A DAMSEL IN DISTRESS? THE PRINCIPLE OF A BONA FIDE PURCHASER.
A DAMSEL IN DISTRESS? THE PRINCIPLE OF A BONA FIDE PURCHASER.
Recently, the Supreme Court of Kenya in Dina Management Limited v County Government of Mombasa & 5 others (2023) eKLR held that registered title to property can be invalidated if the process followed prior to the issuance of the title did not comply with the law.
In effect, innocent buyers cannot rely on the principle of indefeasibility of title if the initial allocation of the land was illegal or unprocedural.
The Court further stated as follows;
“Indeed, the title or lease is an end product of a process. If the process that was followed prior to issuance of the title did not comply with the law, then such a title cannot be held as indefeasible.”
The Black’s Law dictionary defines a bona fide Purchaser as one who has, in good faith, paid valuable consideration for property without notice of prior adverse claims.
This doctrine is applicable in Kenya by virtue of Section 3 (1) (c) of the Judicature Act which elucidates which allows the application of the doctrines of equity and the statutes of general application in force in England on the 12th August, 1897, and the procedure and practice observed in courts of justice in England at that date.
What then emanates from this doctrine is whether a bona fide purchaser of Land without notice can acquire a good title from a person who had fraudulently acquired title over the land and thereby defeat the claim by the original owner of the proposed property.
Article 40 of the Constitution of Kenya provides that every person has the right, either individually or in association with others, to acquire and own property of any description and in any part of Kenya.” Article 40 (6) on the other hand provides that the rights under this Article do not extend to any property that has been found to have been unlawfully acquired.
This doctrine is further encapsulated in section 26 of the Land Registration Act of 2012 which provides that;
26(1) “the certificate of title issued by the Registrar upon registration, or to a purchaser of land upon a transfer or transmission by the proprietor shall be taken by all courts as prima facie evidence that the person named as proprietor of the land is the absolute and indefeasible owner, subject to the encumbrances, easements, restrictions and conditions contained or endorsed in the certificate, and the title of that proprietor shall not be subject to challenge, except—
a) on the ground of fraud or misrepresentation to which the person is proved to be a party; or
b) where the certificate of title has been acquired illegally, unprocedurally or through a corrupt scheme”
The Kenyan legal provisions therefore impose a higher degree of due diligence on the property investors, lenders, and other stakeholders while dealing with properties in Kenya. The Supreme Court judgment also emphasizes the need for caution, diligence, and robust investigations when engaging in property transactions in Kenya.
Conclusion.
Parties are expected to conduct a thorough search on the history of the title, from the first allocation to the current title, to ensure its legality and validity. The burden of proving the legality and validity of a title rests with the buyer. The entire allocation process must have been lawful and in compliance with the prescribed procedures for the title to be indefeasible. As a result, a prudent buyer needs to discover as much as possible about the property being purchased. Usually this will be done by both precontract searches and preliminary enquiries. The buyer must carry out all appropriate searches and enquiries before entering into a binding contract to purchase property.