The Process Of Conversion Of Titles in accodance with the Land Registration Laws

 

Pursuant to the Conversion Manual issued by the Ministry of Lands, the public is advised that all titles are to be converted from the regimes under Repealed Acts and in accordance with the Land Registration Act. 

In this article we seek to demystify the various titles and describe the process of conversion as provided by the Ministry of Lands.

1.0 Repealed Land Registration Systems In Kenya And The Process Of Land Registration Under The New Regime

Land law in Kenya is characterized by various pieces of Legislation which still dictate the processes in the issuance of title deeds.  Since colonialism, the process of registration and issuance of title has been governed by multiple statutes.  In Kenya there are five land registration systems namely; the Registered Land Act (RLA), the Registration of Titles Act (RTA), the Land Titles Act (LTA), Registration of Documents Act (RDA) and the Government Lands Act (GLA) (which have all been repealed) and the Land Registration Act.

These statutes determined the type of document under which a particular parcel of Land was registered.  Under the Registration of Documents Act (RDA), the Land Titles Act (LTA) and the Government Lands Act (GLA, the registration system was that of documents or deeds while under the Registration of Titles Act (RTA) and Registered Land Act (RLA), the registration system was that of titles.

1.1 Registration of Documents Act (RDA)

Enacted in 1902, the Act essentially sought to create a register of documents. It provided for both compulsory and optional registration. The Act made it obligatory to register any document that purported to confer a right, title or interest in immovable property. However, certain documents could be registered at the option of the owner such as Building Plans, Wills, Powers of Attorneys and Deed Polls.

1.2 The Lands Title Act (Cap 283 Laws of Kenya)

This act was enacted in 1908 specifically to assist the government to differentiate between private land and crown land leased from the Sultan of Zanzibar.  Persons who were entitled to private land were issued with Certificates of Ownership giving freehold title. On the other hand, if the title acquired was leasehold, then Certificates of Mortgage or Certificates of Interest were issued as evidence of ownership.

1.3 The Government Lands Act (Cap 280 Laws of Kenya)

This Act was enacted in 1915 and mostly dealt with land parcels considered as farm land such as land in Central Province, Kericho and Nairobi. The title deeds issued under this system contained the words “Indenture”, “Conveyance” or “indenture of conveyance” as part of their heading.

1.4 The Registration of Titles Act (Cap 281 Laws of Kenya)

This statute came into force in 1920 with the aim of improving the issuance of titles to land as well as regulating the same. Just like the Lands Titles Act, under this act, the documents evidencing ownership were Certificates of Ownership, Mortgage or Interest. The Registered Land Act (Cap 300 Laws of Kenya)

Under the Registered Land Act, A certificate of Lease was issued for leasehold Land and an Absolute title deed registered where the land in question was freehold land.

2.0 The process of conversion of titles

The above statutes have since been repealed and the Ministry of Land and Physical Planning has embarked on the process of registration of these titles under the newly enacted Land Registration Act, 2012. In order to effect the provisions of the Land Registration Act 2012, all titles issued under the repealed laws shall be cancelled and replaced with titles under the Land Registration Act, 2012.

Essentially, the process of conversion begins with the preparation of cadastral maps which serve as a unified survey document together with a conversion list showing the old parcel numbers of land within a registration unit and their corresponding sizes.

Upon receipt of the cadastral maps and the conversion list from the registrar, the Cabinet Secretary in charge of the ministry of Land and Physical Planning shall in line with regulation 4 (4) of the Land Registration (Registration Units) Order, 2017, notify the Public through the Kenya Gazette and two daily newspapers of nationwide circulation of the list of old parcel numbers and new parcel numbers after conversion. The Gazette notice shall specify the date after which the land registry shall be open to the public for transactions or dealings within the registration unit.

Any complaints relating to information in the conversion list or cadastral maps shall file be filed within ninety (90) days from the date of publication of the notice. The complaints shall be made, in writing in Form LRA 96 set out in the Second Schedule to the Land Registration (Registration Units) Order, 2017 or Form LRA 67 set out in the Sixth Schedule to the Land Registration (General) Regulations, 2017 for the registration of a caution pending the clarification or resolution of any complaint. The complaints shall thereafter be resolved within ninety (90) after receipt.

At the commencement date, all registers maintained in any other registry previously dealing with the parcels within the registration unit shall be closed for any subsequent dealings and all transactions carried out in the new register.

The registrar will then issue a notice inviting registered owners to make an application for replacement of title documents from the closed registers.  The application shall be accompanied by the original title and the owner’s identification documents. The registrar will then replace the title deeds with new ones and retain the old title documents for records and safe custody.

However, it is important to note that this conversion does not interfere with the ownership, size and other interests registered against the respective title. When it comes to titles in the possession of third parties such as banks, hospitals and courts, the process of conversion shall commence on application by the proprietor.

3.0 Conclusion

The conversion process is an continuing process intended to be carried out in stages. The Ministry of Lands has already issued a Gazette Notice listing various parcels of Land to be converted. Land proprietors are expected to be vigilant and compliant with these notices. To this end land owners are encouraged to confirm whether their properties are listed and make complaints if any within the stipulated period.

Disclaimer: The content of this document is intended to be of general use only.

ANALYSIS OF THE LAW ON CAVEAT AND CAUTION

 

WHAT IS A CAVEAT?

The word Caveat means warning or proviso (something said as a warning, caution, or qualification). The lodging of a caveat over a property is a way telling anyone who wants to deal with the property to be aware of the fact that someone else’s interest already has priority.

 

WHAT IS A CAUTION?

A Caution is a notice in the form of a register to the effect that no action of a specified nature in relation to the land in respect of which the notice has been entered may be taken without first informing the person who gave the notice.

