The Land Act, Act No. 6 of 2012 came into
force on 2nd May, 2012. The Implication of Section 78 of thereof is
that the Act shall operate retrospectively and shall therefore apply to charges
which were created before 2nd May, 2012 when the Act company into
place. Section 79 (3) of the Act requires lenders to obtain spousal consent
before accepting a matrimonial home as security for a loan. Similarly, Section
84 of the Land Act which deals with variation of interests provides that:
“Where
it was contractually agreed upon that the rate of interest is variable, the
rate of interest payable under a charge may be reduced or increased by a
written notice served on the chargor by the chargee:
a) giving
the chargor at least thirty days
notice of the reduction or increase in the rate of interest; and
b) stating
clearly and in a manner that can be readily understood, the new rate of
interest to be paid in respect of the charge.”
It’s also
instructive to note that, vide Section 106 (2) of the Land Registration Act (which is the relevant procedural law for
purposes of the Land Act, 2012) which provides that:
“Nothing
in this Act shall affect the rights, liabilities and remedies of the parties
under
any mortgage, charge, memorandum of equitable mortgage, memorandum
of charge by deposit of title or lease that, immediately before the registration
under this Act of the land affected, was registered under any of the repealed
Acts”,
banks’ rights to
exercise statutory power of sale would remain valid notwithstanding lack of
obtaining of spousal consents for charges/mortgages already made.
An inconsistency between
the two Acts therefore arises. However, it is arguable that the Land Act is the
substantive law and superior to the Land Registration Act.
Accordingly, we are
of the opinion that Banks must as soon as possible comply with provisions on
spousal consent lest borrowers who secured loans using matrimonial property
default in payment and on attempt by the banks on realization, rely on
restrospectivity clauses and any banks’ non-compliance with the same in
challenge of exercise of statutory power of sale.
In view of the
above, it is important for banks and other financial institutions to partner
with law/consultancy firms to undertake an audit of all titles to determine
whether the same are secured by matrimonial properties, and whether consents
were obtained at the time of registration of the charges. Thereafter, the
identified borrowers may be issued with a notice requiring them to obtain
spousal consents in respect of charges and or mortgages already taken in
compliance with these provisions.
CONCLUSION
We hope that the above
will suffice your concerns regarding retrospective effects under the Land Act,
2012 vis-a-vis requirement for spousal consent when using matrimonial property
as security for a charge under the same Act.
However, feel free to contact
us at ceo@stralexgroup.co.ke or okelloted@sichangi.com for further any
further information or clarification regarding implications of the new land laws - the Land Act 2012, Land Registration Act 2012, and National Land Commission Act, 2012. You may also reach us on +254 773 865 798/+254 715 310 677.
Yours faithfully,
FOR:
STRATEGIC LEGAL SOLUTIONS GROUP LIMITED
Conveyancing
& Property Law Consulting Group –
a participating consultancy in the SLS Group of consultancies.
....makes alot of sense; and banks/lenders ought to heed the advice thereof and conduct an audit on their securities. However, I should hope there is a legal mechanism for ascertaining how banks/lenders would ascertain matrimonial property in absence of an entry indicating the same at the relevant registry.
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