherwise to defer payment
of it in whole or in part but provision is also made in the charge instrument or any
collateral agreement for earlier payment of the whole sum in the event of any default
by the chargor or of a demand by the chargee or otherwise, then for purposes of this
section the court may treat as due under the charge in respect of the principal sum
secured and of interest on it only the amounts that the chargor would have expected
to be required to pay if there had been no such provision for earlier payment.

(4) A court may at any time before the charged property is sold refuse to authorise or
approve a remedy if it appears to the court that—
(a) the default in issue has been remedied;
(b) the threat to the security has been removed;
(c) the chargor has taken the steps that the chargor was required to take by the notice
served under section 90; and
(d) the chargee has taken or attempted to take some action against the chargor in
contravention of section 90(4).

Section 105: Power of the court to re-open certain charges and revise terms
(1) The Court may reopen a charge of whatever amount secured on a matrimonial
home, in the interests of doing justice between the parties.

Section 106: Excrcise of power to re-open certain charges

(1) The court may exercise the powers conferred on it by this Act either—
(a) on an application made to it for that purpose by either the chargor or the
chargee—
(i) to enforce the charge; or
(ii) to commence an action under section 90; or
(b) on an application by the chargor for relief against the exercise by the chargee

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 of any remedy in connection with a default by the chargor under a charge; or
(c) on an application by the Registrar in respect of—
(i) charges provided by one or more specific chargees where there is prima
facie evidence of a pattern of unfair dealing and practices by that chargee
or those chargees; or
(ii) a chargee, being a corporate body, that appears to exercise
discrimination against chargors on account of their gender, or by refusing to
grant charges to persons on account of their gender except that a chargee,
being a corporate body that is implementing any programme, approved or
assisted by the national or county governments, designed to assist women to
improve their economic and social position by providing them with
advances secured by a charge of land shall not be taken to be acting in
discriminatory manner if the advances under that programme are made
only to women.

(2) In re-opening the charge, the court may—

(a) direct that the charge shall have effect subject to modifications that the court
shall order;
(b) require the chargee to repay the whole or part of any sum paid under the
charge or any related or collateral agreement by the chargor or any guarantor
or other person who assumed an obligation under the charge whether it was
paid to the chargee or any other person;
(c) require the chargee to pay any compensation to the chargor which the court
shall think fit; or
(d) direct the chargee, being a corporate body to cease acting in a discriminatory
manner with respect to the granting of charges.

(3) In considering whether to exercise the powers conferred on it by this section, the
court shall have regard to—
(a) the age, gender, experience, understanding of commercial transaction, and health
of the chargor at the time when the charge was created, if the chargor is an individual;
(b) the financial standing and resources of the chargor relative to those of the chargee
at the time of the creation of the charge;
(c) the degree to which, at the time of the creation of the charge, the chargor was under
financial pressure and the nature of that pressure;
(d) the interest rates prevailing at the time of the creation of the charge and during the
continuation of the charge and the relationship of those interest rates to the interest
rate applying from time to time in the charge;
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 (e) the degree of risk accepted by the chargee, having regard to the value of the charged
land and the financial standing and other resources of the chargor;
(f) the importance of not undermining the confidence of reputable chargees in the
market for charges; and
(g) any other factors that the court considers relevant.

KEY POINTS TO NOTE

Summary of procedure of the exercise of chargee’s power of sale:

1. Default

2. 30 days after default, chargee to send a statutory demand notice of 90 days to

rectify default (section 90, Land Act)
a. Section 90: If a chargor is in default of an obligation, fails to pay interest
and any other periodic payment or any part thereof due under any
charge or in the performance or observation of ant covenant, express or
implied, in any charge, and continues to be in default for one month, the
chargee may serve the chargor with a notice, in writing, to pay the money
owing or to perform and observe the agreement as the case may be.
3. 90-day wait: Section 90 – If the chargor does not comply within three months
after the date of service of the notice, the chargee may, among other remedies,
sell the charged land.
4. 40-day notice to sell (section 96, Land Act)
5. Sale process by memorandum of sale – no sale agreement as there is no willing
seller. In the memorandum, the charge authorises auctioneer to sell on their
behalf via memorandum of sale.
6. Option 1 – Auction sale – section 21 of the Auctioneers Act.
a. Advertisement of sale and place of auction stating the reserve price which
is to be set after sale valuation has been done by the valuer (section 97,
Land Act) & shall not be more than 25% below market price, otherwise
the chargor may apply to court for an order that the sale be declared
void.
b. 45-day notice of auction by auctioneer – to be served on the chargor or
placed at a place the chargor can see.
c. Then, after the expiry of 45 days, the auctioneer must advertise the sale
of property in a local daily with nationwide circulation 30 days before

