On 27 January 2015, i published my first post. Unsure, second guessing and with hands trembling i started something.

Since then, i have published more posts that have attracted thousands of views and a following of loyal readers.

As a lawyer, i come across many clients who share with me their dreams of the businesses and undertakings they wish to start and seek my assistance in respect of the legal issues arising in setting up. None of the clients that i have assisted in setting up companies, charitable foundations, trusts, business associations etc were sure of where their journey will lead.

Some of the clients i advise have never taken steps towards realising their dreams  and have instead stagnated with their ground breaking ideas.On the other hand, those clients that have taken the leap of faith to start something with the limited resources at their disposal have made substantial progress towards realising their dreams. Some of these clients start something while still employed in very demanding jobs and with opposition and discouragement from their families and friends.

Over time, some of these humble start ups have succeeded beyond their expectations and i am proud to continue representing them as they pursue even greater success.

The conditions may never be ideal to start something, my free advice is, take a leap of faith today and start something.

 

 

“Corporation;

An ingenious device for obtaining individual profit without individual responsibility”

Ambrose Bierce

WHY REGISTER A COMPANY IN KENYA

You might be thinking of starting a business or you have been in business and you would like to set up better structures for the business. The decision to register a company may be voluntary or the law or industry may not give you any choice.

The decision is voluntary if you are making it purely for commercial reasons, on your terms and at your convenience. It is not voluntary if the law or the industry requires you to register a company in order to do business. For instance, to start a bank or an insurance business, you must have a company.

Here are some of the advantages of registration of a company in Kenya.

1. Separate legal entity

When you register a company, you give life to a corporate person. Just like a natural person, every person bears their own burden, so to speak. The company is separate from its owners.

A company can do business in its name, sue or be sued and do all things permitted under law as a separate legal entity.

2. Limited Liability

Limited liability means that you are responsible for the company’s liabilities only to the extent of your shares. As a natural person, you may lose all you property to creditors, your liability is not limited. If your company is required to pay creditors or satisfy any other monetary claim, you as the owner can only lose the value in your shares in the company. Your personal property as a natural person or property owned by another company will not be touched in satisfaction of the liabilities of one company.

There are exceptions to limited liability, if the company was formed for an illegal purpose, if the company’s owners used the company knowingly for fraudulent undertakings just to hide behind their limited liability or if the company was not complying with the law then its shareholders or directors may be personally liable.

3. Perpetual Succession

A company does not die like a natural person, it can therefore outlive its founders and owners. When the natural persons behind a company die, the company does not. A company can therefore exist forever, at least in the law as it currently stands.

How to Register a Limited Liability Company in Kenya

There are many forms of companies including those limited by guarantee and public companies. Limited liability companies are the most common and the subject of this article.

You need to hire an advocate to undertake the registration of the company on your behalf. The process is straight forward.

1.   Name search and reservation

You will be required to conduct a search for the proposed company name at the Registry of Companies. If the name is available, it is reserved for thirty (30) days in which period you must submit your application for registration of the company.

You can extend the reservation for another thirty (30) days before it expires.

2. Required documents and information

Your lawyer will prepare and gather the following documents or information:

a. Memorandum and Articles of Association;

The memorandum state the purpose of the company and all the things it is empowered to do. Articles provide for the internal running of the company e.g. meetings and how the powers granted by the memorandum will be exercised.

The memorandum and articles also disclose the initial shareholders and their addresses.

b.    Form 201 ( Notice of situation of registered office or any change therein)

Requires details of the company’s registered office including name of building, road, street and plot number. The plot number is most important.

 c.  Form 203 (Particulars of directors and secretaries)

You are required to have at least one director and a company secretary. The directors must provide copies of their identity cards or passports, Kenya Revenue Authority PIN and a coloured passport size photograph. The nationality and postal addresses of the directors is also required.  Each director must disclose any other directorships that they hold.

d.   Form D (Statement of nominal capital)

You are required to provide the number of shares of the company and their value.

e.  Form 208 (Declaration of compliance with the requirements of the companies act on application for registration of a company)

Your advocate is required to confirm that all requirement for registration of a company have been met.

These documents are then presented to the Registry of Companies together with an application for registration. A certificate of registration is issued after two (2) to four (4) weeks.

Welcome to the corporate world.

“When the missionaries came to Africa, they had the Bible and we had the land. They said ‘Let us pray.’ We closed our eyes and when we opened them, we had the Bibles and they had the land.”

 Desmond Tutu

This land is mine, so you rightly believe. Why not, I mean, you have done everything right from due diligence to registration and you now want to take possession when you realize that there are squatters residing in your land or your neighbour has erected their fence a few metres into your land or someone shows up with another title to your land.

Conduct of a proper due diligence is not a guarantee that you will not face challenges to your ownership or in enforcing your rights over your land.

I believe that some of my readers have gone through the painful experience of enforcing their rights over land with varying degrees of success. This article offers basic information on how to generally enforce your rights in land and it does not cover all possible disputes that might arise. You definitely must hire a lawyer to advise you on your specific issue.

Let us deal with the squatter issue first.

Squatters and Trespassers

A squatter is a person who takes possession of land that they do not own. A squatter can build on the land or just make use of it for farming etc. A trespasser is someone who enters land without the owners’ permission.

These two terms are distinguished by the level of permanency the illegal entry and occupation achieves. Whereas a trespasser may be said to be passing by and may not wish to stay on once discovered, a squatter aims to stay for as long as they can even after being discovered. A squatter may even claim to have acquired a legal interest over the land and seek protection under the law of adverse possession.

How do you go about solving this problem?  You must notify the squatter(s) or trespasser of your entitlement to the land and ask for their immediate vacation from your property. It is also prudent to seek to establish from the squatter or trespasser whether they have any valid legal interest in the property and documentary proof of their interest.

If the squatters or trespassers leave after your notice, then you may count yourself lucky and take possession of your land. However, if they do not leave, then you might have to escalate the issue to the relevant authorities.

I understand that the usual way is to hire a lawyer and proceed to court to seek orders to evict them. However, the new Constitution provides that such disputes may be settled out of court by way of alternative dispute resolution as long as it is not repugnant to justice.

The next step is to establish the authorities that are charged with handling such disputes locally and seek to engage them. There are different authorities in different places, for example, the elders, committees etc. The consistent authorities everywhere in Kenya are the police, the village elders, chiefs and members of county assembly (“MCA”).

Trespassing and other acts of deprivation of your interest in land by the squatters constitute criminal offences and the police are mandated to protect your interest in your property. You should make a formal report at the local police station and obtain an occurrence book number for purposes of follow up. The police should undertake their investigations on your complaint and if they find that your complaint has merit then they ought to take steps to remove the squatters or trespassers on your land.

The village elders, chief, MCA’s and other local authorities would normally have a say on these matters and should they find in your favour and order the squatters out, then, count yourself lucky.

It is, however, not that simple in most cases. The squatters may rush to court and seek to subvert your efforts to settle the matter with the local authorities. At this point your lawyer should inform the court of the efforts taking place outside court to settle the matter and seek the courts permission and help to order the squatters back to the local mechanisms where the issue will be decided. There is no guarantee that the court would issue such orders but there is backing in law and precedent for the issuance of such orders.

Once you have tried to solve the issue outside court and you have not made progress, you can simply institute a case to seek eviction orders against the squatters. Court cases take time and as you wait for a decision over the years, the squatters may be making use of your land.

There is no guarantee of desired results in an expedient manner in any of the options available to you. It may take years and it may cost you a lot of money, time and effort in enforcing your rights over land but it is better keep going than to surrender what is yours.