 

HOW DOES ONE PLACE AND REMOVE A CAVEAT OR CAUTION?

a) Notice and effect of Caution

The registrar shall give notice in writing of a caution to the proprietor whose land, lease or charge is affected. So long as the caution remains registered, no disposition which is inconsistent with it shall be registered, except with the consent of the cautioner or by order of the court.

 

b) Withdrawal/removal of the Caution

i. A caution can be removed by the person lodging the same, or by order or the court, or by the Registrar, if such person fails to remove it after being served with a notice to do so by the Registrar.

 

ii. The registrar may, on the application of another person interested, serve notice on the cautioner warning him that his caution will be removed at the expiration of the time stated in the notice. If at the expiration of the time stated the cautioner has not objected, the registrar may remove the caution.

 

c) Second Caution in respect to the same matter

The registrar may refuse to accept a further caution by the same person or anyone on his behalf in relation to the same matter as a previous caution.

 

d) Wrongful Caution

Any person who lodges or maintains a caution wrongfully and without reasonable cause shall be liable, in an action for damaged at the suit of any person who has sustained damage, to pay compensation to such person.

 

WHO CAN LODGE A CAVEAT OR CAUTION ON LAND?

Any person who is claiming a contractual or other right over land amounting to a defined interest capable of creation by a registable instrument, e.g. a lease, may lodge a caution with the Registrar against any dealing which is inconsistent with his interest. Entry of a transaction, with respect to such land, may not then be made unless the cautioner has received notice. Lodging of a caveat or caution without reasonable cause can lead to a remedy in damages.

 

Sacco Societies Regulatory Authority (SASRA)/Frequently asked questions on Regulation of SACCOS in Kenya

What regulates SACCOs in Kenya?

The SACCO Societies Regulatory Authority (SASRA) is the primary regulatory body charged with licensing Deposit‑Taking Sacco Societies (Savings and Credit Co-operatives Societies) - DT regulation 2010 and authorizing specified Non Deposit taking saccos - NDTS Regulations 2021 in the Republic of Kenya.

The Sacco Societies Regulatory Authority (SASRA) is a statutory state corporation established under the Sacco Societies Act (Cap 490B) of the Laws of Kenya (the Act) which came into full operation upon the gazettement of the Sacco Societies (Deposit-taking Sacco Business) Regulations, 2010 (the Regulations 2010) on 18th June 2010. The principal mandate of the Authority under the Act as read with the aforesaid Regulations, 2010 has been to license Sacco Societies to undertake deposit-taking Sacco business in Kenya (popularly known as Front Office Service Activity or FOSA), and to supervise and regulate such Sacco Societies in Kenya among other things.

Are SACCOs regulated by CBK?

ii) CBK has a formal working partnership with SASRA to engage in continuous technical consultations to guide the licensing, regulation and supervision of deposit taking SACCO Societies.

How are SACCOs governed?

According to Part II of the SACCO Societies Act 2008 Kenya, an authority is established to regulate and manage SACCO societies. This authority is called SACCO Societies Regulatory Authority (SASRA).

How do SACCOs operate in Kenya?

Like banks, SACCOs accept deposits and make loans—but unlike banks, SACCOs are not in business to make a profit. Banks exist to make money for their stockholders, not for their depositors. SACCOs exist solely to serve their member-owners, and benefits are returned in lower loan rates and higher deposit rates.

Are all SACCOs regulated by Sasra?

SASRA's mandate allows it to regulate, supervise, and license all the deposit-taking Saccos in the country in accordance with the Sacco Societies Act of 2008. Before a Sacco is registered, it has to comply with all the SASRA regulations.

Can one join two SACCOs in Kenya?


Yes. As long as the said member shall belong to no more than one Sacco Society having similar objectives as mentioned above.

Which is best Sacco in Kenya?

STIMA SACCO SOCIETY LTD

Membership is open and any Kenyan citizen is eligible to join Stima Sacco regardless of his or her area of residence. Stima Sacco is currently ranked as the best performing Sacco in the country.

How many members can form a SACCO?


The number of members in the society (At least 10 members); The names, occupation and postal addresses of the Chairman, treasurer and secretary; Proposed Physical address of the society.

How do you manage a SACCO?

SACCO members are the owners and they decide how their money will be used for the benefit of each other. Savings and Credit Cooperatives are democratic organizations and decisions are democratically made. Members elect a board that in turn employs staff to carry out the day-to-day activities of the SACCO.

Does a Sacco have a Constitution?


Section 2 of the SACCO Societies Act defines a Sacco as a savings and credit co-operative society registered under the Co-operative Societies Act. A Sacco is therefore a co-operative society regulated under Part 2 of the Fourth Schedule to the Constitution.

How do you earn dividends in a SACCO?


Saccos pay dividends to all members with balances in deposits and share capital for a given financial year. Most Saccos pay their members' dividends after approval, usually done after the Annual General Meeting.

Which is the richest Sacco in Kenya?

Mwalimu National remains the wealthiest Sacco new Sacco Societies Regulatory Authority (SASRA) data shows.

Procedure for Registration of non-deposit taking saccos

1. Formal request in writing to the commissioner for cooperative development with intent for the formation of a non-deposit taking Sacco

2. Proposed Names for Search and approval

3. Objectives of the society

4. The number of members in the society ( at least 10 members)

5. The name, occupation and postal addresses of the chairman, treasurer and secretary

6. Proposed physical address of the society, address includes road, plot number, town and county

7. Constitution of the society

8. Sacco Registration Forms

Procedure for Registration of deposit-taking saccos

1. The Sacco has to provide a minimum core capital of Kshs 10 million as shown in their financial or through submission of bank statements

2. All directors and senior management will be subject to a fit and proper test vetting their moral and professional suitability to be on the board and to manage the Sacco Society Respectively.

3. A detailed four year business plan and feasibility study including projected financial statements.

4. Fill in and submit application forms to SASRA and required documents

5. If satisfied SASRA will issue a letter of intent, upon which the Sacco will be required to set up its business premises, put in place the management information systems and develop a comprehensive risk management framework.