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 the auction (for immovable property). The advertisement is to be publicly
advertised with particulars or conditions of sale of the property in local
newspaper.
d. On auction day, the highest bona fide bidder will be entitled to have the
property at the price offered by him/her.
e. Note: The charge agreement usually grants the charge power of attorney to
sell property in case there is default of payment.
f. Since sale by auction is not a willing buyer and willing seller scenario,
there is no sale agreement, instead, there is a memorandum of sale.
Usually, the chargee authorises the auctioneer to sale on his/her/its behalf
through the memorandum of sale. It is usually executed by the purchaser
and the auctioneer on behalf of the chargee.
g. After the auctioneer has signed the memorandum of sale and the 25% or so
deposit is paid after the fall of the hammer, the purchaser’s advocate
secures the completion documents and is usually in charge of paying
outgoings such as land rent and rates, and obtaining land control board
consent, if need be. An exception to section 3(3) of the Law of Contract
Act is that the Memorandum of sale does not require attestation.
h. Protection of purchaser: Section 99 of the Land Act – a bona fide
purchaser with notice, in good faith and for value buying land from the
chargee is protected because otherwise, purchasers would stay away from
auctions. In such cases, if the process has irregularities, the remedy for the
chargor is damages and not an injunction etc. Exception is if there was
fraud, dishonesty or misrepresentation known by the purchaser.

7. Note: the statutory notice together with the notice to sell and auction process
take more than 200 days (90+40+45+30, about 7 months) and hence it can be a
cumbersome process.
8. Duty of care owed by the chargee to the chargor:
a. Section 97: chargee owes a duty of care to the chargor and any guarantor
to obtain the best price reasonably obtainable at the time of sell.
b. For the chargee to show that they have discharged the duty of care, the
chargee must show that they have first obtained a forced valuation report
that is not more than 6 months old to show that the amount they sold
the property for is close to the market price.
i. Note: the valuer usually gives three prices: 1) the open market
value which is the amount a property owner would sell it for if
they wake up one day and want to sell; 2) forced sale value – in
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 instances where a bank wants to sell the land to recover a loan
and hence there is no willing seller; and 3) the reserve price –
Section 97 of the Land Act stipulates that this should not be less
than 25% of the market price, hence setting a statutory reserve
price.
ii. If the chargee sells the property for less than 25%, there is a
rebuttable presumption that the chargee is in breach of the duty
of care and the chargor may apply to court to have the sale
voided.
iii. However, the fact that the chargee has sold the land for 25%
below the market value or more does not mean the chargee has
satisfied the statutory duty of care, for instance, if the best price
reasonable at the time is 90% of the market value.
iv. The chargee cannot defend itself in court that it exercised its duty
of care in the sale by virtue of the fact that it had a power of
attorney from the chargor or authority to act on their behalf. In a
charge agreement, there is usually a power of attorney given to
the chargee in event of default and when it comes to the exercising
of remedies to execute the charge, the power of attorney gives the
chargee the authority to do some things on the land or sell.
v. The chargee is not liable to any compensation or indemnity
from the chargor in relation to liability arising from breach of
duty of care.
vi. Section 97 is very critical and if the chargee attempts to exclude it
in the charge agreement, it is void as it is a mandatory statutory
provision.
c. Chargee can buy the land/property: but only with leave of the court
when exercising its power of sale. The chargee must show that sale to it
is the best way to go about it e.g., to get the best price – it’s the most
advantageous way. If buying in the auction, the charge an only buy if its
bid is the highest offered and if it is offering an amount that is the same
or more than the reserve price. Essentially, the chargee should show the
Registrar of the Court that it has complied with section 100 of the Land
Act. This position also applies to the auctioneer of its agents because of
the obvious risk of conflict of interest.

9. Option 2 – Sale by Private Contract: The charge may also sell the whole land to
a private person for market value through a private contract.
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 a. Is there an advantage if selling the property by a private contract?

10. Process of payment and priority of payment after sell: Section 101 –
a. First priority is payment of outgoings such as taxes, rates and rent;
b. Payment of prior charges – this means the chargee exercising power of
sale is a subsequent chargee. This happens if prior chargees have
consented and payment still respects doctrine of priority;
c. Any reasonable costs incurred incidental to the sale such as advertisement
valuation, legal costs and auctioneer’s fees;
d. The sums owing under the charge are recovered;
e. Any sums owed under subsequent charges; and
f. Then the chargor is finally paid if there is any money left.