Boundary Encroachment

If your neighbour has encroached on your land, the best place to start is to establish whether you both have beacons marking your boundaries. If the beacons are still in place, it is easy to show where the boundaries lie and you can agree that the encroaching party will surrender the encroached piece of land. If there are no beacons in place, it is prudent to agree on the appointment of a single surveyor to determine where your boundaries lie and thereafter the encroached land be surrendered.

What if your neighbour does not want to cooperate? Well, you may just have to escalate the matter to the authorities discussed above and finally to court if necessary.

Double Allocation and Fraudulent Transfer

When someone else shows up with a title to your property, it is clear that there can only be one genuine owner. With the cases of fraud at the high level they are in today and the sophistication involved and collusion with officers at the lands office, it is possible to have several seemingly genuine titles to the same land.

The place to start is to conduct an official search to establish who the owner of the land is. Assuming you did all the proper due diligence, it is likely that the search results will establish you as the owner of the land.

It is unlikely that the dispute will end with the search results and the losing party may escalate it to the allocating office to establish which title is genuine. This is also a matter that can be subject to investigations by police since it is likely that there was fraud involved.

If the allocating authority and the lands office are not able to establish the rightful owner, then the matter will escalate to court as most have and await a determination by the court as to the ownership of the land.

Conclusion

Land cases are some of the most emotive and dangerous cases in Kenya. There is no shortage of precedent of the number of cases that have ended up in street battles and have left a trail of bodies in their wake. It is prudent to be careful as you seek to enforce your rights over land and be alive to the risks to you from persons who may not subscribe to the respect for the rule of the law.

Land cases also take time and some have lasted over twenty years in court parties still await determination. It is better to invest in due diligence before committing to buying land than to spend so much trying to enforce your rights after purchasing disputed land.

The moral of the story is better safe than sorry.

Some of my previous articles on labour law matters may have given the impression that I am a crusader for employees and against employers. It is only fair that I also enlighten the employers on their rights. There are few pro employer legal provisions, in my view, this is because employees are the ones in a weaker position and in need of protection of the law to even the playing field.

Lock out is the opposite of a strike. A lock out is defined as the closing of a place of employment or the suspension of work or the refusal by an employer to continue to employ any number of employees for the purpose of compelling those employees to accept any demand in respect of a trade dispute. In short, whereas employees are all entitled to their chants on ‘haki  yetu’, the right accrues to employers too to deny employees access to the work place.

Simply put, if there is a dispute between you and your employees, you have a right to refuse to offer your work, close the office doors and basically do anything to prevent them from working until your demands are met or you reach an agreement.

However, it is not that simple. Basically, just like employees cannot initiate strikes at their own whims, the same applies to lockouts. The Labour Relations Act provides for the steps involved in initiating lockouts similar to steps for initiating strikes.

For you to participate in a lockout, the dispute resulting in a lockout must involve breach of terms and conditions of employment. The trade dispute must also involve the issue of recognition of a trade union, as discussed on my last article.

Further, the dispute itself must have been forwarded to conciliation and was not resolved, seven days written notice of the intended lockout has been given to the employees and to the minister for Labour by the authorized representative, that is you, a group of employers or the employers’ organization. Failure to fulfill the same will constitute an illegal lockout.

As an employer you are not allowed to participate in lockouts where any law, collective bargaining agreement or award by the court binding on you prohibits the lockout, the subject matter of the lockout is governed by a binding collective agreement, the parties have agreed to refer the matter for arbitration or the industrial court, the trade dispute was not referred for conciliation, the employers and employees are engaged in an essential service and the lockout is not in furtherance of a trade dispute.

An essential service as stated above involves a service the interruption of which would probably endanger the life of a person or health of the population as defined in the Labour Relations Act. They include the water supply services, hospital services, air traffic control and civil aviation services, fire service, posts authority and local government authority and ferry services. However, the Ministry of Labour shall from time to time amend the list of essential services.

The Labour Relations Act also introduces a sympathetic lockout whereby you lock out the employee in support of a trade dispute where you are not a party or in respect of which you are not represented by an organization that is a party to a dispute.

Where you have followed the process of initiating a lockout according to the law, it is referred to as a protected lockout. No proceedings can be instituted against a person who has participated in a protected lockout or any conduct that was a result of the protected lockout.

In Kenya, there are not many cases that are successful for employers on matters of lockouts, if there are, they are unreported. In the United States of America, lockouts are used in less visible industries e.g. the professional sports industry. Employers use the lockouts because unions are reluctant to do what the employers consider reasonable in terms of compromising.

In conclusion, the purpose of a lockout is not intended to finally terminate employment. It is a temporary work stoppage or denial and is different from a strike, in which employees refuse to work. This was further defined by Justice Nzioki wa Kamau in Francis Nthenge Mwovwa versus Auto Spring Manufactures Limited, Industrial Cause No. 2224 of 2012, who continued to state that a lockout may be implemented by simply refusing to admit employees into the company premises and it is an antithesis of a strike.

There you have it.

“Nobody wants the expenditure of a lease which lasts 21 years. You can’t plan 21 years ahead”

 James Dyson

 Why Lease?

You probably are familiar with leases over office space, residential houses/apartments or commercial space. Leases over land are not uncommon but they are also not very popular.

Before I get to answer the question posed by the heading, we need to be clear what leases are.

A lease is an interest over property granted by the owner of property (“Landlord”) to a person (“Tenant”) to use the property for some time and the Tenant has the right to exclusive possession of the property. In this article, we shall focus on leases over land and not apartments, houses or offices.

The term sub-lease also refers to the same interest.

Why would anyone want to lease land as opposed to buying the land. I can recall a few reasons that I have come across in my practice.

1. The land may not be available for purchase and you have to settle for a lease. The owner of the land may not be using it at the time but is not willing to sell it either. If you want to engage in a business that does not require you to own the land, you may lease it for the period it is available.
2. You may not have the resources to buy the land but you can afford to lease it.
3. You may not want the land forever, you just want to use it for sometime and move along.

Some of you may be wondering what kind of tenants would want to lease land. Think of service/petrol stations. Most of these do not own the land under which they are built, some do not even own the buildings comprising of the petrol station. For whatever commercial reason, it makes sense for them to lease rather than buy.

I know of at least two groups of young people and I have also read about many others that have gone into farming by starting out with leased land. There are many more reasons and I believe you too might have your own.

Let us see what legal issues arise in leases.

Due Diligence

You may not be as thorough in conducting due diligence while leasing but you would still want a confirmation of some issues for comfort. Have your advocate confirm ownership and conduct a search to find out if there are encumbrances or other interests registered against the land that might be a problem to you.

Paperwork

The law provides for oral leases over land for a period of less than two years and not renewable. You might still want to enter into a written lease that clearly sets out who does what and what interest you are receiving. Issues like payment of land rates, insurance of the land, repairs among others should be set out clearly from the outset to avoid any confusion.

The law also implies certain rights and duties for both the landlord and tenant. You can opt to exclude these implied rights and duties in your lease if it is in writing.

Registration

Leases for less that two years that are not renewable cannot be registered.  Have your lawyer negotiate the terms of the lease and be sure to confirm the term and whether you want an option to renew the lease at the end of the term.

Leases for a period of over twenty five years are deemed to be transfers (at least for purposes of registration and stamp duty). Stamp duty of these leases is chargeable four per cent (4%) in municipalities or cities and two per cent (2%) in other areas.

The registration of lease, whether long term or short term does not entitle the Tenant to sublet the lease without the consent of the landlord.

You can therefore sublet the lease if the Landlord agrees.

Upon expiry of the lease, you are supposed to handover possession of the land back to the Landlord in the same condition as was handed over to you. You should be keen to provide clearly what happens to any improvements or developments you make on the property as you might be required to leave them on the property if you do not.

Why buy when you can lease?

