Transfer Stage in Conveyancing PDF

Preview

Summary

Download Transfer Stage in Conveyancing PDF

Description

TRANSFER (AND REGISTRATION) STAGE IN CONVEYANCING  Upon exchange of the purchase price/undertaking with the completion documents, the next stage is the registration of the conveyance. 

As seen earlier, a conveyance is an instrument alienating an interest in land from one person to another, and include the following: (i) Transfer (ii) Indenture of conveyance (under GLA, now repealed) (iii) Lease (iv) Assent (under section 85 of the Law of Succession Act, as between an executor/administrator (personal representative) and beneficiary, i.e transfer of property by personal representative to beneficiary. RLA had stipulated forms for doing so in place of assent. See section 61(2) of the LRA under which forms may be created) (v) Charge (vi) Mortgage (vii) Easements



Let us look as the parts of a conveyance. The formats prior to the 2012 repeal of laws are still in use. The formats will depend on whether the conveyance if one under GLA, LTA and RTA, or RLA (all repealed).

Parts of a Conveyance under the GLA LTA and RTA (Repealed) 1. 2. 3. 4. 5. 6. 7. 8.

Commencement-comprises nature of document, date and parties. Recital - Divided into Narrative and Introductory Operative Part - comprises the Testatum, Consideration, Receipt, Parcels Clause, Habendum and for Leases, Reddendum. Covenants Testimonium Execution Attestation Clause 1. Commencement (a)

Nature - It states the nature of the document. Each document describes itself, e.g. "THIS MORTGAGE", "THIS LEASE", "THIS CHARGE”, “THIS TRANSFER” etc.

(b)

Date - It also contains the date of the document - i.e. the date of execution. Where the date is omitted or a false date is inserted, this does not invalidate the document. Evidence may be adduced to explain the correct date. The date is important especially where certain statutory provisions must be complied with within a specified period e.g. under the Stamp Duty Act 1

certain documents must be stamped within 30 days from the date of execution. (c)

Parties - These are the signatories to a document. They include, inter alia, natural persons and companies as well as any body that has legal personality. Names should be stated in full. Where a name differs from that given in an earlier document, it is advisable to draw attention to the discrepancy. This may be done by including a statement when reciting the earlier document to the effect that the person was referred to using a different name. At other times, especially, in a transfer of land, it may be necessary for the person with the different name to swear an affidavit stating that he is the same person referred to in the previous document. The various parties who join in the document are expressed to be of separate parts. E.g. XYZ of the First Part, ABC of the Second Part and DEF of the Third Part. The Parts tell us that the document is between two or more parties. In the case of third party mortgages and charges lenders sometimes insist that the Borrower be joined as a third party.

2. Recital This is a descriptive part. It is divided into two sub-parts and normally begins with "WHEREAS". (a)

(b)

Narrative Recital - states 2 things:i)

Nature of the proprietor's interest - i.e. How the proprietor holds the land, e.g. freehold or leasehold.

ii)

History of the property - i.e. the events which have taken place in relation to the property upto the time in question.

Introductory Recital - indicates the intended operation of the document. It states what the parties have agreed to do, e.g. "The Vendor has agreed with the Purchaser for the sale to the Purchaser of the property known as L.R. No…” It explains the purpose of the document.

3. Operative Part Generally, it begins with the part of the deed called the Testatum: (a)

Testatum It introduces the operative part. It begins with the words "NOW THIS DEED WITNESSETH" or "NOW THIS LEASE WITNESSETH" etc. 2

(b)

Consideration The consideration must be stated. S.10 of the Stamp Duty Act - requires that all matters and circumstances which affect the liability of any instrument to stamp duty be fully stated in the instrument to be stamped. Consideration is one such matter. In the case of a transfer by way of gift, the document normally states that the transfer is made in consideration of natural love and affection which the Donor has for the Donee. How does lack of consideration affect the transfer?