Note: Difference Between a First Charge, Further Charge, Second/Subsequent Charge

and a Third Charge

A first charge is the first one created when one registers an encumbrance.
A further charge is where a proprietor creates an additional charge with the same
chargee over the same property and under the same facility.
Scenario
Ann has property LR 207/700 0.4 Ha (1 acre) in Karen, Nairobi, and wants to set up a
prestigious law firm. She thus wants to borrow a loan of 20 Million from Equity
Bank. Kiptoo, who is the advocate for Equity Bank, registers a charge of 20 Million
upon Ann’s property. The land is work 60 Million. The charge is perfected as Entry
Number 3 (Entry 1 was Ann’s dad’s title and Entry 2 transfer of land from Ann’s dad
to her).
Ann has surrendered her title deed to Equity Bank but she still can borrow more
money as value of land is 60 Million and only 30 Million is borrowed so far. She can
borrow a further or supplementary charge loan from Equity Bank through Kiptoo. A
further charge of 10 Million from Equity Bank, which will be registered as Entry 4 as
a further charge with same property, same chargor and chargee.

Second charge
Same property, same chargor but different chargee.

Scenario
Going back to Anne’s example, she has borrowed 30 Million so far and the property
is worth 60 Million. Note: banks don’t usually lend money worth the full value of the
land in case the value of the land goes down, so a maximum of 50 Million is what can
16 | P a g e
 be lent as according to the value of the land.
Ann decides to take a vacation with friends to Honolulu. She then takes a loan
of 10 Million with StanChart Bank which is a better interest rate. A second charge is
then registered with the consent of Equity Bank. So, it is called a second or subsequent
charge because it is with the same chargor, over the same property but with a different
chargee.

A consent from first chargee is necessary as they have first priority and the completion
and title documents needed in the registration of the second charge are with Equity
Bank — a professional undertaking will have to be made for first chargee to release title
documents for registration of second charge.

Note: first chargee has a right to realise the property first.

Third Party Charges

These are executed by 3 parties.
Scenario
Lewis has just finished law school and wants to take a loan but has no security to take
the loan to start a law firm. He has a rich cousin called Brenda who has land in Runda,
Nairobi, Block 7/250 which is 5 acres. The bank to give a loan is Co-operative Bank.
The agreement will be between 3 people: the Bank, Lewis and Brenda. These are called
Third-Party charges, where the chargor is guaranteeing the money being borrowed. If
Lewis defaults, Brenda’s property will be at risk.
Bank – chargee, Lewis – borrower, Brenda – chargor. The borrower is brought in to
show the element of consideration.

To mitigate the potential harshness of this on guarantors, the Law of Contract

(Amendment) Act, 2019 (passed by Parliament but yet to receive Presidential assent)
requires creditors, which includes a chargee, to realise the assets of the principal debtor
(chargor) before bringing a suit against a surety, which includes a guarantor who has
given a special promise to answer for the debts or defaults of the borrower/chargor.
This is controversial though as it is argued that it will be highly detrimental to
lenders,including chargees.

See the following cases:

1. Cieni Plains Company Limited & 2 others v Ecobank Kenya Limited

[2017]eKLR
2. Rajnikantkhetshi Shah v Habib Bank A.G. Zurich [2016] eKLR
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 3. Lalji Karsan Rabadia & 2 Others v Commercial Bank of Africa Limited
[2015]eKLR

b. AUCTIONS
Auctions can be both private and public. In private auction, only a limited group of
people are invited to buy the property. The bid given does not amount to a contract
until it is accepted by the knocking down of the hammer. Section 3 of the Law of
Contract Act does not apply.

The issue of bona fides applies that is, the seller is under an obligation to fetch the
highest price possible. Sections 12 & 11 of the Restrictive Trade Practices & Monopolies
Act prohibits bid rigging.
Sale of land is usually by private treaty or public auction usually to the highest
bidderat the fall of the hammer. This can be done in two ways:
 Execution of a court order; or
 Pursuant to a statutory power of sale.

Look at Auctioneers Act 1996 and the rules thereunder, Civil Procedure Act
(execution of decrees), (sale by chargee). Requirements of section 3(3) of the Law of
Contract Act relating to execution of contracts for the sale of land does not apply since
the contractis formed at the fall of the hammer.

The bid is merely an offer. It can be withdrawn or rescinded at any time and until
acceptance, the bid is susceptible to challenge, especially where the bidder doesn’t meet
the reserve price. Reserve price is the value of the property as at the time of the auction. In
auction sales, the seller is under a duty to act in utmost good faith. If he/she sells the
property at a value other than the debt owed, say in a charge scenario, he/she must
account to the chargor. The auctioneer is at liberty to reject a bid that does not meet
the reserve price. If no bid meets the reserve price the auction will be withdrawn.

