New law to block men from mortgaging family homes

Married couples will find it harder to secure credit if Parliament passes a new law that requires borrowers to file a written consent from their spouses before charging matrimonial homes as collateral for loans.

Though it will apply across the gender divide, the proposed law, which is before the House, mainly targets husbands who have been secretly mortgaging their homes without the knowledge of their wives.

The proposal is contained in the Land Bill 2011 that Parliament must pass as part of the reforms aimed at aligning the country’s legislation with the new Constitution.

“A charge of a matrimonial home — including a customary charge of a matrimonial home — shall be valid only if any document or form used in applying for such a charge is signed by or there is evidence from the document that it has been assented to by the borrower and any spouse of the borrower living in that matrimonial home,” says the Bill.

Alternatively, it demands that a “document or form used to grant the charge is signed by or there is evidence that it has been assented to by the borrower and any spouse of any borrower living in that matrimonial home.”

If passed into law, commercial banks will be required to revise the terms of the charges in their possession (technically called ‘reopening’) to cater for the interests of spouses who were not consulted at the time of the lending.

Kenya Bankers’ Association (KBA) cautiously welcomed the move but warned that it could erect a fresh obstacle to the smooth disbursement of consumer loans.

Kenya has had no distinction of matrimonial homes from other family assets, a position that has allowed borrowers in whose names a property is registered (usually husbands) to sign an application and charge forms.

“Spouses only participated in the transaction if the property is jointly owned and registered as such,” said KBA chief executive Habil Olaka.

Under the Bill, it will not matter whether the matrimonial home is registered in one or a couple’s names. Borrowers intending to charge property with a bank for a loan will have to prove that it is not their matrimonial home or back up the application with a written consent from a spouse.

“It makes the loan application process more difficult because procuring the spouse’s consent creates an additional hurdle in charge creation,” Mr Olaka said.

It remains to be seen whether Kenya’s male-dominated Parliament will pass the Bill that is bound to be hugely popular with women ahead of next year’s General Election.

The proposed law is expected to hit men hard as they will no longer secure bank funding if their wives are opposed to their plans.
The proposal is already facing strong opposition from key constituencies such as legal practitioners who have said that it puts an unnecessary burden on the lenders such as proof of a customer’s marital status.

A Nairobi lawyer who has a matrimony-related case in court termed the Bill ridiculous.

“I am seriously opposed to this and will personally lobby MPs to reject it,” said the lawyer who cannot be named without compromising his court case.

The Land Bill 2011 aims to bring national legislation in line with the provisions of the Land and Environment chapter of the Constitution which came into force on August 27 last year.

Other Bills relating to the chapter on land include the National Land Commission, Land Registration and Community Land.

Forced involvement of spouses in critical decisions such as borrowing which most Kenyans – even the married – consider personal is expected to provoke heated debate in Parliament.

A close reading of the Constitution, however, shows that the drafters had such legislation in mind leaving the legislators with little option of rejecting the Bill.

Article 68(c)(i) of the Constitution demands that Parliament must rationalise and consolidate existing land laws by enacting legislation that protects the matrimonial home “during and on the termination of marriage”.

Family lawyer Judy Thongori, who is handling a high profile matrimonial dispute between retired president Daniel arap Moi’s son, Philip, and his wife, is one of those extremely delighted by the proposal.

The former Fida executive director asked MPs to support the Bill because most of the people who follow them for handouts in their constituencies are victims of reckless actions by spouses.

“The days when men transferred homes over their spouses’ heads are gone. MPs should realise they have the power to change this unfortunate position,” said Ms Thogori.

Court registries handle numerous cases involving men who took loans using matrimonial homes as collateral only to plunge their families into destitution when they fail to service the loans and the lenders auction the property.

While rural homes are loosely regulated by the district land boards, urban homes have largely been at the mercy of husbands.

Some banks have, however, aligned their lending operations with this reality and have been demanding the consent of spouses especially when disbursing small loans against household goods.

“I think the implications here are more social than economic because this is going to protect families,” said Isaac Njuguna, a senior investment manager at Zimele Asset Management.

Mr Njuguna said that the measure could on the other hand have a positive impact by sharing out the responsibility of handling borrowed money between couples.

Banks themselves see a silver lining in the otherwise dark cloud.

“With this proposal, spouses will be required to sign the charge forms — a positive step because it limits cases where the lender comes to the point of realising the security and borrower claims ignorance of the charge and seeks sympathy from the law courts,” said Mr Olaka.

Legal experts have argued that men often make imprudent investment decisions largely because there are no social and legal checks on their actions.

Nancy Baraza, the deputy Chief Justice, in a 2009 paper argued that laws touching on matrimonial property have been hard to implement in a largely patriarchal system.

She said that past attempts to pass relevant laws were defeated “because it was purportedly an assault on local customs or had granted too many rights to women”.

The Land Bill seeks sustainable and equitable use of land resources.

Weighty stipulations in the law include the requirement that the Cabinet Secretary shall “prescribe the minimum and maximum land holding acreages in respect of private land”.

It will also sanction banks for gender discrimination. A charge will be reopened if it is proven that bank interest charges are skewed against any person based on gender where a land charge is involved.