One cannot help to sympathize with a long serving employee who is summarily dismissed or his employment terminated and is now out on the street with a family to feed. The question that arises is whether the law protects the employee or is the deep pocket employer invariably getting away with it?

All too frequently, long serving employees are sent packing without payment of their terminal dues or any other money due to them. This leaves such employees and families in despair. Is there any recourse for such a people?

Termination and summary dismissal refer to different things. Termination is dismissal from employment with notice and entitlement to unpaid salary, outstanding leave days and service pay for every year worked.

Termination is considered unfair if the employer fails to prove the following:

• The reason for termination was valid;
• Fair reason related to the employees’ conduct and operational requirements of the employer; and
• Due and fair procedure was followed in termination.

Section 47 (5) of the Employment Act  provides that in any complaint of unfair termination or wrongful dismissal the burden of proving the same has occurred shall rest on the employee. The employer is required to justify the grounds for the termination of employment.

Summary dismissal occurs when an employer terminates the employment of an employee without notice or with less notice that the one the employee is entitled to. A person who is summarily dismissed is not entitled to any benefits unless he or she proceeds to go to court. The court will then decide whether he or she was unfairly dismissed and grant him or her requisite entitlements. However, it should be noted that there is no provision for any entitlements to a person summarily dismissed, unless you have evidence otherwise

This was the decision in Fred Makori Ondari versus the Management Committee of the Ministry of Works Sports Club, Industrial Cause No. 1079 of 2010 where Justice Rika directed that the Claimant was not entitled to terminal benefits like salary in lieu of notice. He stated that the Claimant was given to absenteeism, and contributed in no small way, to the decision by the Respondent to terminate the contract of employment. The Court further did not understand the Claimant’s submission and evidence on unpaid public holidays, and public holidays worked as there was no clear evidence to support these two claims.

The grounds for summary dismissal are  gross misconduct which includes absenteeism from work without leave, being intoxicated while at work , carelessly and improperly performing your duty, using abusive or insulting words or behaving in a manner that is insulting to others, disobedience to a lawful command issued by an employer or someone in command, arrest for an offence punishable by imprisonment and not being let out on bond within fourteen (14) days and finally being suspected on reasonable and sufficient grounds of having committed a criminal offence against the detriment of your employer.

In the Industrial Cause matter of George Onyango Akuti versus G4S Security Services (K) Limited, 2013 eKLR the Claimant was a security guard on a permanent basis from the 1^st of September, 2002. On 4^th August, 2011 the employer reported theft of Kenya Shillings Six Hundred and Ten Thousand (Kshs 610,000/=) to the police. The Claimant and two others were arrested and charged with stealing by servant contrary to section 202 of the Criminal Procedure Code.

On 4^th September, 2001, the Respondent had summarily dismissed the Claimant because the Claimant was arrested and remained in police custody for over fourteen days. The termination letter indicated he would be paid for days worked up to date of dismissal and leave days earned but not taken.

In conclusion, it was found that the summary dismissal of the claimant was not in accordance with justice and equity and therefore unfair. The Claimant was awarded one month in lieu of notice of Kshs 25,000/=, gratuity of Kshs 172,980/= and one month accrued leave for 2011 of Kshs 25,000/=.

It is not considered fair under employment law to dismiss an employee on grounds of pregnancy, going on leave that you are entitled to, membership or proposed membership to a trade union, participation in trade union activities outside working hours, where an employee acted in the capacity of an officer in a trade union or a worker representative, participation in a lawful strike and an employee’s race, tribe, religion, political opinion or affiliation, marital status, HIV status, disability etc.

“Cuius est solum, euis est  esque ad coelum et ad infelum”

latin maxim

APARTMENTS AND GATED COMMUNITIES IN KENYA

Apartments

Apartments are all the rage in urban areas. With the rapid expansion of the middle class, young professionals with disposable income or access to financing prefer to buy apartments within the proximity of their work place or businesses.

Apartments are basically residential buildings that could be more than one storey with one or more housing units on each floor that are capable of being owned by separate owners. Apartments have common areas which are spaces or facilities within the apartment building that are shared by owners or occupants of the apartments e.g. stairs, corridors etc. A famous example of apartments in Nairobi is the Madaraka Estates.

I recently attended a property expo in Nairobi organized by property developers. What was clear from every stand I visited and from the banners displayed is that apartments are hot cakes in urban areas today.

I believe that one of the reasons that apartments are on demand is the option to buy one before it is built and pay for it in installments  as it is built and take possession upon completion of the construction probably in several years. This is known as purchasing off-plan.

We will discuss this further.

Gated Communities

Gated communities are, simply put, several separately owned residences in one big compound under one management.

An example of gated communities is Runda in Nairobi and Greenpark estate in Athi River. Gated communities it would seem comprise of high end town houses that are constructed in their separate compounds within a larger compound.

Gated communities are popular with wealthy persons who seek the advantage of having security in numbers while still enjoying more privacy and space in their own compounds as opposed to apartments.

The concept of ownership and the relationship among the owners of apartments and gated communities is similar and that is the reason both are discussed in this article.

Buying an Apartment or a House in a Gated Community Off-Plan

Developers will normally offer cheaper rates for buyers who purchase off-plan before construction commences or during construction as opposed to those buying completed units.

There is no house to look at when you are buying off-plan. The building plans, designs, project master plan and other architectural documents are what you have to inspect as you consider making an off-plan purchase.

If you are buying in a gated community, some developers will have the land sold to you separately with individual title deeds and prescribe building plans for owners to construct their houses or if they choose to, to retain the developer to undertake the construction.

In such a case, you would conduct due diligence as if you were buying the land only as discussed in our previous article.

Steps involved in off-plan purchase

The steps are similar to buying land save that the final product is not there to be inspected from the start.

1. Inspection of Building Plans and Project Master Plan

You will in most cases be dealing with an agent who is marketing the apartments and houses to be constructed, with beautiful almost life like artists impressions of the apartments or houses when completed.

Ignore the beautiful pictures and the sweet words of the agent who will tell you of all the amazing amenities and add-ons that will be on the project when completed. Request for copies of the approved and registered building plans and the project master plan for inspection.

Consult an architect to inspect the building plans and advise you on the structural soundness of the building once complete.

Once you have received satisfactory advice on the apartment or house and you are willing to proceed, you might be required to sign a Letter of Offer and pay a reservation fee before you sign the Agreement for Sale.

2. Execution of Letter of Offer

The agents will normally have a Letter of Offer ready for you to complete your details and sign. As discussed in an earlier article, the Letter of Offer gives you time to conduct due diligence before execution of the Agreement for Sale. You should retain an advocate at this point to review the Letter of Offer before you sign it. Your advocate should make the Letter of Offer subject to conduct of a satisfactory due diligence. The reservation fee is normally refundable but just check to ensure the Letter of Offer provides expressly for its refund.

3. Due Diligence

Just as discussed in an earlier article, your advocate will instruct various professionals including the surveyor to conduct due diligence. You should look into the history of the developer who is undertaking the project, you can visit projects they have previously undertaken and inspect the quality and also have a chat with the owners to find out if they have any reservations about the developer.

The National Construction Authority (the “NCA”) has recently set up a hotline to confirm whether constructions have received their approval. It is prudent to check with the NCA to confirm whether they have approved the intended construction.

Look out for any reports of financial unsoundness of the developer which might affect the project. Your lawyer should handle the technical due diligence including searches on the land, the developer and inspection of National Environment and Management Authority (“NEMA”) approvals.

4. Agreement for Sale

Your advocate will review the Agreement for Sale. It is similar to the one you enter into when buying land but more detailed.

The apartments will normally be sold by way of a lease by the developer. You will get a lease document signed by you, the developer and the management company as the title document to your apartment or house.