The terms of the auction sale are in most cases pre-set. The auctioneers have already set
the amount that they want to raise. There are no negotiations. If property is being sold
pursuant to a court decree, the court will set the terms, for instance, provision of the
reserve terms.

Who may bid at the auction?

 chargee and their agents;
 Owner of the property; and
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  Any person desirous of owning the property.

KEY APPLICABLE PROVISIONS OF THE AUCTIONEERS ACT

Section 21: Auction sales

(1) The date, time and place of every sale by auction shall be advertised in the prescribed
manner and such sale shall take place on the date, at the time and at the place so
advertised.

(2) Where any movable or immovable property is put up for sale by auction in lots,
each lot shall prima facie be deemed to be the subject of a separate contract of sale.

(3) It shall be stated in the particulars or conditions of any sale by auction of any
property whether such sale shall be subject to a reserve price or not or whether a right
to bid is reserved.

(4) If it is stated that the sale be without reserve or to that effect, then it shall not be
lawful for the seller or any person employed by him to bid at such sale, or for the
auctioneer to take knowingly any such bidding: Provided that if it is stated that the
sale shall be subject to a right for the seller to bid, then it shall be lawful for the seller or
for any person acting on his behalf to bid at suchauction.

(5) If it is stated that the sale will be subject to a reserve price as regards any one or
more lots, it shall be lawful for the seller or any person acting on his behalf to give one
bid for each such lot and no more.

(6) If the seller or any person acting on his behalf bids at any sale contrary to any of
the provisions of this section, any purchaser may refuse to fulfill his purchase:

Provided that the highest bona fide bidder shall be entitled, if he shall so elect, to have
the property at the price offered by him.

(7) No auctioneer shall make a bid either on behalf of himself or as agent for any other
person unless on making such bid, he announces that it is his bid.

(8) A bidder may retract his bid at any time before the sale is complete.

(9) A person who, knowingly—

19 | P a g e
 (a) receives or makes any bid contrary to the provisions of this section; or
(b) makes a bid which he cannot honour or is fraudulent, or is intended to avoid
a valid sale which is subject to the bid, commits an offence.

(10) Where a person convicted of an offence under this section is a licensed auctioneer,
he shall, in addition to any other penalty imposed, be liable to having his licence
revoked.

DUTIES OF ADVOCATE FOR PROSPECTIVE PURCHASER IN AUCTION SALE

 Search: because of the caveat emptor doctrine. Most auctioneers are quite
secretive; an advocate must therefore raise the relevant requisitions and
inquisitions discovered from the search.
 Conduct enquiries whether there are any pending matters in court.
 Engage surveyor – to advise on a property (advice client on need for this).
 Advise client that he/she is supposed to pay 30 to 40 percent at the fall of the
hammer.
 Advise client to be ready with the balance to be paid within 60 to 90 days. This
is important because of risk of forfeiture of deposit which is higher than the usual
10%.
 Engage valuer to advice on proper/real value of property.

DUTIES OF ADVOCATE FOR SELLER IN AUCTION SALE

 Act in good faith; ensure property fetches the best price.
 Ensure proper procedures are followed once bid is accepted.
 After receiving 30-40%, to ensure that the appropriate documents are put in
order.
Transfer may be by way of vesting order which is registered against title and then the
title is transferred upon payment. Where auction sale is by virtue of executing decree,
transfer may also be by way of transfer by chargee.

Considerations to note:
See Auctioneers Act:

 Auctioneers must be licensed by the Auctioneers board to conduct an auction

sale (sections 12-20 of Auctioneers Act).

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  The auctioneer must hold a valid practicing certificate.
 The place, date and time of auction must be advertised in the local newspaper.
 The sale must take place as advertised unless cancelled by notice.
 The presence of a reserve price, if any, must be indicated in the advert.

If there’s no reserve price, the seller should not bid and the auctioneer knowing this
fact should not allow such a bid. The property must be sold to the bona fide bidder at
the price reserved by him/her.

The three landmark stages of a conveyancing transaction are to take place:

 Making of the Contract

 Completion
 Registration

PROS AND CONS OF AUCTIONS

• Bad root of title can be disposed of;

• Involves many interested parties since sale is publicised;
• Costs - auctioneers, advertising etc;
• Purchaser has little time to consider terms in contract for sale and impose his
conditions;
• Price may not reflect the market value; and
• Prone to challenges by chargor.