6. Once the above is completed SASRA will conduct an onsite inspection within 30 days and if satisfied will issue a Letter of Compliance to the Sacco within another 30 days.

7. The body will then issue a License upon payment of the stipulated license fees.

8. The estimated time is 4 months for a Sacco that fully complies with all the licensing requirements. The license for deposit taking is renewable annually.

 Courtesy of SSRA

A Review of the Salient Features of the Sectional Properties Act, 2020 and the Sectional Properties Regulations, 2021

1.0 Introduction

The Sectional Properties Act, 2020 laws of Kenya (the “new law”) has effectively repealed the Sectional Properties Act of 1987, laws of Kenya (the “repealed law”).

The sectional properties law seeks to sub-divide buildings into units to be owned by individual proprietors and common property to be owned jointly by the proprietors as tenants in common.

The new law seeks to simplify the process of registration of sectional properties and create an enabling environment for investors and property owners. It seeks to guarantee the rights of property owners by conferring absolute rights to individual unit owners over their units and vest in them the reversionary interests thereto.

This will give the unit owners greater power and liberty to deal with their units as they please and it is anticipated that their transactional ability to access financing and dispose their units will be dramatically expanded. This will also motivate lenders and financiers to offer credit facilities to the individual unit owners as they may now charge the individual units directly without requiring the consent of the developer and or the manager.

We highlight the salient features of the Sectional Properties Act, 2020 as below: -

1.1. Leasehold Tenure

The sectional properties law applies to land held on a freehold tenure or on land held on leasehold tenure where the intention is to confer ownership. The new law has reduced the leasehold period to twenty-one years from the forty-five years required under the repealed law. This enlarges the purview of the sectional properties laws to extend to proprietors of all long term leaseholds which are defined in law as leases for a period of twenty-one years and above.

1.2. Nexus Between The Sectional Properties Act 2020 And The Land Registration Act, 2012

The efforts of the Ministry of Lands and Planning (the “Ministry”) in the recent past have been geared towards phasing out the different land registration regimes that have existed and give effect to the Land Registration Act, 2012 (the “LRA”); such that all dealings in or dispositions of land shall be registered under the LRA. The new law makes express reference to this by providing that the title to a sectional property shall be deemed to be issued under the LRA and all dealings and dispositions regarding the sectional property shall be in accordance with the LRA.

1.3. Registration And Mandate Of The Management Corporation

Upon registration of a sectional property, the individual owners are constituted in a Corporation which is responsible for management of the common property. The new law provides that upon registration of the sectional plan, the registrar shall issue a Certificate of Registration in respect of the Corporation. This was not the case under the repealed law.

The new law mandates the Corporation to do all things to ensure the common property is well managed and may engage the services of a property manager or any other person to this end. The new law further mandates the Corporation to establish an internal dispute resolution mechanism through the Committee established under the Act to hear and determine any disputes. It also empowers the Corporation to execute any of its duties by the use of technology. These provisions were not in the repealed law and reflect the dynamics of the current world.

The new law has repealed section 29 of the old law which provided for the compulsory appointment of an institutional manager and extensively set out the qualifications and duties of the said institutional manager who would be responsible for management of the units, any property of the Corporation as well as the common property. As discussed above, section 20(1) of the new law provides that the Corporation may, if it deems it necessary appoint a property manager to manage the common property.

1.4. Conversion of Sub-Leases

The new law further provides that all long term sub-leases intended to confer ownership on a mansionette, apartment, flat, town house or office that were registered before the new law shall be reviewed to conform with section 54(5) of the LRA and the proprietors thereto shall be issued with certificates of lease. The import of this provision is to transition all buildings to sectional status and guarantee the absolute rights of the owners of such units to deal with the same without being subject to the power and direction of the developer and or the management company.
This said review and transition of sub-leases shall be done within a period of two years from the date of commencement of the new law. This will not entail a transaction from scratch and an owner who has already paid stamp duty in respect of the said sub-leases shall not be required to pay stamp duty during the revision.
The process of conversion may be commenced by the developers, the management company or the individual unit owner. If the developer is unwilling to surrender the mother title for purposes of the conversion, the registrar may register a restriction against the title to prevent any further dealings on it.

The review process anticipated in the new law must be read and understood alongside the provisions of the Gazette Notice Number 11348 of 31st December, 2020 providing for conversion of land titles. It would appear that the efforts of the Ministry are geared towards bringing all land dealings in Kenya under the purview of the LRA as earlier discussed. The surrendered sub-leases would be subject to the new land registration units established under the said Gazette Notice depending on where the property is situated. Noting the timelines set out for conversion of the land titles commencing from the month of April, 2021, a diligent unit owner should peruse the Gazette Notice to confirm whether the mother title is part of the phase one of the conversion of land titles. It is not clear which of the two between the conversion and the surrender and revision of the sub-leases should precede the other or whether they can be undertaken at the same time.

1.5. Registration And Removal Of Caution In Respect Of Unpaid Amounts

The Corporation may register a caution against the title to an owner’s unit for any amounts due and unpaid by the owner, provided that upon payment of the amounts due, the Corporation shall within thirty days of payment withdraw the caution. The new law has prescribed the period within which the caution should be withdrawn. The repealed law was silent on this.

1.6. Renting Of Residential Units

Under the repealed law, an owner renting out their unit was required to disclose to the Corporation the amount of rent chargeable to the unit as well as pay a deposit to the Corporation for maintenance, repair and or replacement of the common property. This is not a requirement under the new law which recognizes the autonomy of an individual unit owner to deal with their individual unit as they please independent of the common property and the mandate of the Corporation.