(c)

(i)

In the absence of consideration, a resulting trust may arise in favour of the transferor unless it is in favour of a wife in which case it would be presumed to be an advancement. This is the general rule in voluntary transfers.

(ii)

The remedy of specific performance would not be available to a transferee who has not paid consideration. Reason: The Vendor's covenants title are implied only if there is valuable consideration.

Receipt Clause In a transfer, the receipt clause states "the receipt whereof the vendor hereby acknowledges." This operates as a sufficient discharge on the part of the person paying the consideration without the necessity of giving a further receipt. Note, however, that the clause is not conclusive evidence of payment and equity will always permit proof of non-payment. To a subsequent purchaser without notice of non-payment, however, the receipt clause operates as conclusive evidence of payment.

(d)

Parcels Clause This begins with the words "ALL THAT'. The clause gives the physical description of the property. Where parcels are lengthy, they are normally set out in the schedule to the document. The description should, if appropriate, be the same as in earlier documents. However, if the old description in earlier documents is insufficient to identify the property concerned, e.g. because of a subsequent change in the nature of the property such as sub-division or rebuilding or a change in the surrounding circumstances such as new roads then a new description should be framed so that both the old and new descriptions are incorporated into the instrument. For these reasons, great care must be taken in describing the property.

(e)

Habendum 3

It commences with the words "TO HOLD'. It describes the interest created. It defines the estate conveyed to the transferee or purchaser. It defines the quantum of the interest created. In a lease, the term of the lease is set out here. Any exceptions and reservations are also set out here. In a Charge, the Habendum may read as follows: “The Chargor HEREBY CHARGES the said piece of land in favour of the Chargee...” (f)

Reddendum This appears in Leases only and means that which needs to be paid, eg rent. It begins with the words "YIELDING AND PAYING". This part explains the amount of rent payable by the tenant as well as how and when it is to be paid. This is where the operative part ends.

4.

Covenants This part may begin with the words, “The Lessor hereby covenants that…”. The covenants to be included in a document are a matter of contract and agreement between the parties. Covenants will only be implied by law in the absence of an agreement to the contrary by the parties.

5.

Testimonium This begins with the words "IN WITNESS WHEREOF…". This part links the preceding parts of the document with the seals and signatures of the parties.

6.

Execution This is where the parties affix their seals and signatures.

7.

Attestation Clause - This is where the witnesses sign. (a sample conveyance in the form of transfer under RTA is provided-an indenture of conveyance under GLA was provided earlier) Parts of a Conveyance under the RLA (Repealed) Under S.108 (1) of the RLA (repealed), prescribed forms had to be used unless the prior authority of the Chief Land Registrar was given for the use of a different format. Generally, however, a document under the RLA had the following parts:

1.

Heading 4

There is no commencement in RLA documents. Instead the document contains a heading which states the nature of the transaction and the title of the property. E.g."CHARGE”"TITLE NUMBER……" Note: (i) The names or particulars of the second party do not immediately follow those of the first party. (ii) The date of the document appears towards the end of the document but before the signatures of the parties. (iii)

2.

Recitals are regarded as unnecessary in RLA documents and inconsistent with the principles for which the Register is maintained under the RLA. Reason: Under the RLA, the entries in the Register are conclusive evidence of the matters to which they relate. The State guarantees title.

Operative Part Note: There is no Testatum in an RLA document.

(a)

Consideration and Receipt Clauses S.108 (3) RLA provided that instruments under the Act must state the consideration, if any. But Note S.39 thereof which stated that anyone dealing with a registered proprietor for valuable consideration need not inquire as to whether the proprietor paid consideration for that property. Thus a registered transfer under the RLA had full effect so that a subsequent purchaser did not take the property subject to the vendor's previous liability for any unpaid money.

(b)

Parcels Clause It read, “…the land comprised in the above mentioned title.” It incorporated by reference the description contained in the property section of the Register which in turn referred to the Registry Index Map.