DUE DILLIGENCE IN SALE BY AUCTION

1. You need a copy of the title to conduct the search

2. Under the search, you should find name of the registered owner and an
encumbrance stating the chargee is exercising its statutory power of sale.
3. You will need to make viewing arrangements (this is done by the client). You
may also need to contact a surveyor.
4. You may need to conduct a search of the auctioneer to find out the kind of
license that they have to avoid a situation where the auctioneer does not have
the power to conduct the auction.
5. The statutory reserve price should not be anything less that 25% of the
property’s value. The effect of selling the property below the market price is that
the chargor can go to court to ask that the sale be vitiated. Hence why a land
valuation is important.
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 3) ATTACHMENT AND SALE OF PROPERTY BY COURT ORDER

Order 22 of the Civil Procedure Rules deals with attachment of immovable property.
Where immovable property is sold in execution of a decree, the purchaser will have good
title.

Order 22 Rule 9: the application for attachment of immovable property belonging to a

judgment-debtor is to contain certain particulars:
(i) A description of such property sufficient to identify the same, and in any case,
such property can be identified by boundaries or numbers in government records
or surveys, a specification of such; and
(ii) A specification of the judgment-debtor’s share or interest in such property to the
best of the belief of the applicant, and so far as he has been able to ascertain the
same.
Once the application is made and the sale of the property approved by the court to be sold
by auction, Order 22 Rule 57 applies.

Order 33 Rule 57: Notification of sale by public auction

Where any property is ordered to be sold by public auction in execution of a decree, the court
shall cause a public notice and advertisement of the intended sale to be given in such a manner as
the court may direct.
(i) Such public notice shall be drawn up after notice to the decree-holder and the
judgment-debtor, and shall state the time and place of sale, and specify as fairly
and accurately as possible –
a. The property to be sold;
b. Any encumbrance to which the property is liable;
c. The amount of the recovery of which the sale is ordered; and
d. Every other thing which the court considered material for a purchaser to
knowin order to judge the nature and value of the property;
Provided that notice to the judgment-debtor may be dispensed with, or by
substituted service thereof ordered for reasons to be recorded by the court.
(This is because the judgment-debtor may not be traced or may be violent
when service is effected)
(ii) Every application for an order for sale under this rule shall be accompanied by a
statement signed in the manner herein before prescribed for signing of pleadings
and containing, so far as they are known to or can be ascertained by the person
so signing, the matters required by (ii) to be specified in the public notice.
(iii) For the purpose of ascertaining the matters to be specified in the public notice,

22 | P a g e
 the court may summon any person whom it thinks necessary to summon and may
examine him in respect of any such matters and require him to produce any
document in his possession or power relating thereto.
(iv) Directions shall be given as to be made and expense of advertising the sale, which
expense shall be costs of the sale.
(v) The advertisement shall be in Form no. 15 of Appendix A

Order 22 Rule 58 – Time of Sale

Save in the case of property of the kind described in Rule 37 (attachment of movable
property other than agricultural produce, in possession of the judgment-debtor), no sale
hereunder shall without the consent of the judgment-debtor, take place until after the
expiration of 30 days in the case of immovable property and 15 days in the case of movable
property, calculated from the date on which the copy of the public notice was affixed to
the precincts of the court of the judge ordering the sale.

Who signs transfer documents when property is being sold at the behest of the court?
The Deputy Registrar of the Court does this. The application of sale is also accompanied
with an application for valuation.

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 4) PURCHASING PROPERTY OFF-PLAN

Scenario
A Developer called Topnotch Investment Limited owns Land Reference No. 201/570 IR

6505, a leasehold of 99 years from 1st January 2012, with revisable annual rent of Ksh.
10,000. The size of the land is 2 acres and is located in Nakuru town. Topnotch Investment
Limited is proposing to erect 100 apartments. There will be:

(i) 3-bedroom apartments all with ensuite master bedroom with high class finishes,
spacious living room and dining room, huge laundry area, balcony with nice view
ofthe town, huge kitchen with pantry and granite counter tops.
(ii) Gardens, a clubhouse at the rooftop, gym, a swimming pool, a generator, a
borehole, 24-hour CCTV and round the clock security.
It however has an encumbrance of 500 Million (loan from National Bank).
They have an early bird offer of 40 Million per apartment and will break ground in
September 2021 and expected finish date is 31 December 2022. Once they break ground,
the price will be 60 Million per apartment.
The purchaser is Amanda
The advocate is Nyota

