The Doctrine of Legitimate Expectation and Property Rights in Kenya – Insights from Civil Appeal 463 of 2019: Tarabana Company Limited v Sehmi & 7 Others
The doctrine of legitimate expectation is a fundamental principle of administrative law in Kenya, rooted in Article 47 of the Constitution and reinforced by the Fair Administrative Action Act, 2015. It mandates that public authorities act lawfully, reasonably, and with procedural fairness when making decisions that affect individuals' rights, particularly in matters concerning property. The case of Tarabana Company Limited v Sehmi & 7 others (Civil Appeal 463 of 2019) [2021] KECA 76 (KLR), decided by the Court of Appeal on October 8, 2021, provides a significant examination of this doctrine in the context of leasehold title renewal. This case, which was later appealed to the Supreme Court as Petition No. E033 of 2023, highlights the tension between the rights of leaseholders, the protections afforded to bona fide purchasers, and the obligations of public authorities in land administration.
The dispute centered on a leasehold property, L.R. No. 209/2759/9, located in Nairobi’s Ngara area. The property was originally leased to the 1st to 3rd respondents (the Sehmi brothers) in 1968 for a 59-year term, expiring on October 1, 2001. The respondents claimed they applied for a lease extension before its expiry, but the government failed to process their application and instead allocated the land to the 4th respondent (Rospatech Ltd) in 2009, who subsequently sold it to the appellant (Tarabana Company Limited) in 2014. The Court of Appeal’s ruling, which overturned the Environment and Land Court’s (ELC) decision, provides critical insights into the application of the doctrine of legitimate expectation, the sanctity of title under Kenyan law, and the balance between public and private interests in land administration.
In this piece, we analyzes the Court of Appeal’s judgment, its reasoning, and its implications for leasehold title renewal in Kenya. It also contrasts the decision with the Supreme Court’s later ruling, which emphasized the doctrine of legitimate expectation, to provide a comprehensive understanding of the legal principles at play.
The dispute originated from a leasehold title over L.R. No. 209/2759/9, granted to Harcharan Singh Sehmi, Harbashan Singh Sehmi, and Jaswaran Sehmi (the 1st to 3rd respondents) in 1968 for a term of 59 years, commencing 1st October 1942, and expiring on 1st October 2001. The respondents purchased the property from Elizabeth Ann Maria Estreta Rodrigues for Kshs. 25,000 and were registered as tenants in common. Before the lease expired, the respondents claimed they applied for an extension on 13th July 13, 2001, and provided evidence of correspondence with the Commissioner of Lands, who sought input from the Director of City Planning and Architecture and the Director of Survey. Approvals for the extension were received from these directors in December 2001 and November 2007, respectively, but the lease extension was never formalized, and the relevant lands office file went missing.
In 2009, the government allocated the property to Rospatech Ltd (the 4th respondent) via a letter of allotment, despite the respondents’ pending application. Rospatech Ltd then sold the property to Tarabana Company Limited (the appellant) in 2014, who registered the title and developed a multi-storied building, financed by a Kshs. 61 million loan from Prime Bank Ltd. The respondents challenged the allocation and transfer, alleging fraud and procedural irregularities, and sought to have the title restored to them, along with damages and an injunction against the appellant and Rospatech Ltd. The ELC, in a judgment dated 22nd July 2019, ruled in favor of the respondents, finding that they had initiated the lease renewal process before expiry and that the allocation to Rospatech Ltd was irregular. The court ordered the cancellation of Tarabana’s title, restoration of the respondents as lessees, and eviction of the appellant, among other reliefs. Dissatisfied, Tarabana appealed to the Court of Appeal, raising ten grounds, primarily arguing that it was a bona fide purchaser for value without notice and that the ELC lacked jurisdiction to divest it of its title.
The Court of Appeal, presided over by Judges Asike-Makhandia, Pauline Nyamweya, and Jessie Lesiit, addressed three key issues:
1. Whether Tarabana was a bona fide purchaser for value without notice.
2. Whether the ELC had the power to divest Tarabana of its ownership rights and vest them in the respondents.
3. Whether Tarabana proved its counterclaim against the respondents.
1. Bona Fide Purchaser Status
The Court of Appeal found that Tarabana was a bona fide purchaser for value without notice. The court noted that the respondents’ lease expired on 1st October 2001, and, despite their application for renewal, no evidence was presented to show that the government had formally extended the lease. Consequently, the property reverted to the government upon expiry, as per the operation of law. The court further found that the allocation to Rospatech Ltd in 2009 was irregular, as it did not follow the prescribed process under the Government Lands Act (GLA), which required public auctions for town plots (Sections 12–14). Evidence from the National Land Commission and police investigations revealed that the allotment letter to Rospatech was signed by an unauthorized officer, and the deed plan incorrectly indicated an “extension of lease” rather than a “new grant.”
However, the court emphasized that no evidence linked Tarabana to the irregular process by which Rospatech acquired the title. Under Section 26(1) of the Land Registration Act, 2012 (LRA), a certificate of title is prima facie evidence of absolute and indefeasible ownership, except where fraud, misrepresentation, or an illegal or corrupt process is proven, and the titleholder is implicated. The court held that Tarabana, having purchased the property in 2014 and registered it without knowledge of the irregularities, was protected as an innocent purchaser. The ELC’s finding that Tarabana should have been cautious due to the respondents’ persistent claims was deemed insufficient to override the statutory protection under Section 26.
