The Business Laws Amendment Act, No.1 Of 2020: The Flaw In The Law

The Business Laws Amendment Act, Number 1 of 2020 (BLA) was enacted to bring the cost of doing business down and enhance efficiency in business transactions. The World Bank in its Ease of Doing Business Report, 2020 noted that Kenya ranked 134th with regard to the registration of properties. In response, the Government, through the Ministry of Lands and Physical Planning sought to review the existing laws by removing various cogs that were deemed to slow down the registration of transfers of real property.

A reading of the substantive provisions of the BLA imply that the stumbling blocks affecting the expeditious registration of transfers of land are:

a) Consents to Transfer

b)Land Rent Clearance Certificate

c) Land Rates Clearance Certificate

The Land Registration Act was consequently amended thus:

S.22 The Land Registration Act is amended by deleting Section 38

S.23. The Land Registration Act is amended by deleting Section 39

The deleted provisions of the Land Registration Act mandated the Registrar to register transfers on land on receipt of a Land Rates Clearance Certificate (Section 38) and Land Rent Clearance Certificate and Consent to Transfer (Section 39).

The amendments through the BLA erroneously make two key assumptions, namely, purchases of property are only made in cash and secondly, only the Commissioner of Lands issues consents to transact in property. This is further elaborated below.

Security for Funds

A significant amount of transactions in land are done through bank securities where property owners use real property as collateral for advancement of monies to complete these purchases. The BLA did not take this into account in amending the Land Registration Act.

Section 56(4) of the Land Registration Act provides that:

The Registrar shall not register a charge unless a land rent clearance certificate, certifying that no rent is owing in respect of the land, and the consent to charge has been presented, or unless the land is freehold.

The import of this section is to require that the two instruments which are no longer needed for the registration of transfers of land, will still be required to effect registration of charges over property. Failure to obtain such consent contravenes the provisions of Section 56(4) and risks voiding charge documents.

Applications for consent, and more specifically, consents from the Commissioner of Lands were processes commenced and completed on the e-citizen platform. In implementing the BLA, the Ministry of Lands proceeded to configure the portal by removing the application function thereby making it impossible to comply with Section 56(4).

Land Control Board Consents

It is critical to note that the BLA did not repeal the Land Control Act, Cap 302 which makes provisions for dealings in agricultural land. Failure to obtain the requisite consent renders the transaction void.

Conclusion

The BLA could be said to have had the right intentions to the extent that it sought to enhance business efficiency. However, glaring discrepancies are continuously revealing themselves that gravely impede the performance of obligations under the law.