Supreme Court Reaffirms Limits of Indefeasibility in Land Titles

Land, Property & Real Estate , ,

The Supreme Court reaffirmed the Limits of Indefeasibility in Land Titles and recognized legitimate expectation in Lease Renewals

In a landmark judgment delivered on 11th April 2025, the Supreme Court of Kenya (Ibrahim, Wanjala, Njoki, Lenaola & Ouko, SCJJ) in Petition No. E033 of 2023 – Harcharan Singh Sehmi & Another v. Tarabana Company Ltd & Others clarified the extent to which the doctrine of bona fide purchaser for value without notice applies in matters concerning irregular allotment of public land. The apex court equally pronounced itself on the principle of legitimate expectation with respect to lease renewals.

The Court overturned the decision of the Court of Appeal (Makhandia, Nyamweya, and Lesiit, JJA) which had held that the 1st respondent, was a bona fide purchaser for value. The Supreme Court reaffirmed that irregularly acquired titles cannot enjoy constitutional protection and that lessees of public land have enforceable legitimate expectations in renewal processes, provided the lessees apply for the renewal of lease and due diligence was exercised.

Bona Fide Purchaser and Indefeasibility of Title

Quoting its earlier precedent in Dina Management Ltd v. County Government of Mombasa & Others, the Court restated that where a title originates from an illegal or unprocedural allocation—particularly of public land—there is no legal estate to convey, and the doctrine cannot shield the purchaser, even if they acted in good faith. The Court thus reaffirmed that irregularly acquired titles, including those arising after lease expiry without proper process, cannot benefit from constitutional protection under the doctrine of bona fide purchaser.

Legitimate Expectation in Lease Renewal

The Court emphasized that that upon expiry, a leasehold interest ceases to exist and the land reverts to the Government, becoming public land. This holds true even where a lessee remains in possession and continues paying land rent and rates—such occupation does not create an equitable interest in the absence of a valid renewal. According to the court, whatever remained in favour of occupants of land whose lease had expired could at worst be regarded as “a tenancy at will” or at best “a mere equity”.

Notably, the Court recognized that a lessee who applies for lease renewal before the expiry of the term has a legitimate expectation that their application will be fairly considered. Where the Government fails to respond or communicate the outcome of such an application, that silence may be construed as a breach of the lessee’s constitutional right to fair administrative action under Article 47. The Court warned that administrative inaction must not prejudice applicants who have complied with due process.

Implications of the Judgment

The judgment has profound implications for lessees of public land. Where no renewal application is made before expiry, the leasehold extinguishes and the land becomes government property, exposing occupants to potential eviction or competing allocations. The decision serves as a caution to leaseholders to monitor the status of their leases closely and comply with the relevant provisions of the law regarding renewal of leases. Further, the decision serves as a directive to public authorities to uphold transparency, accountability, and procedural fairness in the management of public land. Finally, the judgement is a forewarning to prospective purchasers of land in order for them to carry out thorough due diligence before buying any property.

H.C Judgement on Lipa na M-Pesa: Implications for Telecom Service Providers

Bank And Financial, Capital Markets, Corporate

The recent High Court Judgement by Justice Lawrence Mugambi directing the Communications Authority of Kenya (CA) to determine the dispute over Safaricom’s Lipa na M-Pesa PayBill charges has significant implications for telecom service providers. The Judgement reaffirms the CA’s central role in regulating the telecommunications sector and clarifies the scope of its authority in addressing consumer concerns related to service pricing and competition.

Expanded Regulatory Oversight

Section 5 of the Kenya Information and Communications Act outlines the Commission’s core purpose being to license and regulate postal, information and communication services within the framework of the Act. To achieve this, the Commission is granted all necessary powers to perform its functions as outlined in the Act. The court’s decision signals a broader interpretation of CA’s mandate, particularly concerning transaction-related costs on telecom platforms. Traditionally, mobile money services, including M-Pesa, have fallen under the purview of the Central Bank of Kenya (CBK). Furthermore, subsection 3 of the same section of the Act provides that the Commission is authorized to collaborate and associate with other organizations, both domestically and internationally, as deemed appropriate and beneficial to fulfilling its established objectives.