2. ELC’s Power to Divest Ownership
The Court of Appeal ruled that the ELC erred in divesting Tarabana of its title and vesting it in the respondents. Since the respondents’ lease had expired in 2001 and no formal extension was granted, they had no legal interest in the property after that date. The court acknowledged that the respondents had a legitimate expectation that their renewal application would be processed fairly, but the government’s failure to act did not confer a continuing legal right to the property. The allocation to Rospatech, though irregular, occurred after the lease’s expiry, and Tarabana’s subsequent title was protected under the LRA. The court held that the ELC lacked jurisdiction to unilaterally renew the lease or transfer ownership, as such powers rested with the National Land Commission (NLC) under the Land Act, 2012.
3. The Appellant’s Counterclaim
Tarabana’s counterclaim sought a declaration of rightful ownership, a permanent injunction against the respondents, and costs. While the court found that Tarabana was the rightful owner as a bona fide purchaser, it dismissed the counterclaim for an injunction and costs, as no evidence was presented to substantiate claims of harassment by the respondents. The court noted that Tarabana’s director provided no testimony regarding specific incidents of interference, rendering the counterclaim partially unproven.
The Court of Appeal allowed the appeal, set aside the ELC’s orders, and awarded costs to Tarabana, to be borne by the 1st and 3rd respondents (noting that the appeal against the 2nd respondent abated due to his death). The court affirmed Tarabana’s title but did not disturb the ELC’s award of Kshs. 25 million in damages to the respondents for the loss of structures and developments on the property, as no cross-appeal was filed on this issue.
DOCTRINE OF LEGITIMATE EXPECTATION
The earlier document referencing Supreme Court Petition No. E033 of 2023 indicates that the Supreme Court overturned the Court of Appeal’s decision, emphasizing the doctrine of legitimate expectation. The Supreme Court likely found that the respondents’ timely application for lease renewal in 2001, coupled with approvals from relevant authorities, created a legitimate expectation that their application would be processed fairly and promptly. The government’s failure to act, followed by the irregular allocation to Rospatech, violated principles of procedural fairness under Article 47 of the Constitution and the Fair Administrative Action Act, 2015.
The Supreme Court’s ruling, as described in the earlier document, articulated key principles of legitimate expectation in leasehold renewal:
1. Timely Consideration: Lessees who apply for renewal before expiry have a right to prompt processing of their application.
2. Procedural Fairness: The renewal process must be transparent and objective.
3. Right to Reasons: If a renewal is declined, written reasons must be provided.
4. Right to Review or Appeal: Lessees must have access to administrative or judicial redress for unfair treatment.
These principles underscore that public authorities, such as the NLC and the Commissioner of Lands, must adhere to due process in land administration. The Supreme Court’s decision likely found that the respondents’ legitimate expectation was breached, rendering the subsequent allocation to Rospatech and transfer to Tarabana unlawful.
Implications for Leasehold Title Renewal in Kenya
The Tarabana case, viewed through both the Court of Appeal and Supreme Court lenses, has significant implications for leasehold title renewal and land administration in Kenya:
a) Protection of Bona Fide Purchasers vs. Legitimate Expectation:
The Court of Appeal prioritized the statutory protection of indefeasible title under Section 26 of the LRA for bona fide purchasers like Tarabana. However, the Supreme Court’s reversal suggests that the doctrine of legitimate expectation may override such protections when public authorities fail to uphold procedural fairness. This creates a delicate balance between safeguarding property transactions and protecting lessees’ rights.
b) Role of Public Authorities:
The case highlights systemic issues in land administration, such as missing files, unauthorized allotments, and lack of transparency. The NLC’s inaction in investigating the irregular allocation to Rospatech underscores the need for robust oversight and accountability in land management.
c) Due Process in Lease Renewal:
The Supreme Court’s emphasis on timely consideration, procedural fairness, and access to reasons reinforces the legal framework under the Land Act, 2012, and the Land (Extension and Renewal of Leases) Regulations, 2017. Lessees must be proactive in initiating renewals, but authorities are equally obligated to process applications diligently.
d) Practical Guidance for Leaseholders:
- Monitor Lease Terms: Begin renewal preparations at least five years before expiry.
- Ensure Compliance: Pay land rent and rates and adhere to lease covenants.
- Maintain Records: Keep all lease-related documents organized.
- Seek Legal Support: Engage legal counsel to navigate disputes or delays.
Conclusion
Civil Appeal 463 of 2019 illustrates the complexities of leasehold title renewal in Kenya, where competing interests of lessees, bona fide purchasers, and public authorities intersect. The Court of Appeal’s decision prioritized the sanctity of title for an innocent purchaser, but the Supreme Court’s subsequent ruling underscored the primacy of procedural fairness and legitimate expectation in administrative actions. Together, these judgments highlight the need for leaseholders to be vigilant in managing their leases and for public authorities to uphold transparency and accountability in land administration.
For leaseholders, particularly in urban areas like Nairobi, early engagement, compliance with statutory requirements, and legal support are critical to securing property rights. For further assistance with lease renewals, title audits, or land disputes, contact us at info@lawguide.co.ke or +254 716 808 104