Supreme Court Ruling on Lease Extensions for Public Land: What It Means – An Analysis of The Supreme Court Decision in Sehmi & Another V Tarabana Company Limited & 5 Others

The Court of Appeal certified three issues as a matter of general public importance that needed to be clarified by the Supreme Court. The Supreme Court framed the issues and analysed them as follows:

1. The Meaning, Scope and Extent of Applicability of the Doctrine of Bona Fide (Innocent) Purchaser for Value Without notice.

The apex court stated that doctrine acts as an absolute, unqualified and unanswerable defence against any person with an equitable interest or an encumbrance over the subject land. However, the court held that the person relying on doctrine had the burden to prove that they were a bona fide purchaser for value.

The court went ahead to set out the elements that must be proved to substantiate the doctrine as a defence. These are:

• Innocence – the purchaser must have acted in good faith. The purchaser’s conduct must not raise doubts as to whether they had notice of the existence of a rival interest over the land. The court affirmed that where the purchaser is found to have engaged in unconscionable conduct, their defence is weakened. The court further held that innocence extended to exercising due diligence over the subject in land. The reaffirmed its stance in Torino Enterprises Limited v Attorney General [2022] holding that due diligence extended to conducting physical inspection over the subject property. The defence would be defeated if the purchaser failed to exercise the requisite due diligence prior to acquiring the land;
• Purchase for value – the purchaser must pay all the money or money’s worth before receiving notice of the existence of an equitable interest over the land. The mere execution of transfer or agreement for sale before receiving notice of the existence of equitable interest without payment of the full purchase price does not avail the doctrine as a defence to such a purchaser;
• A legal estate – the purchaser must have acquired a legal interest in the land without notice of the existence of any equitable interest over the subject land. “Legal rights are good against all the world while equitable interests are good against all persons except a bona fide purchaser of a legal estate for value without notice” The court clarified that the doctrine only protected purchasers against individuals who based their claims upon equitable interest in the land. The court also clarified that the doctrine is only applicable to public land in circumstances where the original allottee creates an equitable interest and later transfers the unexpired term to another person. Such purchaser could rely on the doctrine of bona fide purchaser for value without notice against the equitable interest.

2. Whether the Doctrine of an Innocent Purchaser for Value Without Notice Protects a Purchaser of Illegally Allocated Title Over Public Land

The Supreme Court clarified the confusion created by section 23 of the Registration of Titles Act which accorded a holder of certificate of title over a land parcel the “conclusive evidence” of being the indefeasible owner of the subject land. The Court stated that section 26 of the Land Registration Act had clarified the mischief caused by questions over legality of titles by using the phrase “prima facie evidence” as opposed to “Conclusive evidence”

The Court also reaffirmed the position under Article 40 of the Constitution of Kenya, which stipulates that the rights under the article do not extend to unlawfully acquired property. The Court reiterated its decision in Dina Management Limited vs County Government of Mombasa & 5 Others [2023]. The court held that for a court to make a determination as whether a person was a bona fide purchaser for value, courts have to analyse the root of the title leading to the alleged acquisition. The Court held that the doctrine was not available to a purchaser of illegally allocated public land. The Court stated that two elements of the doctrine, the existence of a legal estate and purchase without notice would be missing. The court reinforced the legal principle that, “An owner of illegally acquired land cannot pass a valid title to a third party.”

3. The Extent of Applicability of the Doctrine of Legitimate Expectation to the Renewal of Leases over Public Land

The apex court defined what amounts to legitimate expectation as it held in Communications Commission of Kenya & 5 Others v Royal Media Services Limited & 5 Others. The Court stated that legitimate expectation arises where a body arouses an expectation within its powers to fulfill, either through representation or by past practice.

The Court also reaffirmed the elements of legitimate expectation set out in the decision. They include:

• The existence of an express, clear and unambiguous promise given by a public authority;
• The expectation in issue must be reasonable;
• The representation made must fall within the body’s competent and legal capacity to make; and
• There cannot be a legitimate expectation that is contrary to the constitutional or legal provisions.

The Court held that where a lease over public land provides for a renewal or extension option, the lessee must proceed to take the action specified for renewal or extension of the lease. The Court stated that where the lessee fails to renew the lease, the land reverts to the government by effluxion of time.

However, where the lessee over public land has applied for renewal or extension, the National Land Commission should consider the application and furnish the Applicant with feedback. The Court found that the first proprietors had a legitimate interest that their lease would be extended. The Court found that in fact a Part Development Plan had been prepared with a view of activating the lease extension process. The Supreme Court held that the circumstances surrounding the case met the requirements for legitimate expectation for the extension of the lease.