1.7. Termination Of The Sectional Status Of A Building

Under the new law, the sectional status of a building may be terminated by unanimous resolution of the unit owners, the substantial all total destruction of the building or pursuant to an order for compulsory acquisition and the Corporation shall stand dissolved upon the termination of the said sectional property status. Under the repealed law, the sectional status would only be terminated by unanimous resolution or by an order of the Court. The Corporation was also required to apply to court for an order winding up the affairs of the Corporation.

1.8. Dispute Resolution

Under the repealed law, any disputes relating to the contravention of the by-laws of the Corporation were referred to a tribunal established under the Landlords and Tenants Act which was mandated to recover from an errant owner or tenant a penalty not exceeding Kenya shillings twenty-five thousands. Under the new law, disputes in relation to contravention of the by-laws are referred to the Committee which is an internal dispute resolution mechanism of the Corporation and without any prescribed limit as to the penalties to be levied.

Under the new law, in the event of non-compliance with an order of the Committee or if a party is disgruntled with the decision of the Committee, both may apply to the Environment and Land Court for enforcement of the order or in the case of an appeal from the decision of the Committee as the case may be. The repealed law provided that enforcement of an order of the tribunal in the event of non-compliance would lie with the Resident Magistrate Court and any right of appeal would be exercised at the High Court of Kenya.

The Sectional Properties Regulations, 2021

Introduction

The Cabinet Secretary for Lands and Physical Planning has gazetted the Sectional Properties Regulations, 2021 (“the Regulations”). Their objective is to operationalise the Sectional Properties Act, 2020 (“the Act”). The Act covers ownership of units in a building such as offices, apartments, flats, and townhouses. We summarize below the key provisions of the Regulations.

Salient features of the Regulations
A key aspect of the Act is that ownership of the unit is devolved to the unit owners and held exclusively by them. This is illustrated by the below:

Sub-division and Consolidation
Owner may sub-divide or consolidate their unit by registering a sectional plan of sub-division, or consolidation respectively. 

Where the subdivision or consolidation is likely to affect the incidental rights of other unit owners, their consent will be required. If the property is charged, the chargee’s consent will be required, as well. 

Apportionment of Rent and Rates 

The obligations to pay rent and rates is now on the unit owners. 

Rates Apportionment is determined by the County Government of the area the parcel is located. 

The Unit factor attributable to the unit, as computed below is one of the factors taken into account in determining rates or rent payable. 

Unit factors 

Each registered unit shall be allocated a unit factor/unit entitlement. The unit factor is critical in determining the ownership of Common Property held by all the unit owners as tenants in common and the number of votes that a person may cast in a poll. 

The unit factor may be determined in reference to any of these 3 factors or a combination: 

❖ by the unit floor area; or 

❖ by the selling/ value of the unit; or 

❖ by location/position of the unit e.g. a penthouse or a riverfront unit as opposed to the other units.

The recommended basis under the Regulations is the use of unit floor area, which is the simplest. The total of the unit factors for all units in the parcel is assumed to be 10,000, for ease in determining unit factors in whole numbers. 

Note: The size of the Common area is not factored in when determining the total area. 

Conversion 

Documents supporting a conversion application are the: sectional plan, sub-lease/ long term lease and the Title or a Copy of the Title of the parcel. Where the original title is unavailable, the applicant shall apply for a replacement title. 

After conversion, the Registrar shall issue the unitowner with a Certificate of Title/Lease. 

 Upon conversion, the management company should transfer all its assets and liabilities to the corporation within a period of one year from the date of registration of the corporation. 

If the property is charged, the application for conversion may be prepared by the developer, Management Company or unit owners but submitted by the chargee or its appointed representative for processing at the Lands Registry. Failure to make an application for conversion shall not invalidate a charge over a Unit meant to secure the unit owner’s obligations to a chargee. A charge may as well exercise its statutory power of sale and the Registrar shall issue a new sectional title in the name of the transferee upon registration of transfer by the chargee.

Conclusion 

The Regulations are a positive step towards the implementation of the Act, which seems to have a lot of confidence from the end purchasers.  

The Act requires conversion of long term leases within 2 years from its commencement i.e. December 28, 2020. With almost a year having lapsed before the publishing of the Regulations and considering any operational delays, it may be prudent that the Act is amended to allow the CS by gazette notice provide for the period within which conversion must be complete. 

Additionally, conversion where the Property is charged as security may be problematic for example where only a portion of the units have been sold. There would need to be co-operation between the developer and the buyers who were issued with long term leases, pursuant to a Partial Discharge. If these individual buyers had then used their units as security to other financial institutions, it presents another hurdle. Even where transfer of all units is complete to individual buyers, noting that securities are noted against the individual leases and not the Head Title, the accuracy of data to ensure no gaps in transition should be ensured. 

More so, a transparent and phased approach such as the one for Conversion of Land parcels, where a gazette notice is published identifying parcels that will be converted may be of some utility, as well as any records by Management Companies for any consents to charge also presented with the application. 

Review: Opposing a bankruptcy petition

 

The purpose of bankruptcy/insolvency proceedings is for reasons that the bankruptcy is a judicial attachment on all assets of the debtor for the benefit of his creditors, almost always resulting in the execution of such assets. A bankruptcy aims ensring the distributiin of the proceeds of exeution of the assets of the debtor to all its creditors, and with due observance of the rights of the debtor. Further, it serves to terminate all existing attachments and prevent future seperate attachments and executions by one or more creditors.

Introduction

The overall design of The Insolvency Act is to give a distressed Debtor a second chance. Where the Debtor is a natural person, Part 11 of The Insolvency Act provides for Alternatives to Bankruptcy. One such alternative is for a Debtor to seek an Interim Order so as to make a proposal to his/her Creditors for a Composition in satisfaction of the debts or a Scheme of Arrangement of its financial affairs. This remedy is provided in section 305 of The Insolvency Act.

If you are served with a bankruptcy petition which seeks to adjudge you bankrupt in securing a debt that is allegedly owed by you, there are various grounds upon which you can rely on in opposing the steps that may result to the making of a bankruptcy order. 