DUE DILLIGENCE
a) The due diligence will establish who owns the property, the directors of the
company, if the owner is a company.
b) To conduct a search at the Nakuru Lands Registry/office whose results should
show the 500 Million encumbrance which would mean that all apartments will be
encumbered.
c) To conduct a search of the Companies Registry to establish the company’s existence,
who the directors are and whether it is insolvent.
d) To look at the registered building plans under the Registered Documents Act. The
plans need to have been approved and registered. You also need to establish that the
area given in the description is the one in the plans.
e) National Construction Authority consent/authorization is needed and should also
beacquired.
f) NEMA approvals – to make sure than an Environmental Impact Assessment has been

24 | P a g e
 submitted (section 17, Land Act).
g) To ensure that an approval for change of user (if need be) is gotten. Under the
Physical Planning Act, a physical planner has to check the use, whether it is a
commercial or residential area, the soil type present and so on, for change of user to be
approved. If this is not there, there is the risk that the property will be demolished.
h) See whether consent from the land control board and others are needed.
i) You also need to request for the maps and plans to confirm the dimensions in the
description.

Due Diligence in Drafting Sale Agreement for Off-Plan Purchase

On Recitals
The vendor is in the process of erecting 100 apartments/ an estate that will incorporate 100 apartments
The purchaser intends to buy one apartment known as XXX as described in the plans.

Completion Date Issues

There is the completion date of the contract and for the construction. If you are an advocate
for the vendor, you cannot agree that completion date for agreement/transaction be the
same as that of construction.
The completion date of construction is pegged on issuance of Certificate of
Occupation by the County Government in question, which indicates that the premises
arefit for human habitation.
Thus also, the completion date for construction is usually said to be 21 or 30 days
after the certificate of Occupation is issued. The vendor or developer is the once who
follows up on this and should inform their advocate as soon as it is issued, preferably
within24 hours after issuance of the certificate.
The Certificate of Occupation will not be issued if construction has not been
completed.
If the property increases in value, the vendor does not mind if he/she/it defaults
and has to refund to the purchaser the deposit of the purchase price plus any penalty as
they will be gaining. As purchaser’s advocate, you should ensure that this is not hazy and
disadvantageous.
When the construction is substantially completed, the architect of the vendor will
issue a Certificate of Practical Completion. This means that the construction has been done
as per the certified, registered and approved building plans. Usually, this is issued before
certificate of Occupation.

25 | P a g e
 The date that the Certificate of Practical Completion is issued is the day that the
Defects Liability begins – in terms of the quality and quantity of materials and
constructionbased on the bills of quantity and quality.
The Defects and Liability period is usually 6 months after issuance of Certificate of
Practical Completion for the vendor to physically inspect the construction/building and
note down the defects in a defects tag list for rectification by the contractors. The defects
noted should be patent defects that can be seen. The identification of defects has to be
within 6 months or otherwise, any additional repairs will be at the vendor’s own extra
expense.
Once defects are rectified, the architect makes a Certificate of Making Good. As the
purchaser’s advocate, you have to ensure that there is a confirmation as to description of
the property and the actual end results.

Sample Provisions Beneficial to the Vendor

The apartments are to be built and constructed in accordance with the architect’s plans and drawings…

The location of the entrance and gardens will be at the sole discretion of the architect…

Vendor to make good of any defects within the Defects Liability Period of 6 months.

The Vendor shall subsequently… in accordance with all approvals…

and the vendor shall have discretion to change materials… but shall not substantially alter the
accommodation of the apartments.

How do you protect your client as the purchaser’s advocate?

These 2 samples give the vendor a lot of discretion. Thus, as the purchaser’s advocate, you
have to limit this by requiring your client’s consent to be sought or certain modifications.
Consent for changes other than non-material modifications.

Sample Provisions Beneficial to the Purchaser

The Vendor shall notify the purchaser once the Defects Liability Period begins and give the purchaser

an opportunity to inspect and identify defects as well, mainly material defects.

The Vendor shall be liable for any repair and rectification of defects for a period of 6 months after

handing over possession of the house.

26 | P a g e
 Therefore, it depends on how the Defects Liability Clause is worded.

Non-material variations could be e.g., a different colour of paint but the paint is of the
quality agreed, despite being of a different colour.

The modifications identified by the purchaser should be limited such that they don’t identify
things not related to the agreement but are just related to personal taste of the purchaser. Schedule

of Finishes Clause/ Standards of Finishes Clause

It should state that good workmanship should go into the plans e.g., ‘Works should be
constructed in a good and workman like manner according to specifications, plans and
schedule of finishes’.

You have to ensure that there is a schedule of finishes as when buying a property not built
yet, the finishes are important as when you are buying off-plan you are buying a promise.

Where there are shared facilities

You are buying one unit if a development but there are shared areas, how do you cater for
ownership of shared areas? How do you own the shared areas?