When you receive the Agreement for Sale with a draft Lease for you to approve you should look out for the completion date of the project, make sure there is a definite date for the completion of the project.

You should also confirm the payment plan, costs to be paid to the advocates (you will bear costs for both the seller’s and your advocate), breakdown of registration costs, initial service charge, share in the management company to be issued to you within a specific date, hand over of the management company by the developer to the owners within a specific date, whether the car park is bought together with the apartment or sold separately, defects liability period, the term of the lease and when and how possession will be handed over to you.

The apartments or houses in a gated community will be managed by a management company that will handle the maintenance of the common areas, security, insurance etc on behalf of all the owners.

It is prudent for your advocate to review the draft lease, memorandum and articles of association of the management company and home owners rules to ensure that the management company will be run by the house owners and that the developer will hand over control to the owners upon completion of construction and sale of the apartments or house within a specific date or deadline.

Each of the apartment or house owners will have a share in the management company and be entitled to participate in decision making on matters of the running the management company. The land on which the apartments are constructed will be owned by the management company. Since apartment owners own a share in the management company, they own the land too.

If the land is a lease from the government or local authority, the right to apply for renewal upon expiry of the lease (“Reversion”) must be transferred to the management company after the sale of the apartments or units but within a specific date or deadline.

5. Execution and Registration of the Lease and Handover of Possession

After you sign the Agreement for Sale, you will pay the installments as scheduled as you await completion.

When the developer approaches completion, you will be called upon to sign the Lease and complete payment of all monies due. Thereafter, the seller’s advocate will register the Lease and deliver a duly registered Lease to your advocate.

You will be given the keys to your apartments as set out in the Agreement for Sale. Normally, you are entitled to possession once you complete all payments and the apartment/house is ready for occupation.

You should note that the defects liability period is normally six months and you should conduct a thorough inspection of the apartment/house within this period and report any defects to the developer for repairs to be undertaken.

Ensure that you receive your registered Lease, share certificate for the share in the management company and a copy of the certificate of occupation.

Welcome to modern living.

Some of us have heard in the news about a certain Honourable Member of Parliament alleged fiasco with a certain former female employee. Anyway, for those whose heads are buried in the sand, no pun intended, it was a sexual harassment issue. The gist of the matter is that the said Honourable Member of Parliament made unwelcome sexual demands or advances to the married lady but the feeling was not mutual.

According to the Employment Act, 2007 a worker is sexually harassed if the employer or co-worker requests directly or indirectly for any form of sexual favor in order to get preferential treatment at the workplace; or threaten the worker of detrimental treatment on the present or future employment status of the worker.

Save for the high profile cases that come to the attention of the media, there are so many unreported cases of sexual harassment going on in the workplaces, but probably the victims are not even aware that they are being sexually harassed. Most of the time, victims of this offence are too afraid to report the same due to fear of loss of employment or that the persons in positions of authority will not believe them. Sexual harassment affects both men and women contrary to the popular belief that only women are victims.

The industrial court has few cases on sexual harassment. A look at a recent case of MWM versus MFS of 2014, the Claimant stated that her dismissal from employment was due to her refusal to give in to the Respondent’s sexual advances that included inviting her to his office for no reason, hugging her, inviting her to his house on weekends and stating several times that he wanted to take care of her as a woman. The Court found that she was sexually harassed and awarded her a sum of Kshs 500,000/= as general damages.

The same was applied in the case of P O versus Board of Trustees, where the  Court found out that the Claimant was physically assaulted in addition to being sexually harassed and; awarded her Kshs 3,000,000 as general damages for the trauma that she underwent. Further, the Court stated that sexual harassment should be viewed as a health and safety issue.

Simply put, if a person who may be your employer or a co-worker exhibits any kind of sexual behaviour that makes you uncomfortable, including using language (written or spoken) or visual material of sexual nature, all these constitute sexual harassment and you have a recourse in court.

Sexual Harassment is both a civil and criminal issue. The Sexual Offences Act of 2006 provides that where any person who being in a position of authority persistently makes any sexual advances or requests which he or she knows or has reasonable grounds to know are unwelcome, is guilty of the offence of sexual harassment and is liable to imprisonment of at least three years or to a fine of at least Kshs 100,000/= or both.

There you have it; there is recourse in the law, reliable evidence is key to successfully prosecuting a sexual harassment suit in both criminal and civil suits e.g. text messages, emails etc.

The law places the first responsibility of discouraging and dealing with sexual harassment with the employer. Organizations that have more than 20 employees are required under the law to issue a policy statement on sexual harassment. The policy statement should be reviewed once every five years and amended if necessary.

The sexual harassment policy should generally enhance great awareness about sexual harassment by defining it, commit to providing a working environment that is free from sexual harassment, assure employees of disciplinary measures against any of those found guilty, assure protection to the victim by keeping the issue anonymous and provide an avenue for complaints of sexual harassment.

In conclusion, sexual harassment is one of the most egregious forms of violence against women and men in the workplace. The sad fact is that unlike the brave lady who stood up and spoke out against the Honourable Member of Parliament most victims are silent about this serious issue.

Imagine you are single or married, a baby on the way and you really do need a job to take care of the baby and yourself. If you are lucky, you have a job and if not, you do not. Now, further imagine that your employment gets terminated for no good reason other than you are pregnant.

Employers being business minded will not look at you as an investment but rather as a liability e.g. getting paid while on leave falls on them etc, will find ways of terminating your employment albeit not directly due to your pregnancy. This is what gives rise to pregnancy discrimination.

There are limited provisions in our law that forbid discrimination based on pregnancy when it comes to any aspect of employment including hiring, firing, pay, job assignments, promotions, layoffs, training, fringe benefits such as leave and health insurance and any other term or condition of employment.

Pregnancy discrimination can be defined as treating a woman (an applicant or employee) unfavourably because of pregnancy, child birth or a medical condition related to pregnancy or childbirth.

Section 29 of the Employment Act, 2007 provides that a female employee shall be entitled to maternity leave on full pay if she gives not less than seven days notice in advance, or in a shorter period as may be reasonable in the circumstances, of her intention to proceed on maternity leave.

A female employee who seeks to exercise her right to maternity leave shall, if required by the employer, produce a certificate as to her medical condition from a qualified medical practitioner or midwife.

Further, section 5 (3) (a) of the above mentioned Act provides that no employer shall discriminate directly or indirectly against an employee on grounds which include among many others, pregnancy.

There is hope in section 46 (a) of the Employment Act, 2007 which provides that pregnancy or any reason connected with pregnancy do not constitute fair reason for dismissal or for the imposition of a disciplinary penalty.

The above provisions are the only ones in law that govern pregnancy related issues in Kenya unlike other countries e.g. the United States. The United States of America have in existence the Pregnancy Discrimination Act which forbids any discrimination based on pregnancy.

According to the Pregnancy Discrimination Act, there are certain medical conditions related to pregnancy or child birth and the employer or other covered entity is required to treat her in the same way as it treats any other temporarily disabled employee. For example, employers may have to provide light duty, alternative assignments, disability leave or unpaid leave to pregnant employees if it does so for other temporarily disabled employees.

The Act also covers impairments resulting from pregnancy (for example, gestational diabetes or preeclampsia, a condition characterized by pregnancy-induced hypertension and protein in the urine) which may be disabilities under the Americans with Disabilities Act (ADA).  An employer may have to provide a reasonable accommodation (such as leave or modifications that enable an employee to perform her job) for a disability related to pregnancy and also absent undue hardship (significant difficulty or expense).  The ADA Amendments Act of 2008 makes it much easier to show that a medical condition is a covered disability.

