DUE DILLIGENCE IN THE PROCESS OF LAND TITLE TRANSFER AND REGISTRATION IN KENYA

In Kenya, navigating the process of purchasing, selling, or transferring land presents numerous complexities and obstacles. This article intends to equip you with the knowledge needed to understand the essential procedures for obtaining a clear title through a conveyance transaction. In this article, we will discuss the first step of the process of land transfer and registration in Kenya: Conducting due diligence. Come along as we decipher the intricacies of conducting due diligence for land dealings in Kenya, providing you with the confidence and clarity to successfully manoeuvre through this intricate system.

Conducting thorough due diligence stands as the foremost critical stage in the land conveyance process because it determines the suitability of the Certificate of Title, before initiating any transactions involving the property. As a bona fide purchaser for value without notice (meaning an honest buyer who has paid a specified price for a property without any suspicion of irregularities in the transaction), it is vital to be vigilant against various scams and illegal activities prevalent in land purchases to safeguard oneself. Failure to carry out necessary due diligence measures could result in significant losses, as underscored by a Supreme Court decision in Dina Management Limited v County Government of Mombasa & 5 others (Petition 8 (E010) of 2021) [2023] KESC 30 (KLR) (21 April 2023) (Judgment) where the Court clarified that the protection afforded to bona fide purchasers for value without notice does not apply if the property Title was acquired irregularly or unlawfully. As a bona fide purchaser for value without notice, conducting pre-contract due diligence entails the following steps:

1.        Conducting a physical inspection of the property: Examine and assess the physical condition of the property by determining its precise location, current condition, boundary demarcations, and potential encroachments such as squatters. It is important to engage a qualified land surveyor to locate the property's beacons and to be issued with a beacon certificate to ascertain the demarcations of the property.  Furthermore, it is important to pose relevant inquiries to gather information about any succession issues and other pertinent details.

2.       Confirming the capacity and identity of the property owner to sell: It's essential to determine whether the property owner is a physical person or an entity. When dealing with a physical person, conduct a background check, obtain a physical address, and seek references from third parties to verify their identity. Additionally, you could perform a search at the Registrar of Persons to verify the vendor's identification document (ID) as instances of fraudsters using deceased individuals' IDs have been reported. To verify the ownership and capacity of entities, you can initiate a search at the Registrar of Companies to obtain the CR 12 for Companies or other registration certificates for other entities. This process helps to identify the entity's owners and individuals authorized to execute transfer documents. Furthermore, it allows you to determine the financial position of the entity and its ability to engage in transactions. For entities, you can conduct a search with the Registrar of Companies to ascertain the ownership of the entity, and to understand persons who can execute the transfer documents. Additionally, you can see whether the entity is solvent and has the capacity to transact.

3.       Conduct a search at the Department of Survey: this search aims to review the cadastral map, providing insight into the property's demarcation. The cadastral map displays the registered boundaries of the property, outlines the land allotment process history, and enhances the certainty of the certificate of title by correlating its reference number with that on the cadastral map. Buyers can obtain a copy of the map for their records as part of their due diligence documentation. This search holds significance as the cadastral map can reveal land earmarked for public utilities like road reserves, thereby protecting the interests of buyers.

4.      Conduct the following Searches at the Land Registry:

a.       Official Search – This search is provided for under Sec 34 – 36 of the Land Registration Act and states that a person who requires an official search in respect of any parcel, shall be entitled to receive particulars of the subsisting entries in the register, certified copies of any document, the cadastral map, or plan filed in the registry upon payment of the prescribed fee. The land registrar grants certified copies of the documents as true copies and these documents are regarded as prima facie evidence before the court and have more weight than documents certified by an advocate. Furthermore, official searches are protected by right to indemnity. 

b.      Personal Search – This search is conducted by an advocate/advocate’s clerk and is either done online or at the registry itself. The process involves completing a search form, submitting it to the registrar, and paying the required fee to obtain documents. When visiting the land registry's physical offices, individuals can request to review files and make notes after paying the necessary fee. However, these personal searches are not covered by the right to indemnity.

c.       Historical Search – This search is essential for determining the land's allotment process and obtaining valuable information about the origin of the title. It helps in understanding how the title was acquired and whether the allotment was conducted correctly. Reviewing the correspondence file provides the parcel number of the land from the allotment date, as well as subsequent parcel numbers resulting from subdivision, along with any other relevant documents related to the land. Furthermore, it's crucial to verify whether the property is listed in the Ndungu Land Report to prevent acquiring properties subject to fraudulent land allocation processes.

d.      Searches at different registries, offices or institutions such as NEMA, County governments, Probate Administration Registry and/or Court records. 

Conclusion 

In the ever-evolving landscape of Kenya's real estate sector, the journey towards successful land transactions continues, guided by diligence, integrity, and a commitment to fostering prosperity for all stakeholders. The importance of conducting pre-contract due diligence measures cannot be overemphasized. 

Sitienei J.

Sitienei@alakonyalaw.co.ke

29^th April 2024