The Management Company

In relation to the above question, what developers do is to incorporate a management
company and require owners of the units as they purchase to also buy a share of the
management company for the development to cater for the shared facilities.
Usually, a management company is formed for a development. Sometimes the bigger
space bought the more the share as you may require more services. If you transfer the
apartment, you must transfer the share.
The management company is meant to manage common areas, security, cleaning,
servicing the lifts etc. It is not a profit-making company. It collects the service-charge levied
to each unit holder according to the ownership. Increase in the service-charge may be made
e.g., if the security company raises its fee.
If the development has more than 80 apartments, it means that the company will
end up being a public limited company as it has more than 50 members. Usually, developers
set up a private limited company and leave it to unit holders to convert it to a private
limited company, which is a cumbersome process that an advocate for a purchaser should
be wary of. Usually, developers will split buildings with apartments to a maximum of 40
apartments each if there are a couple of buildings on the land, and set up different
27 | P a g e
 companies to manage each 40 apartments.

The fact that ownership in this scenario is ownership of property in strata, does not mean
that it will automatically be governed by the Sectional Properties Act. Sometimes it will
be governed by the Land Act or Registered Land Act. So, title issued is either a Sectional
Titleunder the Sectional Property Act or Certificate if under the RLA.

Ownership of the Reversionary Interest

The Management Company owns the reversionary interest.

Scenario
If a developer has a leasehold interest from 1 January 2010 for 99 years, 1.5 acres LR
209/370 IR 36500. Has set up 50 apartments, what interest is it transferring?
It will be a transferring a sub-lease. The owner creates a lesser interest than the one it owns.
e.g., the lease for 99 years from 1 January 2010 less 30 or 60 or 90 days before expiry of the
original lease that the owner has.
Because the owner has a longer interest, the property reverts to him/her/it. This is
however a risk as the original owner could die etc, thus what remains is what is called
reversionary interest, which it is advisable to be transferred to the management company
which is tasked with renewal of the lease closer to the expiry date.
Usually, to protect oneself, there is usually a transfer of reversionary interest to the
management company.

When is this done?

This is usually done when the development company has finished selling the
property/apartments e.g., 90 days after the last unit is sold or within 5 years or 6 from the
date the first unit is sold, whichever is earlier. This protects the purchaser from waiting a
long time for reversion to take place.

Transfer of sub-lease?
In such cases, the sublease document acts as the transfer and title document. However, the
government is now giving sub-lease certificates. Sub-leases are unique as they contain
conditions for sub-lessees.
Who prepares the sub-lease in a development scenario of sale of apartments which is
different in a normal transfer scenario where the transfer is usually done by the purchaser?
It is the developer who does this. The advocate of the Vendor prepares the sub-lease for
purposes of unification of the conditions of the sublease because otherwise, each unit
purchaser will put their different conditions.

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 Payment of Advocates
The purchaser usually pays for his/her/its advocate and the vendor’s advocate as they have
prepared both the sale agreement and sub-lease.

Completion Documents Required

a) Certificate of Practical Completion
b) Certificate of Occupation
c) The sub-lease for unit purchased
d) The share certificate for common areas

Key Question to Note

If the developer is building with a loan of 500 Million and thus when searching the
property, you will see it has an encumbrance, what happens if you are to buy one
apartment for 30Million?

Usually, the developer will enter into an agreement with the bank to have an extra account,
either normal or escrow, where the payments for each apartment are put or paid into and
when this is done, each unit sold is discharged. A professional undertaking is entered into in
relation to this and to ensure that each unit is discharged.

5) WHERE PURCHASER IS BUYING FROM MEMBER OF A

COOPERATIVE SOCIETY (SACCO)

If a SACCO buys a big parcel of land and has around 100 members with shares in the
SACCO and it will take time to sub-divide the land, but intends to sub-divide the
land to its members in half acres, what members get is share certificates as the titles for
the respective half acre each parcels of land are waiting to be sub-divided. This could
eventake about 5 years.
The titles after sub-division will then be in the name of the SACCO until interests
are transferred.
If a member of the SACCO in the 5 th year wants to sell his share/title, what is the
due diligence required?

Due Diligence Required

1. Search at the Registry of SACCOS to confirm that the SACCO exists.
2. Go to the SACCO’s office and ask for register of members to confirm that the
seller is a member and to confirm that the member is also an owner of half an

29 | P a g e
 acre to be subdivided and ask for the plans.
3. Search at the Land’s office, which should show that the land is owned by the
SACCO.
4. Certain shares are given to represent a piece of land, these are the ones
transferred, which means that a seller does not have to sell his or her membership
shares in the SACCO.