(c )

Habendum The words “TO HOLD” were regarded as unnecessary in RLA documents. The interest conveyed was that “comprised in the above mentioned title.”

(d)

Reddendum The words "YIELDING AND PAYING" were regarded as unnecessary. The words used varied from document to document e.g. "the property is leased at the sum of KShs…."

4.

Covenants

5

For leases and charges, the covenants were implied by law in the absence of an agreement to the contrary between the parties. Note: There was no Testimonium in RLA documents. 5.

Execution The signatures and/or seals of the parties appeared immediately after the date of the document.

6.

Attestation and Verification Under the RLA attestation was coupled with the additional requirement of verification. This is now also provided for in Section 44 of the Land Registration Act No.3 of 2012. (A sample conveyance (in the form of transfer) under RLA is provided)

 As stated, the formats used under the repealed statutes are still being used, with necessary modifications to comply with the LA and LRA:



As per Section 44 of the Land Registration Act, all the parties consenting to an instrument affecting disposition of land shall be executed by the said parties by way of a signature, thumbprint or other mark (i.e execution)

-

If execution is by a corporate body, association, cooperative society or any other organization, execution is done in the presence of an Advocate, Magistrate, Judge or Notary Public, (who as we shall see must complete a Certificate of Attestation).

-

As per section 37 of the Companies Act 2015, a company may validly execute by use of common seal witnessed by a director, or by two authorized signatories, or by one director in the presence of one witness. NB-As per section 38 of the Companies Act, a company need not have a common seal.

-

Execution under a Power of Attorney- Power of Attorney is a document authorizing a person to do acts of another. The power may be limited and may refer to particular acts or it may be unlimited and general in its form. A Power of Attorney must be executed by the Donor of the Power and thereafter stamped and registered in the Register of Powers of Attorney. See section 48 of the LRA that provides for powers of attorney.

-

S.56 – deals with a charge, sub-section (1) of which provides that the charge shall contain a special acknowledgement that the charger understands the effect of that section and the acknowledgement shall be signed by the charger or, where the charger is a corporation, the persons attesting the affixation of the common seal. Note: As a matter of 6

interpretation, “that section” refers to S.90 of the Land Act No. 6 of 2012 which provides for the remedies of a chargee.



Section 45 of the LRA provides that a person executing an instrument shall appear before the Land Registrar, Public Officer, or other person (including a judge/magistrate, Registrar or Deputy Registrar of the High Court, Registrar-General or his deputy or assistant, an Administrative Officer, Superintendent of Prisons, Advocate or Bank Official)

-

in

the

Rules/Regulations

not

in

the

Substantive

Act

(i.e

verification/attestation).

-

In the appearing before the prescribed person, the party executing must be accompanied by a credible witness for the purpose of establishing identity unless the party is known to the prescribed person.

-

The prescribed person/official has to identify the party and ascertain whether the party freely and voluntarily executed the instrument, and complete a certificate to that effect.

-

S.45(3) of the LRA– The Registrar may dispense with verification –

(a) if the Registrar considers that it cannot be obtained or it can only be obtained with difficulty and is otherwise satisfied that the document has been properly executed; or (b) if the Registrar knows the document has been properly executed, and shall record on the document the reasons for dispensing with the appearance of the parties. (sample transfers under LRA (but adopted from the repealed statutes are provided) 

In a situation of sale of land, the relevant conveyance is the instrument that transfers title from the owner to the purchaser eg Transfer or Indenture of Conveyance.

Registration of Conveyance 

Certain transactions in land must be registered in order to create rights and liabilities. They are referred to as registrable transactions.



The purpose of registration is to record property rights and interests in land thereby making it possible to ascertain those rights and interests.

7



Section 43(2) of the LRA provides that no instrument effecting any disposition of private land under this Act shall operate to sell or assign land or create, transfer or otherwise affect any land, lease or charge until it has been registered in accordance with the laws relating to the registration of instruments affecting the land in respect of which the disposition has been made.