By directing the CA to assess the fairness of PayBill charges, the Judgement suggests an overlap between telecommunications regulation and financial oversight. This could set a precedent for increased CA intervention in pricing structures that impact consumers using telecom-based financial services.

Increased Scrutiny on Pricing Practices

Telecom operators now face heightened scrutiny regarding their pricing models, particularly for mobile payment services. The Judgement reinforces the expectation that providers must ensure fair and transparent pricing, aligning with consumer protection principles. The CA’s involvement could lead to greater regulatory interventions aimed at preventing monopolistic pricing strategies, potentially compelling operators to adjust transaction fees to avoid regulatory sanctions.
Strengthened Consumer Protection Mechanisms

The Judgement underscores the need for telecom providers to enhance consumer protection measures. The CA is now positioned as the primary authority for handling disputes related to telecom service pricing. This reinforces the requirement for service providers to establish clear grievance redress mechanisms and comply with CA-mandated pricing regulations to prevent consumer exploitation. The KICA under section 27 provides for the general regulations for telecommunication services. Subsection 2(f) specifically provides that the CA may make regulations with respect to fees and other charges for any matter permitted or matters required to be done under the Act in relation to telecommunication services.

Regulatory Coordination Challenges

The Judgement also highlights the complexities of regulatory coordination between the CA and CBK. While financial transactions remain within the CBK’s jurisdiction, telecom-based payment services intersect with telecommunications regulation. This calls for enhanced collaboration between the two regulators to prevent regulatory conflicts and ensure coherent policy enforcement.

Potential Market Reforms

If the CA enforces pricing adjustments on Safaricom’s PayBill charges, it could prompt broader market reforms affecting all telecom providers offering similar services. Operators may need to revise their business models, ensuring compliance with new pricing directives while maintaining service efficiency. Such interventions could also open doors for increased competition, particularly benefiting smaller telecom players seeking a level playing field in mobile financial services.

Conclusion

The High Court’s Judgement for CA to provide oversight on Safaricom PayBill prices reinforces the Authority’s role in safeguarding consumer interests within the telecommunications sector. While this expands its regulatory reach, it also raises questions about jurisdictional boundaries with other regulatory bodies like the CBK. Telecom providers must prepare for enhanced oversight, potential pricing reforms, and stricter compliance requirements to align with evolving regulatory expectations. This case sets a crucial precedent for the future regulation of telecom-based financial services in Kenya.

This article does not constitute legal advice or opinion. For further assistance, please contact the relevant relationship partner.

Jurisdictional Conundrum: A Critical Analysis of recent judgements on rental claims

Property & Real Estate

The recent judgments of Justice D. S. Majanja in Civil Appeal No. E036 of 2022 and Justice Namisi in Civil Appeal E009 of 2022 have sparked significant debate in the legal world and rental market. The two judgments have shed light on the jurisdictional limitations of the Small Claims Court over rental claims in Kenya. This article will analyze the judgments and provide insight on the way forward.

In Christoffersen v Kavneet Kaur Sehmi T/A The Random Shop (Civil Appeal No. E036 OF 2022), the High Court observed that a claim before the Small Claims court must fit into any of the five categories of cases enumerated in section 12 (1) of the Small Claims Court Act, 2016. It held that a claim for rent arrears does not fall within the jurisdiction of the Small Claims Court, as it does not fit into any of the five categories of claims enumerated under Section 12(1) of the Small Claims Court Act. Justice Majanja emphasized that the court’s jurisdiction is strictly limited to the statute and that a court cannot “exercise jurisdiction exceeding that which is conferred upon it by law.” This finding effectively means that rent-related claims ought to be dealt with by the Environment and Land Court.

