The Business Laws (Amendment) Act (the “Act”) was assented into law and came into force on 18 March 2020. The aim of the Act is to amend various statutes to facilitate the ease of doing business in Kenya. In this article, we highlight the changes made to the land laws and the consequent impact on land transactions.
The Act amends the laws below to allow for electronic execution of documents:
- Section 3 (6) of the Law of Contract Act (Chapter 23) to provide for execution of land-related contracts by means of an advanced electronic signature. Authentication of the parties’ signatures is also permitted to be done by advanced electronic signature.
- Section 3 of the Registration of Documents Act (Chapter 285) to provide for execution of documents by means of advanced electronic signatures or through electronic signatures.
- The Survey Act (Chapter 299) to allow for execution of documents by means of advanced electronic signatures or through electronic signatures.
- Section 44 (3A) of the Land Registration Act, 2012 (LRA) to allow for execution of documents by means of advanced electronic signatures or through electronic signatures.
Under section 2 of the Kenya Information and Communications Act (Cap 411A) (KICA) an “electronic signature” is defined to mean data in electronic form affixed to or logically associated with other electronic data which may be used to identify the signatory in relation to the data message and to indicate the signatory’s approval of the information contained in the data message.
On the other hand, an “advanced electronic signature” is defined to mean that which –
- is uniquely linked to the signatory;
- is capable of identifying the signatory;
- is created using means that the signatory can maintain under his sole control; and
- is linked to the data to which it relates in such a manner that any subsequent change to the data is detectable”.
Under section 83 O (3) of KICA, an advanced electronic signature is reliable if
- it is generated through a signature-creation device;
- the signature creation data are, within the context in which they are used, linked to the signatory and to no other person;
- the signature creation data were, at the time of signing, under the control of the signatory and of no other person;
- any alteration to the electronic signature made after the time of signing is detectable; and
- where the purpose of the legal requirement for a signature is to provide assurance as to the integrity of the information to which it relates, any alteration made to that information after the time of signing, is detectable.
The Communications Authority of Kenya (CA) licenses electronic certification service providers to issue digital signatures and to provide electronic signatures support in compliance with the requirements of KICA.
Section 83R of KICA permits the Cabinet Secretary for Information, Communications and Technology in consultation with CA to prescribe regulations for electronic signatures.
Given the above, parties intending to electronically sign contracts (including land agreements) will likely be required to obtain digital signatures from licensed electronic certification service providers. Regulations will need to be prescribed to guide authentication of electronically executed instruments and to provide for other critical issues such as data privacy, impersonation and other forms of fraud which electronic signatures are susceptible to.
Execution of documents by companies without seal or via electronic sea
- The Act introduces the definition of “seal” under section 2 of the LRA to include electronic seals. This permits the Registrar and corporates to execute land instruments via electronic seal. For companies registered under the repealed Companies Act (Cap 486), the use of an electronic seal may require amendments to their Articles of association. For companies, the concept of an electronic seal seems to contradict the Companies Act whose amendments indicate an intention to get rid of the common seal entirely.
- The Act also amends sections 35 (1) (a) and 37 (1) of the Companies Act by deleting the requirement for companies to execute documents under common seal. Sections 38, 42 and 43 of the Companies Act are similarly deleted. Accordingly, a document is validly executed by a company if it is signed on behalf of the company in accordance with section 37 (2) of the Companies Act, that is:
- by two authorised signatories; or
- by a director of the company in the presence of a witness who attests the signature.
This may require amendments to a company’s Articles of Association if a mandatory requirement for execution under seal was prescribed. This applies to companies registered under the repealed Companies Act (Cap 486)
Digitization of Land Transactions and Records
The Act has introduced several changes towards digitizing land transactions and registry records as follows:
- Section 6 of the Act provides for establishment of an electronic register of documents to be maintained by the Registrar of Documents. Electronic filing of documents at the registry of documents is now permitted under section 4 (2) of the Registration of Documents Act.
- Section 8 of the Act introduces section 5 (3) of the Survey Act which permits documents or plans to be processed electronically and to be imprinted with an electronic seal of the Survey of Kenya. Section 30 of the Survey Act permits surveyors to submit documents electronically to the Director of Surveys who is permitted to electronically authenticate the documents (Section 32).