 

How can I oppose a bankruptcy petition?

A bankruptcy petition may be challenged based on the following substantive grounds:

• ·The debt alleged in the demand to be owing is genuinely disputed on substantial grounds by the debtor. If the debt is disputed, the petition will likely be dismissed by the court;
• ·however, unsuccessful arguments presented in an attempt to set aside a statutory demand cannot be reheard by the Court at the bankruptcy petition hearing;
• ·the Court can also dismiss the petition if it is satisfied that the debtor is able to pay all the debts to the creditor; or
• ·The company has a genuine right of set-off against the creditor which exceeds the amount claimed in the demand.
• ·One can argue that the petition is pre-mature; an abuse of the court process as the creditor is yet to exhaust recovery mechanisms available to it in law against the Debtor. Alternatives to bankruptcy are provided for under S. 14 of the Insolvency Act.
• ·More grounds to be added…

What is the procedure to oppose a bankruptcy petition?

The procedure to oppose a bankruptcy petition is to file a replying affidavit in response to the filed bankruptcy petition. in the R.A. you will be expected to provide grounds upon which you decline issuance of a bankruptcy order. The response is to be filed as per the timeline set out by the Insolvency Regulations and Act. This is usually days before the hearing date is set. 

You are equally expected to file copies of evidence which support the reasons as to why you should not be declared bankrupt as soon as it is reasonably practicable.

Malicious Presentation of a bankruptcy Petition

A malicious bankruptcy petition is one that has been presented against a debtor for an improper or wrongful motive. A debtor that suffers a malicious petition can bring a Court claim for malicious prosecution against the petitioner.

Expert Bankruptcy Petition Lawyers

It is very important that you seek legal advice as soon as a bankruptcy petition is served upon you. To reduce failure risk, it is advised that you instruct specialist bankruptcy petition lawyers.

References

Rajendra Ratilal Sanghani v Schoon Ahmed Noorani [2018] eKLR available at http://kenyalaw.org/caselaw/cases/view/161951/

If you have any questions, or for request of PDF Version of the notes, please send a request mail to gechangazacharia@gmail.com

Format/Structure of a Demand Letter

DEMAND LETTER

A demand letter is a formal notice demanding that the addressee perform a legal obligation on specified terms and within a specified time.

The demand letter usually gives the recipient a chance to perform the legal obligation without being taken to Court.

It is sent before the commencement of a suit it serves to inform the adversary of the pending claim.

The purpose of a demand letter and any other notices prior to commencement of a suit is to afford both parties an opportunity to avoid embarking on unnecessary litigation or incurring any additional costs.

Where it is excluded, a party may not be able to claim for costs in the suit.

A demand letter is provided for in Order 3 Rule 2 of the Civil Procedure Code.

A demand letter should be signed by an Advocate meaning that it cannot be drawn by an unqualified person.

Contents of a Demand Letter.

• A date, recipient’s contact information
• The authority to act for the claimant
• The summary of the matter in issue
• A demand for a specified relief
• A deadline by which the matter must be settled
• Consequences of non-adherence to the demand of claim.
  

 

GENERAL FORMAT:

1. Letter head of the firm (optional)

2. Our REF - YOUR REF

3. Address of the Defendant

4. Date

5. Dear Sir/Madame

6. Subject Matter: RE (to be precise and concise)

7. Introduction: 

a) authority to act from clients instructions

b) Facts

c) cause of action arising from the facts

8. Demand for relief/remedy

9. Ask for liability to be admitted

10. Specify time within which you seek compliance (7 days within Nbi, 10 daysoutside)

11. Consequences for non adherence to time line

12. Authenticate letter

13. CC. Client

(acronym:LOAD DS IDA SCAC) - you can make your own

BILL OF COSTS: STEP BY STEP GUIDE ON DRAFTING A BILL OF COSTS

What is it?

Generally, the party who is successful in a High/Subordinate Court proceeding may ask the court for an order that the unsuccessful party pay their costs. These costs are commonly referred to as “party/party” costs. The “costs” are to partially indemnify a person for the legal costs incurred by them or the time spent prosecuting or defending a court proceeding. The costs are then, based on the tariff set out in the Advocates (Remuneration) (Amendment) Order, (specific Year)
All court related civil matters are said to be litigation matters and the law sets the minimum fees. The mechanism of charging fees is different in the High Court with subordinate courts having a separate scale of fees. In civil litigation, there are two distinct methods of determining fees and these are said to be ‘party and party’ fees and ‘advocate and client’ fees.
 

Before the hearing
The party who was awarded costs will prepare their bill following regulations of each set of rules under the advocates remuneration order of a specified year. The Tariff sets out items involved in prosecuting/defending a proceeding and assigns a number of units or sets a prescribed amount of costs for each of these events. In civil matters, some of the items show a range of units; others are fixed depending on how long the event took. If there is a range, the number of units awarded is based on the work done within the description of the items covered under a particular tariff item. The bill will also include a list of disbursements. A copy of the bill is served on all affected parties. If a party does not agree with the amount of the bill, a hearing to assess the costs must be arranged before a registrar. A date for the hearing is obtained from Supreme Court Scheduling in the court registry where the proceeding originated or the registry where all parties have agreed the costs assessment should take place.

At the hearing
The onus is on the party who was awarded costs to prove their bill. This means they must produce proof of work done and disbursements incurred. If proof is not given, the items may be disallowed. This is often done by producing at the hearing copies of the pleadings, any interim orders made, notices to admit and the like. The party presenting the bill of costs for assessment may make an affidavit setting out the work done, as well as an affidavit of disbursements. Sometimes, a party testifies in court, at the assessment hearing itself. The opposing party must be prepared to tell the registrar why they object to disputed items and disbursements on the bill. The assessment is conducted like any other court hearing. The person presenting the bill of costs goes first, the opposing party then makes their objections and then the party awarded costs has a right of reply. Sometimes the registrar will rule on the tariff items before turning to the disbursements but usually, the registrar will deal with all matters and provide their decision at the conclusion of the hearing. If the opposing party does not appear, proof of service of the appointment (i.e. an affidavit of service) is required.
 