In Michelle Muhanda v LP Holdings Ltd (Civil Appeal No. E256 of 2023), Justice Namisi observed that a claim for rent and arrears is distinct from that of breach of contract relating to rent deposits. The court found that that the small claims court has jurisdiction to hear the appellant’s claim for refund of rent deposit as the claim relates to a contract for money held and received, which falls within the ambit of section 12 (1) of the Small Claims Court Act. The decision has cleared the way for tenants to take landlords to the Small Claims Court and claim their deposits upon relocating, and all proceedings shall be heard and determined on the same day or on a day-to-day basis until the final determination of the matter, which shall be within 60 days from the date of filing the claim.

Way Forward

In light of these judgments, several recommendations can be made:

  1. Legislative Review: The Small Claims Court Act, 2016 should be reviewed to clarify the court’s jurisdiction and provide guidance on the types of claims that can be entertained.
  2. Proper Pleadings: Parties must ensure that their claims are properly pleaded and fall within the jurisdiction of the appropriate court.
  3. Forum Shopping: Parties should avoid forum shopping and select the appropriate court based on the nature of their claim.

In conclusion, the judgments serve as a timely reminder of the importance of jurisdictional competence in the administration of justice.

The information provided in this article is for general informational purposes only and does not constitute legal advice. For bespoke legal advice tailored to your specific circumstances, please connect with your relationship partner or a qualified legal professional. For further information, please email faith.wamuyu@attorneysafrica.com

Addressing Inefficiencies in Property Rate Collection and Unlocking Revenue Potential

Land, Property & Real Estate, Tax Law

The National Rating Act of 2024 marks a significant step in reforming Kenya’s property rating and valuation framework. This law was introduced to address long-standing issues, which have been holding counties back from earning their full potential. A study conducted in 2018 by the National Treasury, with the support of the World Bank, revealed that county governments had substantial unrealised revenue potential, particularly from property rates. This catalysed the introduction of a new law to replace the outdated Rating Act of 1963 and the Valuation for Rating Act of 1956, which had failed to align property rates with the rising market values.

The Rating Bill was initially passed by the National Assembly in October 2023. It then underwent amendments in the Senate before a mediated version was approved in November 2024. It received presidential assent on 4th December 2024, marking the beginning of a legislative journey aimed at unlocking the revenue potential of county governments.

The new law encourages the use of modern technology to make valuations more accurate and efficient, ensuring that property values reflect the current market rates. Counties are now required to review and update their valuation rolls every five years, with a possible two-year extension if approved by the county assembly. A valuation roll is a list of ratable properties showing owners, their addresses, locations of land, tenure, acreage and assigned value.

To streamline operations, the Act creates the Office of the Chief Government Valuer, which will offer expert guidance and strategies to counties and the national government to promote best-practice on handling various valuation issues. It further establishes the National Rating Tribunal, which will handle property disputes quickly within 60 days, fostering fairness and efficiency in adjudication processes. In addition, the Act introduces measures to ensure accountability and equity in revenue collection. Property owners are required to pay rates promptly, with counties empowered to enforce payment through notices and, if necessary, the seizure and sale of properties with unpaid rates after a 60-day notice period. However, property owners may apply for rate remission and applications not acted upon within 60 days are deemed approved, providing a safeguard against administrative delays.

Further, the law excludes freehold agricultural land from its scope, focusing instead on urban properties and other rateable properties. Counties are encouraged to consider different property categories such as residential, commercial or agricultural when determining rates, allowing for incentives that promote good land use. Counties can also employ the use of private valuers to expedite the preparation of valuation rolls, preventing backlogs and alleviating the workload on government valuers to ensure timely updates.

This new legal framework is designed to address inefficiencies that have previously cost counties billions of shillings in lost revenue. By aligning property rates with market values, fostering responsible financial management and promoting transparency and accountability, the Act is set to transform county revenue collection, enabling better delivery of services and infrastructure development for the benefit of citizens.