There are several cases in Kenya that have covered pregnancy discrimination and of particular interest to me was the 2013 case of DMV versus Bank of Africa Kenya Limited, where the Claimant had sought damages for termination of employment on grounds of pregnancy.

The Claimant was initially employed by the Respondent Bank, on 1st November 2006, in the position of Relations Officer. She rose through the ranks, becoming Manager as of 4th March 2011 when her contract of employment was terminated.

She was pregnant with her first baby and proceeded on maternity leave on 15^th January 2009, resuming on 4th May 2009. Sometime in August/ September 2010, the Respondent learnt the Claimant was expecting a second baby. It was not a trouble- free pregnancy; according to the Claimant she took sick leave between 22^nd February 2011 and 1^st March 2011, to attend to sickness associated with her second pregnancy. She resumed duty on 2nd March 2011. She was asked to see the Respondent’s Managing Director the following day, 3rd March 2011. She did so, and was informed by the Managing Director that her services were no longer required.

The Claimant won the case and was awarded through the judgment of Justice Rika where it was held that:-

(a) The termination of service was based on her pregnancy, and therefore discriminatory, unfair, unlawful, and in violation of the Employment Act 2007, the Contract of Employment, and the Constitution of Kenya;

 (b) The Claimant  was to be paid coalesced damages at Kshs. 3,000,000;

 (c) The Claimant was to be paid salary in lieu of notice; service/gratuity pay; outstanding leave; and 3 days worked in March 2011 at Kshs. 1,473,006;

 (d) The Respondent shall pay to the Claimant a total of Kshs. 4,473,006;

 (f) Costs to the Claimant; and,

 (g) Interest on the principal sum and on costs, granted to the Claimant at 14% per annum from

the date of the delivery of this Award, to the date payment is made in full.

 You will note that on matters of health and safety when it comes to matters of pregnancy in Kenya, there are no safety requirements as to health protection of pregnant women or new mothers. This is covered under the Americans with Disabilities Act (ADA) mentioned above.

The issue of prenatal care also arises. What happens when they need to express milk for their new borns? Most organizations in Kenya do not have areas where young mothers’ breastfeeding can express milk privately. In the United States of America nursing mothers have the right to express milk in the workplace under a provision of the Fair Labor Standards Act enforced by the U.S. Department of Labor’s Wage and Hour Division.

These are issues that need to be addressed by the government through appropriate legislation.  Pregnancy discrimination is a lacuna in law that needs to be solved.

“The mortgage crisis is a clear instance of consumers who needed protection. There was predatory lending to people who didn’t know what they were doing”

Nassim Nicholas Taleb

You have found your ideal property, this time round; it’s your dream house.

It would be great if you can pay cash for it and move on to other things. The reality is that, most people cannot afford to pay cash for a house and saving up for it will take a lifetime.

This is where a mortgage comes into play. A mortgage is an industry term for loans offered by banks or financial institutions for purposes of buying land or a house. The loan is ordinarily secured by the land or house to be bought and the bank keeps the original title documents and other security documents to enable it to sell the house to recover the loan incase you default.

I recently read in an article that despite the biting housing shortage in urban areas in Kenya, the rate of uptake of mortgages is very low. This article is not intended to market mortgages so as to convince you to take up one. This article is intended to provide basic legal information about mortgages to those interested in knowing what is involved in taking up mortgages.

As an advocate, I have acted for people who are taking mortgages and for banks that are auctioning mortgaged houses for default in payment. I have seen the tears of excitement and joy from borrowers when they finally succeed in securing a mortgage to buy their dream house. I have also seen tears of pain from borrowers who have defaulted in their mortgage repayment and their houses are put up for auction.

When planning to take a mortgage, take advice from the relevant financial experts on the financial implications. The relationship managers at the bank ought to be in a position to advise you on the financial implications but it might help to seek independent advice from financial consultants.

An advocate should be the next professional you consult on your mortgage. Ensure you request for a breakdown of all costs involved in the process from the negotiation of the Agreement for Sale to the registration of the mortgage. If you have already identified the bank you wish to take your mortgage with, you should request the bank to give you a list of the advocates in their panel for you to consult. This will save you costs and provide continuity since it is the same advocate you will use to deal with the purchase of the house and in registration of the bank’s mortgage documents.

The legal process of buying the house is, save for minor variations, the same as buying land which we have discussed in an earlier article. I note that there is a growing trend of buying houses off plan. This means that you buy a house that is yet to be constructed and pay for it in installments as it is being constructed. I will discuss this in a separate article, for now, let us talk about buying houses that are up and ready for occupation.

I will discuss the process in brief.

Identify the land or house and agree on a price with the seller. Consider how much you are able to pay and how much you need to borrow from the bank. You do not have to borrow the entire amount of the purchase price; you can borrow to cover the shortfall. Ideally, you should budget to pay for the deposit, registration costs, lawyers and valuers fees and borrow the balance of the purchase price. This is a commercial decision for you and your bank.

The bank will require a signed Agreement for Sale and a valuation report. The bank will refer you to a valuer in their panel to conduct the valuation of the house to ascertain its value. Remember to request the bank to refer you to an advocate in their panel for you to instruct as you enter into the Agreement for Sale. You will bear the cost of the valuation and the advocate, be prepared to pay for this.

You will submit the valuation report and signed Agreement for Sale together with your mortgage application to the bank for approval. If your application is approved, the bank will give you a mortgage facility letter which is also referred to as an offer letter. The facility letter contains the amount of money approved for the mortgage, repayment schedule, interest rate and other commercial terms. The bank will thereafter instruct an advocate on their panel to undertake the registration of the mortgage documents.

The advocate is likely to be the one you instructed to handle the purchase of the house. The advocate will prepare the standard mortgage documents and contact you for execution. In legal circles, the term mortgage is not used in the ordinary sense we are accustomed to, don’t be shocked when the advocate presents to you “legal charge” documents instead of mortgage documents for you to sign.

The advocate instructed by the bank may be acting for you in the purchase of the house but as far as the mortgage is concerned they are technically the advocate for the bank and their first duty is to deliver properly registered mortgage documents to the bank. It is normally preferred that the same advocate acts for you in the purchase and for the bank in the mortgage for convenience and saving on costs. However, the advocate will advise you if there is any issue of conflict of interest in acting for both you and the bank. If you feel that there will be a conflict, you should discuss this with the advocate before you sign the mortgage documents.

If you have not already done so, you should discuss legal fees for the mortgage with the advocate since legal fees are payable on two levels, even if it is the same advocate; on the purchase of the house and the registration of the mortgage.

Once you have signed the mortgage documents, the advocate will pursue the seller’s advocate for the completion documents to facilitate simultaneous registration of the transfer of the house in your favour and the mortgage in favour of the bank. Take note to ensure that your advocate has indicated in the Agreement for Sale that utility bills payment receipts are part of the completion documents if the house has been previously occupied. Request for the up to date electricity and water payment receipts together with signed transfer forms to facilitate change of records in your favour at the water and Kenya Power and Lighting Company offices.  Your advocate ought to make arrangements for signed Memorandum of Rates (MRT) transfer forms to facilitate updating land rates records at the county governments’ offices. Take note that if you are married, your spouse will be required to consent to the mortgage by signing a spousal consent which is part of the mortgage documents.

When the advocate completes registration of the transfer and mortgage documents, the original title documents together with the mortgage documents are forwarded to the bank. You are entitled to receive copies of these documents and it is important that you have them for future reference. The original title documents will be returned to you once you have repaid the mortgage in full.

The advocate will then advise the bank to pay the balance of the purchase price to the account of the seller or that of the seller’s advocate if the seller is represented. Normally, the seller will hand you the keys to your new house after they have received full payment from the bank.

Now you are a happy new house owner, keep in mind to be up to date with your mortgage repayments to avoid a sad twist to the fairy tale ending.