Mode of charging
Party and party’ costs are based on the principle that the unsuccessful party in any case must, unless the court otherwise orders for good reason, pay the successful party. After a matter is finalized, the successful party and the losing party may agree on the costs to be paid. Failure to this, a Resident Magistrate of any designation who has been gazetted as a Registrar or Deputy Registrar of the High Court can adjudicate upon the quantum of fees between opposing parties or between an advocate and client.
The Magistrate (in his capacity as Taxing Officer), decides on all matters of fees. The taxing officer’s decision is appealable to the High Court and the Court of Appeal. And what are ‘advocate and client fees? In a concluded matter, the minimum advocate/client fees is that assessed by the taxing officer increased by one half. An unsuccessful litigant pays the opposing side and his own lawyers’ costs and in the same breath the winning side’s lawyer gets fees from the losing party and his own client. Every single aspect of costing is provided for by law, from writing a letter, perusing it to appearances in court. But the ‘instruction fees’ are based on the value of the subject matter, and whether the matter is defended or undefended.
For step by step guidance on preparation of a Bill of costs in Kenya and samples please consult through the mail.

Termination of a Contract, Benefits and Wages (Labour Law)

1.0 Key Areas

• Termination of a Contract
• Termination of a Contract and Benefits and Wages
• Termination of a Contract and Labour Laws in Kenya

2.0 Introduction

Termination of employment can be initiated by either of the parties to a contract of employment (Employment Act, section 35 (1)). Lawful termination of employment under common law includes:

• Termination of employment by agreement: When the employer and employee agree to bring a contract of employment to an end following an agreement. This may be in case of terminating a contract of apprenticeship; where the period of training expires then the contract will obviously come to an end.
• Automatic termination: A contract of employment may be terminated automatically in circumstances such as death or loss of business of the employer.
• Termination of employment by the employee/resignation: This happens when an employee due to material breach of the contract by the employer decides to resign from his/her employment.
• Termination of employment by an employer: An employer may also terminate the employment of an employee but there is a need to comply with the provisions of the law and contract relating to termination. 

3.0 On what grounds can a contract of employment be terminated by an employer?

A contract of employment may be terminated by an employer on the following grounds:

• By mutual agreement between the employer and the worker (Industrial Training Act, section 13 (1) (a)).
• By the employer when the employee dies before the expiration of the period of employment.
• By the employer, if the worker is found by a medical examination to be unfit for employment. Due to sickness or accident, the employee becomes unable to carry out his or her work (Employment Act, section 41(1)).
• By the employer based on the misconduct of employee (Employment Act, section 44 (3)) 

4.0 What should an employer do if he or she wants to terminate a contract of employment?

A contract of employment may be terminated at any time by an employer who must give the employee a period of notice of termination (e.g. at the close of day in case of a contract for daily wages, one month or more in case of monthly pay contracts). 

5.0 What form of notice should I give as an employer?

A termination notice shall be in writing. In case the employee does not understand the notice, the employer is responsible to ensure that the notice is explained orally to the worker in a language he/she understands (section 35 (2) (3)).  

• If the employee is employed on a daily wage contract, the notice is given at the close of any day without notice. 
• If the employee is employed on a weekly pay or two-week basis the notice period shall be one week or two weeks respectively, given in writing or payment of one week’s salary in place of notice.
• If the employee is employed every month the notice period shall be 28 days and in writing or payment of one month’s salary in lieu of notice.
• In the case where a contract of employment provides that the notice of termination be given for a greater period than one month, then there will be agreed in writing between employer and employee for a longer notice and the agreed notice period shall be of equal duration for both employer and the employee (section 35 (2)). 

6.0 Can an employer terminate an employee immediately without allowing them to work during the notice period? Does the law allow this?

In the event, the employer wants to terminate an employee without allowing her/him to serve the notice period the employer will be required to pay the employee the amount that an employee would have received if she/he had worked during the notice period. This is what is usually referred to as payment in lieu of notice (section 36) also (section 38). 

Section 36 provides for payment of equivalent salary in place of notice instead of serving the notice. The length of notice will depend on the interval at which the salary is paid.

7.0 What happens if an employee is terminated but they have outstanding leave they have not taken?

In the case of accrued leave upon termination the employer shall pay an employee on a pro-rata basis an amount in cash for the accrued annual leave to which that employee is entitled (section 40 (1) (e)) - provided that it is taken not later than six months after the end of leave cycle or twelve months after the end of leave cycle if (if the employee consented or extension is justified by operational requirements) (section 28(4)). 

8.0 Can an employer terminate a contract of employment without notice?

Yes. Either party to a contract of employment may terminate the contract without notice if that party pays the other party a sum equal to the amount of remuneration which would have accrued to the worker during the period of the notice (section 36).

9.0 Is a certificate of service and notice mandatory even when terminated on misconduct?

Yes. Both are mandatory regardless of the reason for termination unless the period of service of the employee to the employer has lasted less than four weeks (section 51). 

10.0 Four grounds that justify termination of the employment by the employer

• Misconduct.
• Physical incapacity.
• Poor performance.
• Employer’s operational requirements/retrenchment. 

An employer may also terminate an employee due to participation in an illegal strike. Therefore for an employer to terminate an employee he/she should have a genuine reason as specified in section 45 (2) and section 46. An employee cannot be fired because an employer does not like them - unless the grounds for this dislike are based on the above-mentioned factors.

11.0 What amounts to fair terms termination of employment?

For termination to be fair in the eyes of the law, it has to be both substantively and procedurally fair. The employer needs to have a valid and fair reason for termination. 