The Act establishes a flexible framework, allowing county governments to use one of four major methodologies for valuing properties, customized to their specific areas, as specified in Section 9(2) of the Act. This is not a one-size-fits-all strategy, and here are the options:

  1. Annual Rental Value: This method focuses on the potential rental income of your property. It considers either the actual rent you could get or the equivalent of comparable rents in the open market. As the Act defines it, “annual rental value” means the amount arrived at based on the actual annual rent realizable or the annual equivalent of comparable rents. This method is most relevant when your property is used for rental purposes.
  2. Area Rating: This is a straightforward approach that calculates rates based on the size of your land. Counties can use a flat rate, a graduated rate based on acreage, or a differential rate based on land use. As the Act defines it, “area rate” includes a flat rate, graduated rate or differential rate adopted by the county government. This method may appeal to owners of larger land holdings.
  3. Unimproved Site Value: This approach values the land as if it were vacant, without considering any buildings or improvements Sections 7, and 9(2)(c)]. In essence, “unimproved site value” is the value of vacant land that does not include the value of any improvements. This method highlights the raw value of your land.
  4. Combined Approach: This method blends the value of the land with the value of any improvements Sections 7, and 9(2)(d)]. This offers a more comprehensive approach.

Before any of these methods are implemented, county governments must seek public input Section 10(1). This is not a mere formality but a key opportunity for land owners to shape how their property rates are calculated. Notices about proposed methods will be published in the Kenya Gazette and in at least two newspapers of wide national and county circulation, and will be circulated through electronic media, ensuring you get at least 60 days to make your views known Section 10(2). As the Act states, “Prior to the adoption of any form of rating, the County Executive Committee member shall, issue a notice of not less than sixty days inviting comments from the members of public Section 10(1)

National Rating Tribunal

A key feature of this Act is the establishment of the National Rating Tribunal Section 39(1). This tribunal is will hear and determine appeals and objections related to property valuations and rates, aiming to resolve issues within six months. The Tribunal will not be bound by the rules of evidence in the Evidence Act Section 42(2). If you disagree with the Tribunal’s decision, you can appeal it at the Environment and Land Court.

On Exemptions:

Not all properties will be subject to rates. The Act exempts certain types of land, including properties listed under Section 38 which include:

• Land used exclusively for public purposes.
• Places of public religious worship.
• Cemeteries, crematoria, and burial grounds.
• Public health facilities.
• Public educational institutions and libraries

However, these exemptions do not extend to properties used for profit or for residential purposes Section 38(3). The Act also specifies that places of public religious worship with profit-earning ventures are only exempt for the place of worship and that rateable property leased for foreign embassies are still subject to rates if registered under the rateable owner.,

Paying Rates Consequences of Default

The County Executive Committee Member will determine when rates are due, and you will be able to pay through authorised bank accounts or electronic payment systems, or by any other means prescribed under Section 15(2), and 16(1). However, it’s crucial to pay on time as the Act introduces stricter enforcement measures for defaulters under Section 19(2). These measures can include penalties, denial of county services, or even the creation of a charge against your property under Section 19(2)(d).

Relief for Those Who Need It

If you’re struggling to pay your rates, the Act provides some routes for relief. You can apply for a remission of rates, where a portion or the whole of the rates may be reduced Section 17(1). There are also possibilities for discounts and waivers of interest and penalties, though these will have specific criteria set by each county under Section 18(1).

Public Land and Contributions

The Act also addresses the issue of public land, with provisions for contributions in lieu of rates under Section 20(1). The National Land Commission will create guidelines for including or excluding certain public lands from valuation rolls [20(2)].

What Does this Mean for You as a Property Owner?

  1. More clarity and consistency: The Act aims to create a more transparent and consistent system for property taxation Section3(a).
  2. Increased public participation: You have a greater say in the valuation process as prescribed in Section 10(1).
  3. A structured dispute resolution process: The National Rating Tribunal offers a formal avenue for addressing disagreements by the Tribunal established under Section 39(1).
  4. Potential changes to your tax liability: Depending on the new valuations, your property taxes might increase or decrease.
  5. Stricter enforcement: Be prepared for stricter measures if you fail to pay your rates as provided under Section 19(2).

