In Dina Management Limited v County Government of Mombasa & 5 others [2023] KESC 30 (KLR), Dina Management Limited stated that it is a bona fide purchaser of the property that was the subject of the suit. It had purchased the said property from Messrs. Bawazir & Co. for KES 18 million. It was a second purchaser and had acquired a valid and legal title after carrying out all the necessary due diligence before purchase and subsequent transfer of ownership. Dina Management Limited argued that its title was therefore indefeasible. On its part, the Supreme Court of Kenya stated:
“Where the registered proprietor’s root title is under challenge, it is not enough to dangle the instrument of title as proof of ownership. It is the instrument that is in challenge and therefore the registered proprietor must go beyond the instrument and prove the legality of the title and show that the acquisition was legal, formal and free from any encumbrance including interests which would not be noted in the register. To establish whether the appellant is a bona fide purchaser for value therefore, we must first go to the root of the title, right from the first allotment, as this is the bone of contention in this matter… Further, we cannot, on the basis of indefeasibility of title, sanction irregularities and illegalities in the allocation of public land. It is not enough for a party to state that they have a lease or title to the property.”
What the Supreme Court Missed
Though Kenyan courts routinely use the term “due diligence”, there is no law defining the limits thereof. Going by the decisions cited in the Dina Management Limited case, one person’s due diligence may be another court’s reason to invalidate title. It has become a common feature of Kenyan real estate law for the courts to define “due diligence” without defining it; the courts usually say that this or that should have been done, this extra step was missed, or that it is not enough to conduct a search at the Land Registry. In the end, the courts will invalidate the title based on some factor that the current owner could possibly not have contemplated when purchasing the land. This reasoning and approach are problematic.
When the Courts invalidate the indefeasibility of title, they create uncertainty concerning the guarantees of property rights. Such uncertainty reduces the market value of property and prospective investors see no reason to invest in Kenyan property because the proof of ownership is uncertain if a future Court could invalidate such ownership for some reason yet to be determined. If the title you hold is not a guarantee of ownership, and the Land Registry’s records cannot be trusted, why should you consider buying the property in the first place? Even worse, why should you buy knowing you will pay for the sins of previous owners?
The question of whether there have been illegal property transfers during current or previous regimes in Kenya is a separate issue altogether. If the original owner of the property illegally acquired the land, legal sanctions should be applied to that specific person (even if this includes the current owner). It is improper to punish current innocent owners for the sins of the original owner. The question here is not whether we are sanitizing illegal property ownership but rather whether it is beneficial to destabilize the guarantees of private property based on a notion of misplaced retrospective justice.
It is not given to the Court to determine punish Person D who currently owns property for the sins of Person A who illegally acquired the property by invalidating Person D’s current title. Should one person pay for the illegalities of another? It beats logic that the law is based on the notion of person responsibility but when it comes to private property, we punish the arguably unfortunate last owner for the illegalities of the original perpetrator(s).In other words, protecting indefeasibility of title is not an argument for sanitizing illegalities, it is simply recognizing that indefeasibility is not the problem, those who are perpetrating illegalities are.
The indefeasibility of title is not a privilege to the specific owner. The indefeasibility of title is an incentive to the owner to make the best use they can of the property. The indefeasibility of title benefits not only the owner because they know they have a guarantee that the investments they make on the property will be protected, but also the other non-owners who know that the investments made on the property will benefit them too. This may be direct or indirect, such as through jobs if the investment made is a place requiring workers, or a farm whose produce can be sold to the public which needs it. But no one is going to invest in the property by, for example, building a supermarket if they know that their ownership could be invalidated on some vague notion of “due diligence”, or some factor only known to a future Court depending on their opinions as to how much investigation should have been done on the title till kingdom come.
The indefeasibility of the title assures the public what they buy they own. Continuously expanding the concept of due diligence, while leaving it undefined, disincentivizes prospective owners because there is no guarantee that what they buy will truly be their own.