Apart from this valid reason of termination, the employer must follow fair procedures for termination as are provided under the Employment Act, section 45 (2) and section 46.). In any form of termination, the employer is required to prove the reasons for the termination otherwise it will be termed as unfair (section 45 (2)). The procedures for termination are different depending on the reason for termination but they all have a common item - the right of an employee to be heard before a termination decision is taken against an employee (section 41 (2)).

12.0 Am I to follow the procedure for termination even in cases where an employee is caught red-handed committing serious misconduct, for example, stealing?

Yes. Notwithstanding the serious misconduct of the employee, and the evidence available, the law requires that procedures outlined under the law be followed. Failure to follow the procedure will amount to summary dismissal, meaning an employee is terminated without being availed of an opportunity to defend herself/himself before a fair disciplinary committee. In labor laws, summary dismissal amounts to unfair termination with consequences specified in section 47 and 49 (1) & (3).

Can I terminate an employee who is facing a criminal charge before a court of law?

No one can terminate or take disciplinary action against an employee who is facing the same charges before a court of law unless the two charges are different or do not arise in the same cause of action. 

What are the likely consequences of unfair termination for an employer?

If the labor officer makes the decision that the summary dismissal or the termination of the contract of an employee is unjustified, he may recommend to the employer to pay the employee any or all of the following:

• The wages which the employee would have earned had the employee been given the period of notice to which he was entitled under this Act or his contract of service. 
• Where dismissal terminates the contract before the completion of any service upon which the employee’s wages became due, the proportion of the wage due for the period of time for which the employee has worked; and any other loss consequent upon the dismissal and arising between the date of dismissal and the date of expiry of the period of notice referred to in paragraph (a) which the employee would have been entitled to by virtue of the contract.
• The equivalent of several months’ wages or salary not exceeding twelve months based on the gross monthly wage or salary of the employee at the time of dismissal.
• Alternatively, the employer may have to reinstate the employee and treat the employee in all respects as if the employees' employment had not been terminated; or 
• Re-engage the employee in work comparable to that in which the employee was employed before his/her dismissal, or other reasonably suitable work, at the same wage.
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• For PDF Version of notes just send a request mail to ---gechangazacharia@gmail.com---

Principle of Unreasonableness - Kenyan Case Study: Keroche Industries Limited vs. Kenya Revenue Authority & 5 Others

Judicial Review in Kenya: The Keroche Industries Case and the Limits of Retrospective Taxation

Keywords: Judicial Review in Kenya, Keroche Industries, Kenya Revenue Authority, Legitimate Expectation, Wednesbury Unreasonableness, Administrative Law, Tax Law, Rule of Law, Retrospective Taxation, Constitutional Law.

Introduction

The relationship between taxpayers and revenue authorities is founded not only on statutory obligations but also on the constitutional principles of fairness, legality, transparency, and accountability. While the Kenya Revenue Authority (KRA) is empowered to assess and collect taxes, that mandate must always be exercised within the confines of the law.

The landmark decision in Keroche Industries Limited v Kenya Revenue Authority & 5 Others remains one of Kenya's most authoritative decisions on judicial review and administrative law. The High Court held that public authorities cannot exercise statutory powers arbitrarily or retrospectively where doing so undermines legitimate expectations and violates the rule of law.

The judgment has become a leading authority on the doctrines of legitimate expectation, administrative fairness, proportionality, abuse of power, and the celebrated Wednesbury principle of reasonableness established in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223.

For businesses, investors, tax practitioners, and public institutions alike, the case continues to define the constitutional limits of governmental decision-making.

The Background of the Dispute

Keroche Industries Limited was licensed by the Customs Department in the late 1990s to manufacture fortified wines. Following approval by the relevant tax authorities, its products were classified under Tariff Heading 22.04, attracting excise duty at the applicable rate of 45%.

For approximately nine years, the company operated its business, priced its products, and paid taxes in accordance with this tariff classification. During this period, KRA consistently accepted the classification without objection.

In November 2006, however, KRA informed the company that its products had allegedly been incorrectly classified and ought instead to have fallen under Tariff Heading 22.06, attracting a significantly higher tax rate of 60%.

Rather than applying the revised classification prospectively, KRA reassessed Keroche's tax liability retrospectively for the years 2002 to 2005 and demanded payment of approximately Kshs. 1.1 billion within fourteen days.

The company challenged the decision through judicial review proceedings before the High Court.

The Legal Issues Before the Court

The Court was invited to determine several significant questions of administrative law, including:

• Whether judicial review was available despite the existence of alternative statutory tax dispute mechanisms.
• Whether KRA could lawfully apply a revised tariff classification retrospectively.
• Whether the taxpayer had acquired a legitimate expectation arising from KRA's longstanding conduct.
• Whether the retrospective tax demand constituted an abuse of statutory discretion.
• Whether the decision satisfied the standards of reasonableness established under the Wednesbury doctrine.

Each of these issues has had a lasting influence on Kenyan public law.

Judicial Review and the Right to Access the Courts

KRA argued that the High Court lacked jurisdiction because Keroche had failed to exhaust the available tax dispute resolution mechanisms before approaching the Court.

The High Court rejected this argument.

The Court recognised that while statutory tribunals ordinarily provide the primary avenue for resolving specialised disputes, judicial review remains available where public authorities exercise power unlawfully or in violation of constitutional principles.

The Court emphasised that access to justice is a constitutional safeguard that cannot be curtailed merely because an alternative statutory procedure exists. Where the legality, fairness, or rationality of administrative action is under challenge, the High Court retains supervisory jurisdiction.

This principle has since become central to Kenyan administrative law and continues to guide courts when determining whether exceptional circumstances justify bypassing statutory remedies.

Legitimate Expectation: Protecting Public Confidence

One of the most enduring contributions of the Keroche decision is its comprehensive treatment of the doctrine of legitimate expectation.