The transaction that will then take place is for the seller to transfer his/her share in the
SACCO, which is related to the ownership of the land, to the buyer.

6) BUYING FROM COMPANY PROPERTY/LAND TO BE SUBDIVIDED

1) To apply to be one of the members of the land buying company and to be

allotted your piece of land after sub-division.
2) To be allotted shares in the company.
3) Search should show that the land is owned by the company.
4) Resolution by the members of the company to sub-divide and sell to each
member of the company each parcel of land at a fee.
5) Before sub-division, what you will get before new titles are issued is share
certificates which legally have no backing but are temporary documents before
titles are issued.
6) Then, titles will be given upon sub-division.

Due Diligence when buying from member of the Company

1) Search at the Companies registry to find out if the company owns the land.
2) Peruse the company’s register to find out if the seller is a shareholder and entitled
to a share/allotted piece of land.
3) To get a power of attorney from seller to act on his/her behalf in the company
as there are no titles yet. For buyer to ensure that his/her name is put in the title.
4) The sale agreement will have to capture the unique issues highlighted above.

7) BUYING PROPERTY/LAND WITH TENANTS

Due Diligence
1) Find out if tenants have leases and if buyer is okay buyer is okay buying property
with tenants. This is because you want to establish if there are protected tenants
under the Business Premises Tenants Act so that you do not get into problems.
It will also help you negotiate terms of sale.
2) To find out terms of the leases, the expiry dates and whether buyer intends to
30 | P a g e
 renew them to ensure one does not get into problems as above.
3) To find out if the owner has procured a change of user to business premises from
County Government.
4) To find out if tenant leases provided that the lessor could assign or transfer their
interest without permission of the tenant. Landlords can assign their interests in
leases, but tenants cannot.
5) In relation to subdivided land that was originally agricultural, you have to
makesure that the change of user had been obtained.

8) CONCEPT OF TIME SHARE

This is not specifically legislated in Kenya, but is well set out in other developed
jurisdictions.

Scenario
Francis buys land and sets up a villa in Malindi facing the beach but will only stay
there once a year, and what he wants to do is sell time to stay at the property in a
year – time share. What they are selling, and the agreement entered into is just in
relation to time each year. Contracts with international companies are usually
entered into tomanage this.
There needs to be legislation on this to fully govern these types of transactions.

9) ALLOTMENT LETTERS

An allotment letter is not a title document capable of transferring an interest in land.

When one is issued with an allotment letter by e.g., a County Government, they are
meant to pursue their original title deeds with the Lands Office.

Regulations 26 and 35 of the Land (Allocation of Public Land) Regulations, 2017

provide that an allotment letter is usually issued in the process of alienation of land and
is not a final proof of ownership. It sets out special conditions and other requirements
that a person should fulfil before they are granted title to hold land under either a
leasehold or freehold tenure. Such conditions and requirements are usually meant to be
fulfilled within a stipulated period. If the conditions and requirements, such as
payment of the requisite fees, are not paid within the stipulated period, the offer of
land lapses.
Recently, Nairobi County Management has said that they will issue titles for

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 areas in Embakasi which have had just allotment letters for a long time.
The way to curb this is to do a sale agreement and a power of attorney so that
when title documents come out, they come out in the name of the purchaser.

Note: the person allotted land first in time has a better title.

Stephen Mburu & 4 Others v Comat Merchants Ltd & Another [2012] eKLR, Kimondo J
observed at paragraph 11 that:

From a legal standpoint, a letter of allotment is not a title to

property. It is a transient and often conditional right or offer to
take property…Mirrored against the 1st defendant’s registered
interest in the land, and the evidence, the plaintiffs’ claim is on
quicksand… The registered interest ranks higher than the transient
rights in the letters of allotment.

Joseph N.K. Arap Ng'ok v Moijo Ole Keiwua & 4 Others [1997] eKLR at page 2
paragraph 3:
It is trite that such title to landed property can only come into
existence after issuance of letter of allotment, meeting the
conditions stated in such letter and actual issuance thereafter of
title document pursuant to provisions in the Act under which
theproperty is held.

10) QUESTIONS TO CONSIDER

1. Explain the process of a chargee exercising the statutory power of sale.

2. Discuss how an auction for the sale of land is conducted.

3. Assume that one Juma Makosa has 100 acres of land in Embu and had
borrowed 20 Million from National Bank which he is in default of in
terms of loan plus interest monthly repayments. Assume that 1 acre is 8
Million, so that 100 acres will be worth 800 million.

You are working for National Bank as their advocate and have issued the
statutory notice and notice to sell. How would you goabout the sell?

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