In conclusion, this Act is a huge step towards modernizing property tax collection in Kenya. Keep a close eye on updates from your county, as they will be creating their own specific legislation and regulations to implement this Act. This change not only impacts property owners, but also shapes how property ownership and responsibility is understood in Kenya.

Analysis of the Business Laws – Amendment Bill

Bank And Financial, Corporate

On 1st November 2024, the National Assembly published the Business Laws (Amendment) Bill, 2024 (“the Bill”) that seeks to amend several laws to enhance consumer protection, boost trade and manufacturing and harmonise our legal framework in the banking sector. We shall highlight and analyse the proposed amendments below and explore the positive and negative impact these changes may have on trade, businesses, manufacturers, financial institutions and potential local and international investors.

The Banking Act, Cap 488

The Bill proposes an amendment to Section 55 of the Banking Act by providing that the Central Bank of Kenya (CBK) can prescribe penalties on financial institutions, credit reference bureaus or any person that fails to comply with the provisions of the Banking Act, Prudential Guidelines or directions issued by the CBK. The CBK can impose penalties of up to Kshs. 20 million for institutions or credit reference bureaus, or an amount that is three times higher than the amount gained or loss avoided by failing to comply. This provision imposes stricter penalties that are aimed at enhancing overall compliance with the laws, rules and regulations that govern the operation of our banking sector.

The Second Schedule of the Banking Act may also be amended to increase the minimum core capital required to operate as a bank or mortgage finance company gradually from Kshs. 1 billion in 2024 to Kshs. 10 billion in 2027. Our current framework is out-of-date as it only sets out the core capital requirements until 31st December 2005. Therefore, this is a welcome amendment that promotes a stable market which aligns with the current growth of our financial industry and available banking products.

The Central Bank of Kenya Act, Cap 491

The proposed amendments to this Act largely broaden the definition of digital credit and digital credit providers by replacing it with non-deposit taking credit providers. The objective of this proposal is to cover all non-deposit taking credit providers, which includes digital lenders and peer-to-peer lenders. The CBK will also have the power to register, license and regulate non-deposit taking credit providers, including determining pricing parameters and prescribing a Code of Conduct that such entities must adhere to.

The Bill further increases the scope of the CBK’s regulatory powers by ensuring that the CBK licenses and monitors the operations of credit guarantee companies that are not currently regulated under any other written law. Credit guarantee companies typically act as guarantors to financiers by absorbing all or a part of the financier’s risk on a credit facility made to a Borrower in the event that the Borrower defaults on repayments.

Under the proposed law, the CBK will have the power to determine the capital adequacy standards, minimum liquidity requirements, anti-money laundering procedures, permissible and prohibited activities and corporate governance of the entity, including certifying whether a significant shareholder is a fit and proper person. Should this amendment pass, it’s crucial for the CBK to draft further regulations and directions on the requirements on the operations of credit guarantee companies. This ensures that there is further oversight and supervision over institutions operating in the financing sector to ensure standard levels of market conduct, transparency in credit dealing, integrity of our financial systems, and the prevention of predatory lending practices that protect borrowers.
Microfinance Act, Cap 493C.

The Bill proposes an amendment to Section 4A of the Act by including that a person cannot carry out any non-deposit taking microfinance business without being properly registered under the Companies Act and licensed under the Microfinance Act.

Additionally, non-deposit taking microfinance businesses would be obligated to furnish borrowers with accurate information on the procedure and conditions of loans, the cost implications and their rights and duties. They cannot collect additional fees, penalties or charges unless this is allowed under the agreement they have with borrowers.

The proposal also increases the duties these institutions owe to Borrowers because they cannot harass, oppress or threaten borrowers, loan guarantors or any person when collecting or recovering debts. It is evident that these new provisions are aimed at ensuring consumers are protected and abuse is prevented, particularly for digital lenders who would now fall under this purview. The amendments to the Act create a structured framework for their operations, fostering accountability and a more regulated environment.

