Law Reform

Memorandum to National Assembly – Business Laws Amendment Act (No.2)

Written By :
Angella Wairimu ｜ Byron Mutali ｜
  1. On Friday, February 12th, 2021 the Clerk to the National Assembly published in the local dailies an invitation for public participation and submission of memoranda on the Business Laws (Amendment) (No. 2) Bill, 2020 (National Assembly Bill No. 50 of 2020)(hereinafter referred to as “the Bill”) in line with Article 118 (1) (b) of the Constitution and Standing Order 127 (3) of the National Assembly Standing Orders.
  2. The Bill was published on 14th December 2020 and read the first time on Tuesday, 22nd December 2020. The Bill seeks to make amendments to various statutes to facilitate the ease of doing business in Kenya.
  3. The Bill proposes to amend inter alia the Land Registration Act No. 3 of 2012 to eliminate the use of company seals in the execution of documents by companies incorporated under the Companies Act, 2015, eliminate the requirement to submit Land Rent and Rate Clearance Certificate and Consents in other land transactions.
  4. The memorandum herein focuses on the requirement or otherwise of consents vis-a-vis the main object of the Bill which is to facilitate the ease of doing business in Kenya.
  5. In line with the main objective of the Bill, we urge Parliament to consider doing away with the requirement for consent altogether.
  • Background
  1. Historically, land ownership did not exist outside of customary ownership. Colonialism introduced a system of individual land ownership that permitted the commercialization of landed property. Control measures to land transactions were subsequently adopted through the Swynnerton Plan of 1954. The Plan was meant to introduce security of tenure in the ownership of land through an indefeasible title. In this regard, it was intended that the security of title conferred by registration would create a land market enabling persons owning uneconomical fragments of land to dispose them off to third parties who would consolidate them for enhanced commercial benefits.
  2. The general principle of control measures in land transactions by statutory boards was taken from the Land Control Ordinance 1944, Cap. 150 (Laws of Kenya, 1948) which had introduced a system of land control into the White Highlands. The coming into force of the Land Control Act in 1967, further consolidated a single land control system in Kenya.
  3. Land control boards were granted a very wide discretion which would enable them to forbid, for instance, if they so wish, the alienation of land outside the tribe, clan or family group, and also to exercise some restraint over the [newly emancipated] landowner who wishes to sell his land to the detriment of his family.
  4. Today the requirement for consent for transactions remains in force despite the cultural advancement of the Kenyan community into a more liberal and cosmopolitan society. In fact, the types of consents required for transactions has become broad to include the following;
  • Consent of the National Lands Commission

Applies to land that is leased from the national government. The proprietor of the land will be required to first obtain the consent before either selling, sub-leasing or using their property as loan security as in the case with a charge.

  • Land Control Board (LCB) Consent

Applies to agricultural land. The requirement for LCB Consent was introduced as a measure to control land transactions and in particular, prevent fragmentation of land to smaller units that undermine agrarian utility.

  • County Government consent

This applies to land that is leased from the respective county government.

  • Lessor’s consent

The consent applies to where land/property is leased by a person, whether natural or juristic, other than a government.

  • Management company’s consent

This is a requirement where there is separate ownership of units within a development. For example apartments, office suites or townhouses. The management company acquires the reversionary interest in the development upon the sale of the last unit and will normally have the prerogative of issuing its consent before a proprietor of a unit can either sell or use their property as security.

  • Chargee’s consent

Where a property owner has obtained a loan facility by offering their property as security, a charge is created in favour of a financier. If the property owner intends to deal in that property either by way of sale or through a second charge, they would be required to obtain the consent of the financier in order to effect any transaction in connection with the property.

  • Other Corporate Bodies/government entities

In certain instances, other corporate bodies and/or entities may impose restrictions to the alienation of land. For example, any dealing with land that is situated adjacent to an airport may be subject to consent by the Kenya Civil Aviation Authority.

The Case against Consents

  • Constitutional Right to Ownership of Property
  1. The proprietorship right to property is a constitutional right enshrined in Article 40 of the Constitution. Article 40 (1) confers on “every person the right, either individually or in association with others, to acquire and own property“
  2. Article 40 (2) of the Constitution expressly prohibits the enactment of any laws that permits the state or any person to ” arbitrarily deprive a person of property of any description or of any interest in, or right over, any property of any description; or (b) to limit, or in any way restrict the enjoyment of any right under this [Article] on the basis of any of the grounds specified or contemplated”
  3. Certain consents, especially consent to be obtained from lessors in real estate developments and management companies have in the past been denied for arbitrary reasons. We submit that the requirement for consent is an outright inhibitor to the right to own property as enshrined in the Constitution.
  4. On the other hand, we have not in our practice, been denied consents from land control boards or governments. If this were court, it would most likely take judicial notice of the fact that the utility of these consents stands defeated and has been reduced to an exercise of ticking a box.
  • Feasibility and / or Practicality in obtaining the relevant consent
  1. The process of obtaining consent(s) is largely unregulated. The factors to be considered when granting or refusing a consent are not openly spelt out leaving the decision to the arbitrary discretion of the official(s) in most instances to the unfair exploitation of the applicant who has had to fork out unavailable resources to obtain what are now known as “special board consents”.
  2. Land control boards serve for a set period and upon the expiry of this period, the cabinet secretary in charge of land and physical planning will appoint new board members and the names are published in the Kenya Gazette. There have been instances where protracted delays in these appointments have inhibited land transactions.
  3. Certain areas are still classified as agricultural area requiring LCB Consent while in reality they are densely populated commercial and/or residential areas, case in point is the Dagoretti Area in Nairobi County. It no longer makes sense to obtain land control board consents for land that is no longer agricultural.
  4. The practical application of Section 6 of the Land Control Act has metamorphosed beyond its intent. While it specifically provides that the consent of the Land Control Board will not be required for subdivision of land of less than 20 acres, it has become commonplace that no sub-division, regardless of size of the land, can proceed without this consent.
  5. We submit therefore that the long process and the unclear procedural formalities in obtaining consents have in their very nature acted as an inhibiting factor to the ease of doing business in Kenya.
  • Protection through Zoning Regulations

Should Parliament be minded by the initial reasons for which the requirement for consent was introduced, the same objective could still be sufficiently achieved through zoning regulations.

  • Conclusion
  1. For the reasons set out above, parliament may consider the following recommendations:
  2. Total repeal of the Land Control Act whose initial intention has since been overtaken by events.
  3. Total deletion of section 55 of the Land Registration Act together with a proposed amendment introduced under paragraph 10 of the Bill.
  4. Total deletion of section 56 (4) of the Land Registration Act together with a proposed amendment introduced under paragraph 11 of the Bill.