-

According to section 2 of the LRA, disposition means, a sale, charge, transfer, grant, partition, exchange, lease, assignment, surrender, easement ect and includes an agreement to undertake any such disposition.



Transfer – Ss. 37 (2)- A transfer shall be completed by registration. A Sale Agreement would precede a transfer (transfer is the disposition that is registrable).



Charge – S.56(3) – The charge shall be completed by registration.



Lease- According to section 58 of the Land Act, short term leases are not registrable. Short-term leases are leases of less than 2 years of periodic leases (unstated term, or not more than yearly term, or expired term, exclusive occupation without a written agreement-see section 57 of LA),



As per section 36(1) of the LRA, non-registration does not extinguish, transfer, vary or affect interest in the land. However, as per section 36(2), an unregistered instrument may, however, operate as a contract inter-partes/in personam (Latin word for, against the person) as opposed to registration which gives effect to contracts in rem i.e against the whole word).

-

The so-called contract inter partes must, however, satisfy the requirements of S.3 (3) of the Law of Contract Act (Cap 23) and section 38 of the Land Act (seen earlier)



Priority is given by the date of registration which is the same as the date on which the document is presented for registration.

-

Priority is NOT given by the date of the document (i.e. the date which parties have inserted in the document or the date of execution of the document).



The following are advantages of registration:

1. Security of tenure: A registered proprietor acquires an indefeasible title against the whole world (in rem). The security of tenure acquired through registration also gives the property owner a right to indemnity from the Government where there is fraud or an error in the Register. See Sections 80-85 of the Land Registration Act 2012.

8

2. Reduction of unnecessary litigation: The registered owner can transact or settle his land without the fear of being sued to challenge his title because upon registration, he acquires an indefeasible title against the whole world. 3. Prevention of re-fragmentation of land: Registration helps to determine whether or not a particular piece of land can be sub-divided because his title details pertaining to the land, such as acreage, will have been noted in the Register. 4. Facilitation of Government property tax administration: Through registration, the Government is able to identify persons/property owners on whom to levy tax in respect of a particular piece of land. 5. Efficient administration of the loan system: The security of title which flows from registration makes it possible for property owners to obtain loans from financial institutions. 6. Efficient facilitation of land transactions: A prospective purchaser has more faith dealing with an owner whose land is registered. 7. Prevention of concealed dealings in land: Registration gives publicity to land transactions. Since the register is a public document and is therefore open to the public, it is possible to ascertain who owns what interest in land. Stamp Duty  S.46 of the Land Registration Act No.3 of 2012 – provides that an instrument required by law to be stamped shall not be accepted for registration unless it is stamped in accordance with the Stamp Duty Act.  Governed by Stamp Duty Act, Cap 480, Laws of Kenya.  S.19 - A document which requires to be stamped but which is not stamped cannot be produced in evidence in court in civil proceedings. Exceptions: (a) Criminal proceedings (b) civil proceedings by the Collector of Stamp Duty to recover stamp duty.  Stamp duty applies to various transactions conducted by persons in respect of property in Kenya. Section 7 - States that all duties with which instruments are chargeable shall be paid and denoted upon the instrument by means of stamps. 

Examples of instruments which must be stamped include the following: transfer, lease, partition, charge, discharge of charge, insurance policy, higher purchase agreement, transfer of chattel, Power of Attorney, Debenture and Memorandum and Articles of Association.

9

 Presently, stamp duty is paid through the bank - National Bank of Kenya Limited and Kenya Commercial Bank Limited, or Huduma Centre.  Certain instruments/transactions are exempt from stamp duty. For example: (i)

Exemption of duty when transferring property to a subsidiary Company, where one company owns at least 90% of the issued share capital of the other;

(ii)

Exemption of duty when transfer is by way of transmission;