Land is increasingly becoming scarce annually due to the various new frontiers of utilisation. [Courtesy]
There has been a surge in land transactions in Kenya. I have said on this forum before that land is becoming the riskiest venture in Kenya. This fact has been aggravated by a lot of factors. First, there is a view that the Supreme Court, in its several decisions, has not settled the law on the scope of due diligence when it comes to the actual practice. There are several structural problems with the threshold the Supreme Court sets; the question of how far a buyer can go in terms of investigating the root of title.
Further, what is the liability ascribable to the land registrars-those with the mandate to ensure titles and records attendant to them are above board. The decisions of the Apex Court have placed a heavier burden on the buyer and has left the state, through land registries, to enjoy a certain level of recklessness in handling land titles on the cover that the buyer has to do his job.
Secondly, land as the main factor of production upon which our social and economic life revolves, is increasingly becoming scarce annually due to the various new utilisation frontiers both in the rural and urban settings. Due to this, land fraud is inevitable due to the competition and the premium on it especially in urban areas.
Thirdly and perhaps the most critical reason is that our moral fabric has broken down as a society. There is rarely anything genuine in Kenya, even where one is sure of it, one still has to take two steps back and confirm for the worst.
As a commercial law practitioner, I can attest that this informs the cautious nature in which banks are treating land, through titles as security for loans. As it stands now, the Supreme Court is yet to clarify in a case still pending before it on whether banks and other commercial entities bear the same obligation and level of due diligence as innocent purchasers for value of land or theirs is to just confirm that a particular title belongs to the borrower through a simple search.
Whatever the outcome of the case before the Apex Court that will definitely be groundbreaking. I foresee that in the next few years, banks and other financial institutions will highly frown upon land as security. If the court requires a heightened due diligence, finance institutions will obviously incur higher costs when giving out loans.
Similarly, if it maintains the test to be of a mere search, then the risk for financial institutions will remain high on the potential of many titles used for security being declared fraudulently obtained. Either of the options is not good for economic growth as a testament that the ultimate solution lies not on the level of due diligence imposed or required of innocent buyers and lenders.