- Section 12 of the Act amends section 2 and introduces section 119 (d) of the Stamp Duty Act (Chapter 480) which permits adoption of electronic stamping of documents. This allows for full digitization of the process of payment of stamp duty. However, it is not clear whether digital assessment for duty will also be provided for. Under section 199 of the Stamp Duty Act, the Cabinet Secretary for Finance may prescribe Regulations for electronic stamping which would provide further clarity.
- The Act introduces section 44 (3A) of the LRA to allow for electronic processing of instruments executed electronically by means of advanced electronic signatures or through electronic signatures. Section 45 (3) (c) of the LRA allows the Registrar to dispense with verification of an instrument if it has been executed and processed electronically.
Land Rents and Rates Clearance Certificates
The Act deletes section 38 of the LRA which required a land rates clearance certificate to be obtained prior to registration of interests transferring or vesting any rights to land where the property is situated within the area of a rating authority.
Section 23 of the Act similarly deletes section 39 of the LRA which required a land rent clearance certificate to be obtained from the national or county government prior to registration of a transfer or creation of an interest in land.
However, the Act fails to address the following legal provisions which still require land rent and rates clearance to be obtained:
- Section 55 (b) of the LRA provides that if a Lease contains a condition, express or implied, that the Lessor shall not transfer, sub-let, charge or otherwise part with possession of leased land, a land rent clearance certificate and consent to lease has to be produced to the Registrar.
- Section 56 (4) of the LRA provides that “The Registrar shall not register a charge, unless a land rent clearance certificate, certifying that no rent is owing in respect of the land and the consent to charge has been presented, unless the land is freehold”.
- Rule 49 (2) (b) & (c) of the Land Registration (General) Regulations 2017 (the “Regulations”) requires an application for transfer of any interest in land to be accompanied by a land rent clearance certificate and a land rates clearance certificate, as applicable.
- Rule 51 (2) (b) and (c) of the Regulations requires an application for transfer of an undivided share of an interest in land to be accompanied by a land rent clearance certificate and a land rates clearance certificate, as applicable.
- Rule 57 (2) (d) and (e) of the Regulations requires an application for transfer by a personal representative to a beneficiary to be accompanied by a land rent clearance certificate and a land rates clearance certificate, as applicable.
- Rule 70 (2) (b) of the Regulations require an application for registration of a charge to be accompanied by a land rent clearance certificate, as applicable.
- Rule 76 (2) (b) & (c) of the Regulations requires an application for registration of a lease to be accompanied by a land rent clearance certificate and a land rates clearance certificate, as applicable.
Until the above sections are deleted, land rates and rent clearance certificates are still required (as applicable) to register transfers, leases and charges.
However, one could argue that as the Act referred to “registration of interests transferring or vesting any rights to land” and “registration of a transfer or creation of an interest in land” it would, by implication, cover the documents under (a) to (g) above because:
- The definition of “interest” under the LRA means “a right in or over land”; and
- The definition of “transfer “under the LRA means (a) the passing of land, a lease or a charge from one party to another by an act of the parties and not by operation of the law or (b) the instrument by which any such passing is effected”.
We anticipate that the above disparities and uncertainties will be addressed in the near future and we will have a clear legal position on the issue of land rates and rents clearance certificates.
Procedure for claiming indemnity
The Act also amends section 83 of the LRA to require a person claiming indemnity under section 81 of the LRA to apply to the Chief Land Registrar for investigation and consideration. Previously, this was within the exclusive purview of the Environment and Land Court. The Court however acquires appellate jurisdiction over actions and decisions of the Chief Land Registrar.
Opportunities for further reforms
In order to further ease the land transaction processes, the following additional reforms should also be considered:
- Digitization of the Land Control Boards application process and issuance of consents by making necessary amendments to the Land Control Act (Chapter 302);
- Digitization of land ownership documents by providing for electronic certificates evidencing ownership. This will require amendment of various laws including the LRA, the Land Act and the Sectional Properties Act;
- Digitization of the application for valuation of properties by the government valuer;
- The Oaths and Statutory Declaration Act ought to be amended to allow for electronic execution of statutory declarations and to permit for electronical attestation to signatures of deponents; and
- The Law Society of Kenya ought to issue practice directions with respect to attestation of electronically executed instruments by Advocates.
This article was written by Loice Erambo, a Senior Associate in the Real Estate and Finance Practice Group.