“A verbal contract is not worth the paper it is written on.”

                                                                                                                        Samuel Goldwyn

A majority, if not all of us want to spend as little money as possible while buying land. We would prefer not to hire a lawyer to prepare an agreement for sale just to save on the legal fees.

There are cases where buyers of land just make payment to the seller and entrust their agent to deliver a title document in their name after sometime.

The challenge with this is that Kenyan contract law requires that contracts for the sale of land must be in writing, signed by the buyer and the seller and their signatures witnessed/attested to.

What if the seller and the buyer trust each other and are satisfied with a verbal agreement?

Can the buyer and seller draw their own agreement without hiring a lawyer?

Is it not sufficient if you have paid for the land in cash and received the original title document and other necessary documents in exchange?

What about land bought through SACCO’s, self help groups or “chamas” as popularly known?

These questions and the reason you must have a written Agreement for Sale while buying land will be answered as we discuss the contents of a basic Agreement for Sale of land.

1. Offer Letter

The Offer Letter is less known than the Agreement for Sale. This is because most people go straight to the Agreement for Sale after identifying the land they want to buy. There is normally an urgency to enter into an Agreement for Sale and to pay deposit in order to tie down the seller of the land to make sure he or she does not consider any offers from other interested buyers.

The Offer Letter is a document normally drawn by the seller where the buyer expresses their interest to purchase the land for a certain price. The buyer will normally pay a reservation fee which is nominal compared to the deposit paid under an agreement for sale. The reservation fee is a show of commitment and also consideration for the seller not accepting other offers from other buyers while the Offer Letter is in force. It may be an unconditional Offer Letter, in this case, once the seller accepts your offer and signs the Offer Letter, he or she is bound to sell the land to you.

A conditional Offer Letter is normally made subject to you entering into a formal contract/Agreement for Sale. In this case, once the seller signs the Offer Letter, you must sign an Agreement for Sale within a certain time or the offer expires after the deadline. If you have not signed an agreement for sale by the set deadline, the seller is free to accept other offers and you will forfeit the reservation fee.

The advantage of signing an offer letter before entering into an agreement for sale is that you commit the seller to sell to you for a certain period, say thirty days. The reservation fee paid is also a small figure compared to a deposit on the Agreement for Sale, it could be Kenya shillings one hundred thousand on land worth Kenya shillings ten million. The reservation fee is in some cases refundable at the option of the buyer should you decide not to buy the land before the expiry of the Offer Letter. The legal fees or cost involved in the preparation and signing of an Offer Letter is significantly cheaper and you may even use a standard template without going to a lawyer. Some estate agents and sophisticated sellers will have a standard Offer Letter form for you to complete at no cost.

The Offer Letter gives you time to conduct your due diligence before entering into an Agreement for Sale. The land selling companies or even individuals who deal in selling land on a regular basis understand the need for you to conduct due diligence and use the Offer          Letter as an attractive “win win”  tool to encourage you to buy the land. There is little or no harm in this and I would encourage you to sign an Offer Letter where you have an opportunity to do so.

2. Agreement for Sale

The Agreement for Sale is a must if you are buying land. SACCO’s and “Chamas” will have signatories or officials who will negotiate and sign the Agreement for Sale on behalf of the members. The land will then be distributed to the members according to the provisions of their constitution or rules.

Under the new land laws which came into effect in 2012, an Agreement for Sale is recognized as an instrument of transferring beneficial interest in land from the seller to the buyer. However, this should not be confused to mean that you do not need to do anything else after signing an Agreement for Sale. An Agreement for Sale passes the equitable or beneficial interest in the land to you once it is signed by both you and the seller. This means that you have a claim to the land which is enforceable against the seller should he or she not transfer the land to you. However, if the seller transfers the land to a third party after you sign the Agreement for Sale, the third party will receive good title to the land and be the genuine and legally recognised owner of the land. Your redress is to pursue the seller for damages/compensation under the contract/Agreement for Sale. This is because; registration of the transfer at the lands office is the only way of transferring legal interest/ownership in land. Once the registration is done, the land is now legally yours and a search at the lands office will confirm this.

You must enter into a written Agreement for Sale and you will need a lawyer for this especially when you are buying land. In practice, it is the seller’s lawyer who drafts the agreement for sale and sends it to your lawyer for comments and/or approval.

Your lawyer is required to only act on your instructions, you will have to also read and understand the Agreement for Sale and approve it before your lawyer request the seller’s lawyer to avail final copies for you to sign.

To assist you in understanding the basic terms of an Agreement for Sale, please see below.

The Agreement for Sale has the following basic clauses:

• Title-contains the description of the agreement and the land to which it relates;
• Definition of terms-the terms/words used in the Agreement for Sale are defined here and interpretation of common words/terms is also set out here;
• Recitals– the capacity of the buyer and seller and their intention to enter into an Agreement for Sale are set out here;
• Parties– contain the description of the buyer and seller. Your names and addresses will appear here;
• Description of the land-contains the description of the land as it appears on the title document. The title/L.R number, location, size and whether the land is freehold or leasehold will appear here;
• Payment of Purchase Price-contains the agreed price and the mode of payment. The payment may be by installments, financing or a single payment. Deposit may also appear here;
• Completion- contains the date, place and manner in which the completion documents will be handed over to you in exchange for payment of the entire purchase price;
• Possession- provides for when and how the possession of the land will be handed over to you;
• Warranties-contains affirmations by the seller of matters relating to the property. The seller is to guarantee matters as to ownership, authority to sign, no pending disputes or conflicts, not government land or road reserve, no encumbrance etc;
• Waivers and Disclaimers-It is an exclusion of liability by the seller. The seller will limit their liability on the condition of the land to it being sold as it is etc;
• Law Society of Kenya Conditions of Sale- contains a statement as to whether the LSK Conditions of Sale apply and exclusion or variation of certain specific conditions. The LSK Conditions of Sale are optional and may be excluded. They contain terms that when applied do not have to be repeated in the Agreement for Sale; and
• Execution and attestation- this is where your name and that of the seller will appear for you to sign and below your signature is a provision for an advocate to attest your signature.

The list above is not exhaustive and you may find agreements which have more clauses and some with less. A basic Agreement for Sale that is properly drafted should be not more than fifteen pages.

As a buyer, when your lawyer sends you the Agreement for Sale for your approval. You should be keen on the property description, the completion clause and the payment terms. Your lawyer should have taken care of the technical terms and you need not to worry about those.

Sometimes sellers have a higher bargaining power than the buyer on the terms of the Agreement for Sale. Sellers may abuse that power to provide for unreasonable and extremely unfair terms. The Consumer Protection Act provides protection for buyers caught in such circumstances and such unfair terms may be unenforceable.

Next time you have an Agreement for Sale to sign, don’t just turn to the last page and sign on the dotted line. Take time to understand it and the obligations it imposes upon you.

“Mke mpeleleze

Ndoani siteleze

Kagundua mbeleze

Zabandia nyweleze”

                                                                                                              Anon Swahili Poet

Due diligence

You have identified your ideal piece of land in your dream location. The price may be just right for your budget or over the top, but worth every shilling in excess of your budget, keeping in mind your plans for it and gains to be had once you succeed. The seller is eager to close the deal as he or she makes you aware that there are other competitive offers from other interested persons so you should hurry and make payment to hold it before any of them do.

From this point on, think of it as the start of a relationship; boy meets girl, they get to know each other and the future is to a great extent a result of the information they learn and find out about each other. Due diligence is the process of seeking information about your ideal land like you would a prospective Mr or Mrs. right before you commit.

To be able to conduct an effective due diligence, you need a basic understanding of land as commodity for sale. Land is immovable and you cannot take it away when you purchase it, so what do you receive in exchange for the money you pay so that you can confirm with certainty that you got what you paid for?

