Thorough due diligence key to avoiding losses in land deals

I want to buy a property. However, I am very sceptical after watching the recent demolition videos. Do you have any tips on how I can avoid being duped? Sam

Dear Sam, indeed, the demolitions were very unfortunate. The biggest losers here were the investors. Recent court decisions from the Supreme Court Of Kenya have placed a huge responsibility on investors to conduct thorough due diligence on land before buying.

Courts have long protected innocent buyers where there was sufficient evidence that the buyer conducted proper due diligence when buying the property.

Innocent purchase

However, a legal maxim, “one cannot give what they do not have,” may work against an innocent purchaser. This maxim is generally to the effect that a seller cannot pass on a defective title to a buyer regardless of whether the buyer knew of that defect or not. This means if someone acquired land fraudulently or illegally, they cannot pass on the title to you.

In the Supreme Court decision in Dina Management versus the County Government of Mombasa & others, the court held that the land acquisition in that particular case was irregular as the land was public.

In Kenya, decisions by the Supreme Court and other courts of high standing form part of the law.

Here are a few tips to guard yourself as a buyer.

My recommendation lies in doing thorough due diligence and drafting suitable legal documentation. The legal documentation I recommend is a well-drafted sale agreement and possibly a warranty deed.

It starts with thorough due diligence of both the seller and the property. If the seller is an individual, ask for copies of his identification documents and verify them.

If it is a firm, do a CR12 search to establish the company owners, the date of incorporation and other details. A due diligence of the seller will guard you against imposters.

Official search

Do due diligence on the property. Get a copy of the title and do an official search at the land’s office. This search will only give you ownership and encumbrance details. It will help you know the listed owner of the property and if there are any loans or third-party interests.

A deeper physical search is increasingly becoming necessary. It is a difficult, expensive and time-consuming process that sheds light on the history of the land.

Do a site visit of the property and verify beacons and acreage. If possible, get a surveyor to give you a map of the area to establish the land is not marked as public land.

The legal documentation you get into can be a source of reprieve for you against defective purchases. The sale agreement must have a warranty where the seller guarantees that he has good title to the property and that the land is not public land.

Should the title be later found to be defective, then you can sue the seller and enforce the warranty. In the agreement, let this warranty constitute a material clause such that the entire transaction shall fail for want of title. The seller will have to refund the money paid.

A warranty deed, common in the US, is a separate agreement you can enter into with the seller to secure your position. I will give you the tips in the next publication.

Ms Mputhia is the founder of C Mputhia Advocates | [email protected]