YOU CANNOT ACQUIRE VALID LAND OWNERSHIP RIGHTS FROM SOMEONE WHO DID NOT HAVE LEGITIMATE TITLE IN THE FIRST PLACE

I am sure you have been receiving numerous notifications lately regarding a “legal event” known as Petition 8 (E010) of 2021 concerning the case of Dina Management Limited v County Government of Mombasa & 5 others (the Dina Decision). This ruling by the Kenyan Supreme Court has sparked a lively discussion about the required level of due diligence before purchasing land. However, is the Dina Decision really a fresh legal development, or did the Supreme Court merely reaffirm an established legal position?

1.1 What happened?

Dina Management Limited (Dina) purchased a beachfront property located in Nyali Beach, Mombasa. Following the payment of the agreed purchase price and the successful registration of the transfer in Dina's name at the Registry, they were issued a title document. At this stage, Dina became the third officially registered owner of the property.

However, in September 2017, the County Government of Mombasa (the County Government) took forceful action by entering the property without any prior notice. They proceeded to demolish the entire perimeter wall that faced the beachfront and flattened the whole property to be at the same level as the beach. Their justification was that the property was public land, not private, and they aimed to create an unobstructed path to the beach.

Dina argued that it carried out due diligence on the property and took the following steps with the aim of confirming that the title to the property was valid and capable of transfer: (1) sought confirmation from the relevant registry of the existence of a valid title, and (2) obtained a beacon certificate and survey plans to determine the boundaries and extent of the property. In addition, consent to transfer the property was issued further confirming the validity of the title. According to Dina, neither the national government nor the County Government questioned the validity of the title but on the contrary, they confirmed the legitimacy of the title, which thereby establishes Dina as a bona fide purchaser with an indefeasible title.

The proceedings before the Supreme Court were based on an appeal by Dina raising multiple grounds. One of the main contentions was that the Court of Appeal made a mistake in interpreting the principle of bona fide purchaser for value without notice of defect, which misinterpretation led to a violation of Dina’s right to property.

 1.2 Who is a bona fide purchaser?

A bona fide purchaser is a person who acquires property in good faith, pays valuable consideration (money or something of value), and has no notice of any competing claims or defects in the title. These key elements must be present in order to establish a claim of bona fide purchaser for value. If successful, the innocent buyer can retain ownership and possession of the property in question, secured against any prior claims or interests or defects in the seller's ownership even if they would have otherwise been valid.

 1.3 What is the position in Kenyan law?

The legal defense of bona fide purchaser for value without notice is provided in Section 26 of the Land Registration Act, 2012 (the LRA). According to Section 26(1) of the LRA, a certificate of title issued by a Registrar upon registration, or to a purchaser of land upon transfer or transmission, serves as prima facie evidence that the named person is the absolute and indefeasible owner of the land. This means that, on the face of it, the existence of the certificate of title establishes a presumption of the truth or validity the registered owner's title.

However, this presumption is rebuttable given the limitations in Section 26(1) (a) and (b) of the LRA and therefore, the doctrine of bona fide purchaser for value without notice may not provide absolute protection in all circumstances. These provisions specify that the certificate of title may be subject to challenge in cases of fraud or misrepresentation where the registered owner is proven to be involved, or if the title has been acquired illegally, through a corrupt scheme, or through a procedure against the law.

In cases where the title was obtained unlawfully, a court may disregard the principle of bona fide transactions and focus on rectifying the defect in the root of the title. The court's primary concern would be to determine the true and lawful owner of the property, rather than protecting the interests of subsequent buyers. The final determination usually depends on the specific facts and evidence presented in the case.

 1.4 What were the specific facts in this matter?

·  The tenure of the property in question was freehold yet regulation stipulated that the tenure of town plots within Mombasa municipality must be a lease for a term not exceeding 100 years. Speaking of freehold, I do not have specific details regarding the nature of the consent that was granted for the transfer in favor of Dina, as earlier mentioned.

·  The process for allocating unalienated land was not followed. No evidence was produced to show that allocation of the property to the first registered owner was regular.

·  The initial acquisition of the title to the property could not be traced back to a valid and lawful source, meaning that the title was not free from defects or irregularities.

1.5 Could Dina be shielded by the doctrine of bona fide purchaser for value?

In order to maintain a fair and effective legal system, it is generally desirable to strike a balance. This is why Section 26 of the LRA lists some exceptions to the principle of indefeasibility of title, where the title of a registered proprietor can be defeated.

In addition, no one can give what they do not have. This is known as The Nemo Dat Rule in the legal field. It generally operates in the context of the law of sale of goods but the same principle applies in the transfer of immovable property as the transferor must possess good title.

The court went to the root of the ownership of the title and determined that the first registered owner did not have valid ownership or authority to transfer the property and therefore, they could not pass on good title to another person. As a result, Dina’s claim of ownership could not be withheld since the title was defeasible based on the facts summarized in 1.4 above.

1.6 Is due diligence a legal requirement?

I will quote the Supreme Court directly on its commentary regarding the risks linked to specific property types:

“We hasten to add that, the suit property, by its very nature being a beach property, was always bound to be attractive and lucrative. The appellant ought to have been more cautious in undertaking its due diligence.”

Due diligence is the process of conducting an investigation of the property and its title before completing a purchase. It is a necessary step to mitigate risks in a property transaction. It is not a legal requirement per se, but prudence demands that the purchaser undertakes a thorough due diligence in order to identify any potential issues or defects in the title such as encumbrances or legal disputes.

It is not lost to me that a title search can go a long way in supporting the buyer's claim of lack of notice. I am also aware that it is possible that certain defects in the title or fraudulent activities may not be detected through a standard title search at the land registry. However, I am not fully convinced that the Supreme Court explicitly asserted in the above statement that the absence of an in-depth title search, also known as a comprehensive title search (which goes beyond a standard title search and involves a more detailed examination of the property's ownership history and related documents) would negate a claim of bona fide purchaser for value if the key elements for establishing the claim are present.

1.7 Does the Torrens principle come into play?

The title to the subject property was issued under the repealed Government Land Act (GLA) regime, which is based on the principle of "title by deed." In the system of deed, ownership of property is created through the transfer of written documents (deeds) and recorded in the land register. Proof of ownership relies on the chain of deeds and the history of recorded transactions, and is determined by examining the series of deeds, beginning from the original grant, through subsequent transfers, to the current owner.

On the other hand, the Torrens land registration process moves away from the reliance on deeds and provides for the issuance of a title document that serves as evidence of ownership. So, was the Torrens principle applicable regarding the challenges to Dina’s title? I am still racking my brain over this issue, and I intend to delve deeper into it for a future article.