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or lease that, immediately before the registration under this Act of the land affected, was registered under any of the repealed Acts”,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.
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 email@example.com or firstname.lastname@example.org 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.
FOR: STRATEGIC LEGAL SOLUTIONS GROUP LIMITED
Conveyancing & Property Law Consulting Group – a participating consultancy in the SLS Group of consultancies.