For nearly a decade, KRA had consistently accepted the applicant's tariff classification. The company had invested significant capital, structured its operations, developed pricing models, and prepared long-term business projections based on the understanding that the classification had been approved by the tax authority.

The Court held that this conduct gave rise to a legitimate expectation deserving of legal protection.

Although public authorities may correct genuine administrative mistakes, they must do so fairly and prospectively unless legislation expressly authorises retrospective action.

Businesses should not bear the financial consequences of governmental inconsistency where they have acted in good faith upon official representations.

The doctrine therefore serves not merely to protect private interests but also to preserve public confidence in governmental decision-making.

Retrospective Taxation and the Rule of Law

The Court was particularly critical of KRA's attempt to impose tax liabilities retrospectively.

Retrospective taxation creates uncertainty because it alters legal consequences after taxpayers have already arranged their affairs in reliance upon the existing legal position.

The Court observed that certainty is an indispensable component of the rule of law.

Investors require predictable legal and regulatory environments to make commercial decisions. If public authorities could revisit settled tax positions years later, businesses would operate under perpetual uncertainty.

The Court therefore concluded that retrospective application of the revised tariff was:

• irrational;
• unreasonable;
• arbitrary;
• oppressive;
• discriminatory;
• procedurally unfair;
• an abuse of power; and
• inconsistent with constitutional principles.

Although Parliament may expressly legislate with retrospective effect in limited circumstances, administrative agencies cannot ordinarily achieve the same result through discretionary decision-making.

The Wednesbury Principle and Administrative Reasonableness

The Court's reasoning drew extensively from the English decision in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223, one of the foundational authorities on judicial review.

Lord Greene MR explained that a public authority acts unreasonably where it:

• fails to consider relevant matters;
• considers irrelevant matters;
• misdirects itself in law;
• acts arbitrarily; or
• reaches a decision so unreasonable that no reasonable decision-maker could have made it.

This standard has become universally known as Wednesbury unreasonableness.

Applying those principles, the High Court concluded that KRA had exercised its discretion irrationally.

Among other considerations, the authority failed to appreciate:

• the taxpayer's long-standing reliance on the approved tariff;
• the devastating financial consequences of retrospective reassessment;
• the absence of procedural fairness; and
• the broader constitutional obligation to exercise statutory powers reasonably.

The demand for more than Kshs. 1 billion payable within fourteen days was found to exemplify administrative arbitrariness.

Abuse of Power and Proportionality

The Court also examined whether KRA's conduct amounted to an abuse of public power.

In answering that question, the Court considered:

• the abrupt reversal of the tariff classification;
• the retrospective nature of the assessment;
• the enormous financial burden imposed;
• the potential destruction of the applicant's business; and
• the absence of adequate procedural safeguards.

While acknowledging the importance of tax collection in funding public services, the Court held that revenue generation cannot justify unlawful administrative conduct.

Public authorities must pursue legitimate governmental objectives using lawful, proportionate, and procedurally fair means.

The Rule of Law and Constitutional Governance

One of the most frequently cited passages in the judgment concerns the constitutional significance of the rule of law.

The Court observed that Kenya operates under a system of limited government in which every public authority is constrained by law.

Administrative convenience cannot replace legality.

Likewise, certainty of law is indispensable to attracting investment and promoting economic development.

The Court affirmed that judicial review exists to ensure that governmental power remains accountable to constitutional standards rather than administrative preference.

Why the Decision Still Matters Today

Nearly twenty years later, the Keroche decision continues to shape Kenyan jurisprudence.

Its principles extend far beyond tax disputes.

The case is routinely cited in matters involving:

• judicial review;
• legitimate expectation;
• abuse of discretion;
• administrative fairness;
• procedural propriety;
• constitutional governance;
• proportionality;
• irrational administrative action; and
• the rule of law.

The judgment has also influenced courts interpreting Article 47 of the Constitution and the Fair Administrative Action Act, both of which reinforce the constitutional obligation that administrative action be lawful, reasonable, and procedurally fair.

Practical Lessons for Businesses

The decision offers several important lessons for businesses operating in Kenya.

Maintain complete regulatory records. Official approvals, licences, correspondence, and tax assessments may become critical evidence should disputes arise.

Act promptly. Businesses should challenge unlawful administrative decisions without delay to preserve available legal remedies.

Understand your rights. Regulatory agencies possess extensive powers, but those powers are subject to constitutional limitations and judicial oversight.

Seek specialist legal advice. Early legal intervention can often prevent disputes from escalating into significant financial liabilities.

Conclusion

The decision in Keroche Industries Limited v Kenya Revenue Authority & 5 Others remains a cornerstone of Kenyan administrative law and judicial review.

The judgment reaffirmed that governmental authority is not absolute. Public bodies must exercise statutory powers consistently with legality, fairness, rationality, proportionality, and the rule of law.

By applying the enduring principles of Wednesbury reasonableness, the High Court confirmed that retrospective administrative action—particularly where it imposes significant financial liabilities after years of official acquiescence—will rarely withstand judicial scrutiny.

For taxpayers, businesses, investors, and public authorities alike, the decision stands as a powerful reminder that constitutional governance demands more than the lawful collection of revenue. It requires that every exercise of public power be transparent, predictable, fair, and accountable.

How We Can Help

Our Public Law and Tax Disputes practice regularly advises clients on judicial review proceedings, tax assessments, administrative appeals, constitutional petitions, regulatory compliance, and disputes involving the Kenya Revenue Authority and other public bodies.

If your business is facing an unlawful administrative decision, retrospective tax assessment, or regulatory action, our team can provide strategic legal advice and robust representation to protect your rights and commercial interests.

 Disclaimer: This publication is intended for general informational purposes only and should not be construed as legal advice. Readers should seek specific legal advice before acting on any information contained in this article. No lawyer-client relationship is created by virtue of reading this publication.