The Standards Act, Cap 496

The Bill proposes the addition of several provisions for the registration of manufacturers and quality testing of products. It seeks to ensure that any person that wishes to manufacture goods and products must be registered by the Kenya Bureau of Standards (“KEBS”). This brings every manufacturer within the scope and regulatory compliance framework of KEBS, ensuring they meet minimum quality standards throughout the production process before products are available for consumers.

This is further evident in the proposed inclusion of Section 10D which details the duties of manufacturers to ensure every product is designed and manufactured in accordance with the relevant standards, conduct sample testing is before product releases, establish procedures for tracing products from the factory to end-consumers, ensure appropriate labelling, and investigate and keep records of all complaints.

The Bill further proposes the inclusion of Section 12A and 12B into the Standards Act which would allow KEBS to establish or designate competent labs to offer testing services, issue test certificates and develop national measurement standards. Section 14D enables KEBS to appoint an inspection body for goods in the country of origin to verify that the goods conform to Kenya’s standards. Such bodies are liable to pay taxes in Kenya. These three proposals create efficiency in the testing and examination of products, which will enhance our quality standards and ability to enforce product quality specifications. However, if Kenya doesn’t have a double taxation agreement with the country in which they appoint an inspection body, such bodies may be subject to double taxation.

These amendments may lead to the improved quality of products manufactured and increased accountability for manufacturers enhancing consumer safety. The Bill further provides a stronger regulatory framework that may counter the prevalence of substandard goods entering the Kenyan market. However, these provisions may impose additional costs on manufacturers including registration fees, and compliance costs which may disadvantage the small-scale manufacturers.

Special Economic Zones Act, Cap 517A

The Bill empowers the Cabinet Secretary for Investments, Trade and Industry to set the minimum requirements for acreage of land and thresholds for investments for land that may be considered for declaration as a special economic zone. The Bill also clarifies that goods that remain within a customs-controlled and special economic zone are entitled to the tax benefits conferred under the Act. Tax benefits and incentives that are granted to enterprises and developers in these zones last for 10 years from the date of issuance of a license.

The proposed amendment to Section 11 of the Act seeks to streamline the administrative process of creating and managing special economic zones by establishing a one-stop shop for all enterprises to channel their applications for permits, approvals and licenses and ensuring compliance with the law. These amendments encourage large-scale investments and emphasise the role that special economic zones play in the development of trade, manufacturing, industry growth and ultimately, our economy.

The Kenya Accreditation Service Act, Cap 496A

The proposed Bill aims to modify the Act by adding new sections that outline the accreditation process for foreign Conformity Assessment Bodies functioning in Kenya and to set up an Accreditation levy at a rate of 3% on the value of any accredited service delivered to a third party by an accredited conformity assessment body.

This may lead to various advantages, including a more competitive market with the entry of more international players, the introduction of a new revenue stream allowing for better funding of regulatory activities and enhancement of services provided to certified bodies and the improvement of Kenya’s trade relationships by ensuring that foreign goods and services meet specific quality and safety standards. It has, however, several disadvantages which include increased stringent and time-consuming accreditation procedures and increased prices for services which may be passed down to the consumers.

The Scrap Metal Act, Cap 503

The Bill proposes to amend the Act by making changes to the composition of the Scrap Metal Council. The chairperson will now be appointed by the President, with additional representation for collectors, agents, smelters, and millers, ensuring inclusivity and balanced decision-making. This aims to enhance inclusivity and representation which provides a more diverse range of perspectives in decision-making through increased oversight and stakeholder engagement.

Conclusion

The Bill has been submitted for public participation before it is put before the National Assembly for consideration. Our team is closely monitoring the developments and will continue to provide updates and advice as the process evolves.

 

A polite note: The Business Laws (Amendment) Bill, 2024 has now been assented into Law.

For further assistance or information, please contact Benson Ngugi, Kabu Karanja or Jessica Obimbo.

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