A little history at this point might come in handy. For those of us who believe in creation, we know that God made the land before humans. On the other hand, I recall my science teacher Mr. Kirimi teaching me about the big bang theory and how the universe and the earth came from a big explosion in space millions of years before humans existed. So however you look at it, we now have land and people on it.

In pre-colonial era Kenya, land in most African societies was a community resource and there was no private ownership of land by individuals. Clans, families and age groups would be granted rights of use over a certain piece of land such that one family will pass down those rights over generations. This is still the case in some places in Kenya but this is a discussion for another day.

If memory serves me right, Kenya and other countries were carved out on a piece of paper in Berlin during the partitioning of Africa by the colonial powers. As a result of the partitioning, the colonial era began by the British taking control of most of the land in Kenya. They needed to establish a system that made it easy for the settlers coming into Kenya to own land. By applying their laws, the land in Kenya was vested in her Majesty the Queen. The Queen through appointed officials granted rights over parcels of land to the settlers. This was foreign land that had been taken away by force from the natives, the settlers wanted an assurance that the rights over the land granted to them by their Queen who is thousands of miles away were secure. This assurance was given by a system of land ownership that is attributed to Torrens, a renowned Australian. The Torrens system had three pillars:

1. Mirror principle. The government surveyed and mapped out the land, divided it into pieces with identifying numbers on them which are known as land reference numbers. The government keeps records of the location of pieces of land, dimensions, user, ownership, dealings etc. When a person is granted rights over a certain piece of land, they would get a piece of paper that had the description of the land, the rights granted (freehold or leasehold), the owner and any dealings over the land. This piece of paper is the certificate of title, title deed or indenture of conveyance depending on the law under which it was granted. The mirror principle is a guarantee by the issuing authority, in that case, the Queen that the details recorded on the certificate of title reflect the accurate current status on the ground and anyone can rely on it.
2. Curtain Principle. Anyone looking at the certificate of title does not need to go behind it since it contains all the details on the land. All one would need to do is to verify the authenticity of the certificate of title.
3. Indemnity principle. Anyone who suffers loss as a result of reliance on the certificate of title and the loss was a result of errors on the certificate of title made by the registrar or other authorized official is entitled to be compensated by the government.

I believe we now understand that details about land are recorded in the certificate of title which will be transferred to you once you buy the land. In ideal circumstances due diligence will only entail verifying the authenticity of the certificate of title and relying on its details.

The circumstances are not ideal; unscrupulous dealers can create fake title documents of land that does not exist, the dimensions, boundaries or size of the land on title might not match the position on the ground, the government officials put in charge of the records at lands might issue several original title documents over the same piece of land to different “owners” and many other risks come with buying land in the Kenya of today.

Do not despair though, with proper due diligence by the right professionals you can buy land and receive genuine title to it without breaking a sweat. It is in your interest as a buyer to conduct due diligence and as such you will bear the cost of the due diligence. You must engage a lawyer as soon as you identify the land you want to buy. Your lawyer will coordinate the due diligence. I will discuss due diligence under two heads for ease of discussion.

Formal due diligence

1. Search at the lands registry

This entails obtaining or verifying information about the land through the offices charged with record keeping. Your lawyer will conduct a search at the lands registry.

A search is done by completing a form available at the lands registry supported by a complete copy of the title document, identity card of person making the application and paying the requisite fees.

The search results should be ready in a few days. The search results will reveal the registered owner, any encumbrances on the land including mortgages or charges, leases granted over the land, cautions or restrictions lodged against dealings over the land, court orders relating to the land and any other registrable dealing over the land.

2.   Survey

A ground survey confirms that the land reference number or parcel number exists in official survey maps and the dimensions/boundaries and size of the piece of land on the ground match those on the certificate of title.

A survey is conducted by a registered surveyor who is a professional with a certificate of registration and licence.

In the instructions to the surveyor, ensure that your lawyer has asked for a confirmation of the user of the land, whether it lies on a road reserve and the user of the adjacent parcels of land. The surveyor will present his/her findings in a report detailing the location of the property, size and whether the beacons marking the boundaries are in place. The report will also confirm the user of the land, whether single dwelling, multiple dwelling, mixed use, agricultural, industrial, commercial etc. The user is important because you cannot make a different use of the land from the one it is set aside for. You are not allowed to build flats on a single dwelling user, you will need to apply for a change of user or risk demolition of any developments which are contrary to the user. The user also helps you to plan and manage your expectations of how the adjacent properties will develop. For instance, if you are in a residential low density user area then you expect that this is posh neighbourhood with well spaced developments a maximum of one storey high.

3. Registry of Companies Search

If the seller is a company, it is prudent for your advocate to conduct a search at the registry of companies. The search will reveal whether the company exists, its owners and directors. This confirms that you are dealing with the rightful owners of the company and the directors who sign the documents are genuine directors.

4. Kenya Airports Authority and Kenya Railways Corporation

Any dealing in land that is within one hundred meters (100m) from a railway line requires the consent of the Kenya Railways Corporation. The Kenya Airports Authority owns a lot of land near airports and it is prudent to get its confirmation that the land you are purchasing was not illegally carved out of its land before you proceed.

Informal due diligence

It entails getting information from the seller or other people who might have knowledge of the land. This reveals details that may not be in official sources.

Your lawyer should send pre-contract enquiries to the seller with questions about the land. You can also request for documents that show the history of the land from the seller.

Local leaders and elders are also a useful source of information on history of the land and whether there is any existing conflict or ownership dispute on the land.

The elders and leaders may also have information on whether the land is communal, if it is you will need to have more people involved to consent to the purchase of the land.

There have been various commissions that have looked into land issues in Kenya and the Ndung’u land commission is by far the most prominent.

The Ndung’u report is a public document that can now be purchased at the Government Printer. It is prudent to also ensure that your lawyer has looked at this report and confirmed that the land is not mentioned adversely. The report has not yet been implemented but it is prudent to be safe than sorry should it ever be implemented.

Conclusion

There are emerging trends especially for sophisticated land buyers who are purchasing the land for purposes of putting major developments to seek services of environmental consultants to advise on whether their projects may have any hurdle and getting the necessary approvals from the National Environment Management Authority (NEMA). If you are investing hundreds of millions on land with plans to invest more millions in a project that will generate handsome returns it is prudent to engage these professionals as you conduct your due diligence.

Some purchasers also engage valuers to conduct valuation of the land to ascertain the market price, which may be different from the negotiated price you are buying the land. This is particularly important if you intend to get financing from a bank or other institution for the purchase of the land since the financier will only finance you up to a comfortable margin of the market price and not necessarily the selling price you have negotiated and agreed with the seller.

I trust this has shed some light in due diligence while buying land in Kenya, if you have questions or if you would have more information on any specific part of this article please leave your comment and I will address your concern.

“I conceive that land belongs to a vast family, of which many are dead, a few are living and countless are unborn”

West African elder

  BUYING LAND

So you want to own a piece of Kenya. Here are the legal matters to keep in mind.

This article is for the benefit of mostly the first time buyers who have no idea how to go about buying land.

Buying land is not so different from buying tomatoes from the market, at least not in principle. Just like at the market, you will start by identifying the tomatoes you want, negotiate a price with the seller or accept the price tag on them, pay for them and take them home.

Buying tomatoes seems like a single stroke transaction but in principle it can be broken down into various steps that are not different from buying land. Let’s discuss these steps below:

1. Identify the land

Identifying the land to buy is not a legal step but a commercial or personal one. Your decision may be influenced by the purpose for the land (are you buying for farming, building your family home, developing and selling off houses or apartments etc), price, location etc.

