Legal Procedure for Registration and Transfer of a Charge in Kenya

Registration of a Charge

The legal procedure to be followed during the registration of any Instrument creating a Charge is as stipulated below: –

1.       Conduct of an official search over the particulars of the title to the property to be charged to ascertain ownership and the nature of any encumbrances that may exist over the property.
2.       Drawing up of the Instrument of Charge.
3.       Execution of the Charge. The Charge is executed by both the Chargor (the person who owns the property being charged) and the Chargee (the lender in whose favour the Charge is created). In certain instances, there will be 3 signatories to the Charge as is the case where the Chargor (the owner of the property over which a Charge is to be created) and the person to whom the funds are lent (borrower) are distinct persons and are hence required to execute the charge together with the Chargee.
4.       Obtaining all the necessary consents and clearances to enable the registration of the Charge. In this regard, where land is held under leasehold tenure then the consent of the Lessor to the Charge is required together with a Land Rent Clearance Certificate. Where the Charge is over agricultural land then the Consent of the Land Control Board is required. Where the land is situated within a municipality and land rates are payable then a Land Rates Clearance Certificate would be required to be issued by the Local Authority within which the property is located.
5.       Assessment of the instrument to stamp duty and payment of the assessed stamp duty. Presently stamp duty payable is 0.1% of the lent amount.
6.       Lodging of the Charge at the Lands Registry for stamping.
7.       Registration of the charge at the Lands registry upon payment of a standard registration fee. The Charge is accompanied by the original document of Title to the property to be charged to enable the making of an endorsement on the said title document indicating the existence of the Charge as an encumbrance over the property.

 

Procedure with regards to Transfer of a Charge

the procedure to be followed in the transfer of an instrument creating a charge entails:

1.       Conduct of an official search over the particulars of the title of the property to be charged so as to ascertain ownership and the nature of any other encumbrances that may exist over the property.
2.       Drawing up and execution of a sale agreement for the property.
3.       Drawing up and execution of the Instrument of Transfer. The Transfer is executed by both the Transferor (the person who owns the property and is selling it) and the Transferee (the person purchasing the property)
4.       Assessment of the instrument of Transfer to stamp duty and payment of assessed stamp duty. Assessment of a Transfer to determine the stamp duty payable to the Kenya Revenue Authority on the Transfer is done by a Government Land Valuer at the Lands Registry. Stamp duty payable on the transfer of real property is computed at either 4% for land situated within a municipality or 2% for property located outside a municipality. Both parties to the transaction require a PIN.
5.       Lodging of the Instrument of Transfer at the Lands Registry for stamping.
6.       Registration of the Transfer upon payment of a standard fee. When lodging the Instrument of Transfer for registration the same should be accompanied by the original documents of Title to the property.

Under the Registration of Lands Act the old Title Deed of the property is delivered up and cancelled and a new Title in the name of the new proprietor issued. In the case of the Registration of Titles Act and the Government Lands Act the existing document of title is duly endorsed with a memorandum of the transfer by the Registrar of Lands clearly indicating that the property has been transferred to the Transferee.

 

Reasons why it is more advisable to form a Limited Liability Partnership

a. tax benefits- as with a general partnership, the profits and losses in a limited partnership flow through the business to the partners, all of whom are taxed on their personal income tax returns. The difference is that the limited partners in the relationship get to share in the profits and losses, but they do not have to participate in the business itself.

b. liability limits-a limited partner’s liability for the partnership’s debt is limited to the amount of money or property that individual partner contributed to the partnership. This is not true of the general partnership, where any money or property contributed becomes an asset of all the partners.

c. the general partners take charge- in a limited partnership, the general partners deal with the daily operations and responsibilities and don’t need to consult the limited partners for most business decisions.

d. no turnover issues- limited partners can be replaced or leave without dissolving the limited partnership.

e. less paperwork- creating a limited partnership, like a general partnership, requires less paperwork than forming a corporation.

Transmission of Shares in Succession Law

Transmission refers to the automatic transfer of ownership of a shareholder’s share by operation of law upon the said shareholder’s demise or bankruptcy. Transmission of shares safeguards the continuity of membership in a company which fortifies the sustainability of the day-to-day running of a company as it mitigates the possibility of disruptive withdrawal of shareholders.

The Law

- Section 497 of the Companies Act provides that a company may only register a transfer of shares if a proper document of transfer(transfer of shares form) has been delivered to it, failure to which the said transfer is rendered void.

- The succession of shares of a deceased shareholder is regulated by the Law of Succession Act Cap 160 and the Companies Act No. 17 of 2015.

Documents required for Transmission of Shares.

The following documents should be lodged at the Companies registry in order to effect the transfer of shares by transmission to a beneficiary: -

• Certified copy of the Death certificate of the deceased shareholder;
• Certified copy of Identification card or surrender form of the deceased shareholder.
• Certified copy of the grant of letters of administration in the event the shareholder died intestate or certified copy grant of probate in the event the shareholder died testate;
• Certified copy of Certificate of confirmation of Grant from the High Court.
• Certified copy of the Identity card of the personal representative and/or administrator;
• Certified copy of the Identity card of the Beneficiary;
• Original share certificates of the subject companies; and
• Duly filled transfer of shares form.

PROCEDURE FOR OBTAINING CHANGE OF USE OF PROPERTY IN KENYA

 

The power to control land use and development in Kenya is vested in the County Governments and therefore the owner or the legal entity of any property, who intends to develop his/her land for any purpose other than that earmarked in the approved Master Plan, will make an application, along with relevant documents, to the respective County Governments’ Department of Physical Planning for consideration through a registered physical planner.

PROCEDURE

The process includes:

 

1.  Placing an advertisement and getting recommendations from members of the public and line- ministries, which are obtained by the County Government. The application is often combined with one for a construction permit.

2.  The investor, through a registered physical planner will make application for the change of user through filling in PPA 1 form, which must be duly signed by the physical planner.

3.  The planner and the investor will then publish public notices regarding the proposed change of user in two daily newspapers, inviting objections from the public within a period of not less than fourteen (14) days. A site notice will also be placed on the site indicating intention to change its use within the same duration.

4.  Planning brief/report for the site is prepared by the physical planner. The process of preparing and implementing a planning brief/report provides a framework for collecting information about a site, and investigating and evaluating different interests in it. The brief will explain why the change of use is in line with the policy and why it will not have any negative effects on the land and the neighboring properties. The process could take from one day to 7days depending on the scale of the project

5.  The requisite fee will be paid to the respective County Governments and the receipt annexed to the planning brief/report prepared by the physical planner.

6.  The brief will then be submitted to the County Government's Department of Physical Planning for approval.

7.  The County Government then receives submissions from the general public on any opposition to the change of use. This process could take up to 14 working days:-

8.  The County Government will then review the Change of Use proposal/brief with the public objections received if any and will pass a resolution, recording reasons, regarding its consideration or non-consideration for the change. This process takes a minimum of 20 days and could extend depending on the requirements the County Government wants fulfilled.

9.  The authority shall, if it finds that the changes sought are relevant to planning principles and are in public interest and are not in contravention to any other statute, give permission for the same by issuing a PPA2 form.

REQUIREMENTS

In summary, below are the requirements for application for a change of user.

 

·       Two dully filled P.P.A 1 forms in triplicate submitted and signed by a registered physical Planner

·       Planning Brief prepared by a Registered Physical Planner (signed accordingly)

·       Ownership documents (Title Deeds)

·       Comprehensive Location Plan

·       Advertisement of proposal on: a) Two local dailies, b) On site

·       Application fee receipt

·       Latest Rates payment receipts