Identifying land may involve you going out to look for the land you like or you may hear of land for sale from friends, adverts in the press etc.

You may also engage an estate agent to identify the land you want for a fee. There are precautions to take when dealing with estate agents. You must ensure the agent is registered and is licensed to practice as an estate agent for the current year. You should request for their certificate of registration and confirmation of renewal of their annual licence.

 2. Offer and acceptance

After identifying the land, the next step is to agree on a price with the seller. This involves you making an offer or accepting the offer by the seller.

At this stage no money has changed hands, you will however want to ask for copies of title documents for the land and identity documents of the seller.

3. Due diligence

Similar to inspecting tomatoes at the market before making payment, you must inspect the land before making payment.

The inspection of the land is complex and involves various professionals.

The first and most important professional is an advocate. You must engage an advocate at this point, the advocate will advise you on the appropriate due diligence to be undertaken. You should negotiate and agree on legal fees at this stage. Your advocate will also advise you on the costs involved in the transaction including registration costs.

Due diligence is normally undertaken at the same time as the negotiation of the terms of the agreement for sale.

It is prudent that your advocate concludes due diligence before you sign the agreement for sale.

Due diligence is a topic for another article but in brief, it involves conducting a search at the lands registry, ground survey of the land by a surveyor, inspection of the original title documents and a visit to land to see whether there are squatters, physical defects and whether it matches the description. Background search on the seller’s identity and dealings, inspection of the seller’s registration documents if the seller is a company to confirm its authority to hold and sell land.

4. Signing the agreement for Sale

The seller’s advocate ordinarily drafts the agreement for sale and sends it to your advocate for approval. Your advocate will review the technical terms of the agreement and negotiate the best terms for you and generally lookout for your interests.

We will discuss terms of a typical agreement for sale in a separate article.

Your advocate may refer some commercial terms to you for approval, for instance, if the seller is asking for a deposit of more than ten percent. Your advocate will also advise you of the legal terms of the agreement that are unfavourable and risky to you which the seller has insisted on retaining in the agreement.

Finally, your lawyer will send you the final version of the agreement for your approval and thereafter he will request the seller’s advocate to provide engrossed copies for you to sign.

Once you as the buyer signs the agreement, you will ordinarily be required to pay deposit before the seller signs the agreement.

5. Completion

The agreement for sale will normally provide for a period between the signing of the agreement and handover of original documents by the seller and payment of the balance of the purchase price by the buyer.

The completion date is the day when the parties make the exchange.

The completion documents vary for various properties depending on the law under which the title document was issued and the location of the property.

Ordinary completion documents are the original title document, land rates and land rent receipts, land control board consent if the land is agricultural, duly executed transfer document with coloured passport photos of the parties affixed, identification documents and KRA PIN certificates.

6. Registration

Once you and the buyer sign the agreement for sale, beneficial interest in the land passes to you but the legal title in the land only passes on registration of the transfer in your favour at the lands registry.

Your advocate will undertake registration at the lands registry and thereafter release to you or keep on your behalf the original title document, receipts and the other documents handed over on completion.

After successful registration, your advocate will notify the seller’s advocate of it and the seller’s advocate may release the purchase to the buyer unconditionally.

Conclusion

I have attempted to be brief in my explanation of the process. However, there are many variables in buying land, you might be financed, the seller might not have legal title to the land because of pending succession issues, the land might be charged to the bank as security for a loan etc. I will attempt to cover these specific variations and delve into deeper discussion of some matters like due diligence and terms of the agreement for sale among other matters in other articles.

In the meantime, happy buying.

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‘’Agree with thine adversary quickly, whiles thou art in the way with him; lest at any time the adversary deliver thee to the judge, and the judge deliver thee to the office, and thou be cast into prison.’’

Mathew 5:2 King James Version

ALTERNATIVE DISPUTE RESOLUTION PROCESS (ADR)

Since, we brushed on this on the first article, I thought it best to cover this ground some more.

Article 159 (2) (c) of the Constitution of Kenya, 2010 enumerates ADR as one way of accessing justice by granting the courts power to promote ADR as an alternative to the adversarial and overly technical method that is litigation.

The legislation framework in Kenya includes;

1. The Constitution of Kenya, 2010
2. Arbitration (Amendment) Act, 2009 and Arbitration Rules, 1997
3. Civil Procedure Act and Civil Procedure Rules, 2010
4. The Appellate Jurisdiction Act
5. International Centre for Arbitration Act, No. 26 of 2013

Each of the major ADR mechanisms are explored below:

• Negotiation

It is voluntary and allows parties control in the process and over the outcome. As such the focus of negotiations is the common interests of the parties rather than their relative power or position.

It has also been described as a process involving two or more people of either equal or unequal power meeting to discuss shared and / or opposed interests in relation to a particular area of mutual concern.

Where parties in a negotiation hit a deadlock in their talks, a third party is called in to help them continue negotiating. This process is called mediation.

• Mediation

It is a continuation of the negotiation process by other means where instead of having a two way negotiation, it now becomes a three way process: the mediator in essence mediating the negotiations between the parties.

The salient features of mediation are that it emphasizes interests rather than (legal) rights and it is cost –effective, informal, private, flexible and easily accessible to parties to conflicts.

• Conciliation

This process is similar to mediation except for the fact that the third party can propose a solution, making parties lose some control over the process. It works best in trade disputes.

In the event the parties are unable to reach a mutually acceptable settlement, the conciliator issues a recommendation which is binding on the parties unless it is rejected by one of them. However, the conciliator does not have the power to impose a settlement.

• Arbitration

Arbitration arises where a third party neutral (known as an arbitrator) is appointed by the parties or an appointing authority to determine the dispute and give a final and binding award.

Its advantages are that parties can agree on an arbitrator to determine the matter; the arbitrator has expertise in the area of dispute; any person (not necessarily an advocate) can represent a party in the dispute; flexibility; cost-effective; confidentiality; speedy and the result is binding.

• Med-Arb

It is a combination of mediation and arbitration where the parties agree to mediate but if it fails to achieve a settlement the dispute is referred to arbitration. It is best to have different persons mediate and arbitrate.

It can be successfully be employed where the parties are looking for a final and binding decision but would like the opportunity to first discuss the issues involved in the dispute with the other party with the understanding that some or all of the issues may be settled prior to going into the arbitration process, with the assistance of a trained and experienced mediator.

• Arb-med

This is where parties start with arbitration and thereafter opt to resolve the dispute through mediation. It is best to have different persons mediate and arbitrate. This is because a person arbitrating may have made up his mind who is the successful party and thus be biased during the mediation process if he transforms himself into a mediator.

• Adjudication

It is where an impartial, third-party neutral person known as an adjudicator, makes a fair, rapid and in-expensive decision on a given dispute arising under a construction contract.

It is an informal process under very tight time scales, flexible and inexpensive process; which allows the power imbalance in relationships to be dealt with so that weaker sub-contractors have a clear route to deal with more powerful contractors.

The decision of the adjudicator is binding unless the matter is referred to arbitration or litigation.

The demerits of adjudication are that it is not suitable to non construction disputes; the choice of the arbitrator is also crucial as his decision is binding and that it does not enhance relationships between the parties.

I have pondered over an appropriate introduction for this blog for two weeks now and i am still undecided.

Lets see how this goes though.

I am an advocate practicing in Kenya. I often receive calls from relatives, friends and even fellow advocates to advise them on legal matters. The topics of the questions range from registration of limited companies to child support by estranged spouses.

This got me thinking that there is a need for basic legal information broken down in a topical and easy to read format that can be easily understood by legal minds as well as ordinary persons.

The purpose of this blog is to attempt to fulfill that need and i sincerely hope to achieve this with time.

Lets start something.