1. Introduction: Understanding Charges and Securities Over Immovable Property
A charge or security interest over immovable property is a legal mechanism that allows a lender (chargee) to secure a loan or obligation using real estate as collateral. If the borrower (charger) defaults, the lender has the right to enforce the security and recover the debt through legal means.
Under Section 2 of the Land Act, 2012, a charge is “an interest in land securing the payment of money or money’s worth or the fulfilment of any condition.” Unlike a mortgage, a charge does not transfer ownership but grants the lender a proprietary interest in the property.
2. What Constitutes Immovable Property in Kenya?
Immovable property refers to assets that cannot be moved without altering their fundamental nature. In Kenya, immovable property includes:
- Land (both freehold and leasehold)
- Buildings and structures permanently affixed to land
- Fixtures that form part of the land
- Interests in land, such as leases, easements, and rights of occupancy
These are governed under Section 3 of the Interpretation and General Provisions Act, alongside the Land Act, 2012 and the Land Registration Act, 2012.
3. Legal Framework Governing Securities Over Immovable Property
The process of creating and perfecting a charge over immovable property in Kenya is governed by several statutes:
- Land Act, 2012 – Governs the creation, nature, and remedies of charges over land.
- Land Registration Act, 2012 – Prescribes registration procedures and the effect of registered charges.
- Stamp Duty Act, Cap. 480 – Governs the stamping of instruments affecting land.
- Companies Act, 2015 – Mandates registration of charges created by companies.
- Matrimonial Property Act, 2013 – Provides for spousal consent where applicable.
- Land Control Act, Cap. 302 – Requires Land Control Board consent for transactions involving agricultural land.
4. Preliminary Consents Required Before Perfecting a Charge
Before a charge can be validly created and registered, certain statutory consents must be obtained:
- Land Control Board (LCB) Consent: Required under Section 6 of the Land Control Act for any transaction involving agricultural land. Failure to obtain consent renders the transaction null and void.
- Spousal Consent: Under Section 12 of the Matrimonial Property Act, spousal consent is mandatory when dealing with matrimonial property. A spousal consent form must be signed and lodged with the charge instrument.
- Lessor’s Consent: For leasehold properties, the head lessor (e.g., the Government or county government) may require consent before the leasehold interest can be charged. This involves getting the land rates and the land rent clearance certificates.
5. Step-by-Step Process of Perfecting Securities Over Immovable Property
Step 1: Conducting an Official Search: Verify ownership and identify existing encumbrances (e.g., mortgages, liens) via a search at the Lands Registry
Step 2: Drafting and Execution of the Charge Instrument: A valid charge must be prepared under Form LRA 12 (prescribed under the Land Registration Act). It must outline:
- Terms of the charge
- Amount secured
- Property description
- Interest rate
- Remedies on default
The charge must be executed by both parties and witnessed by independent witnesses.
Step 3: Obtaining Consents and Clearances: Obtain the relevant consents and clearances from the relevant institution depending on the nature of the property.
Step 4 Stamp Duty Assessment and Payment: Required under the Stamp Duty Act before registration. Charged at 0.1% of the amount secured. Payment is done through the iTax platform and receipted accordingly.
Step 5: Registration at the Lands Registry
The following documents are lodged:
- Stamped charge instrument
- Original title deed
- Spousal/Land Control Board consent (if applicable)
- Application form (Form LRA 9)
Once registered, the charge is entered into the land register, and the encumbrance is noted on the title.
Step 6: Registration at the Companies Registry (for Corporate Borrowers)
- Corporate borrowers must file the charge at the Companies Registry under Section 885 of the Companies Act, 2015. Must be done within 30 days of creating the charge.
- For dematerialised shares borrowers, they must register share pledges with the Central Depository and Settlement Corporation.
- Required documents:
- Executed charge instrument
- Form CR25
- Copy of the company’s certificate of incorporation
- Payment of the prescribed fee (KES 2,000 to KES 14,000, depending on the amount secured)
Failure to comply renders the charge void against a liquidator, administrator, or creditor.
Step 7: Digital Lodgment via Ardhisasa (for Nairobi and Digitalized Counties)
Where land is listed on the Ardhisasa platform, all applications, consents, and registrations must be done online. Both borrower and lender must create profiles on the portal. Supporting documents are uploaded, and the workflow is monitored digitally.
6. Effect of Registration and Perfection
Once a charge is registered:
- It becomes a legal interest and takes priority over subsequent unregistered or later-registered charges.
- The lender has enforceable rights to the land if the borrower defaults.
- The title is endorsed with a Charge Entry detailing the charge particulars.
- The earliest registered charge takes precedence over subsequent claims (First-in-time rule).
7. Enforcement of a Charge Upon Default
The Land Act, 2012, provides detailed procedures for enforcement, which include:
- Statutory Notice: Issued under Section 90, giving 90 days to remedy the default.
- Further Notice: After the 90 days, a 40-day notice is given under Section 96(2) before exercising the power of sale.
- Valuation: A forced sale valuation must be conducted under Section 97 before selling the property.
- Remedies
- Sale by private treaty or auction
- Appointment of a receiver to manage the property income
- Leasing the land
- Taking possession
Courts strictly scrutinise these processes, especially under public interest and borrower protection provisions.
8. Common Pitfalls and Compliance Issues
- Failure to obtain Land Control Board consent on time.
- Omission of spousal consent for matrimonial property.
- Late registration at the Companies Registry.
- Not paying stamp duty before registration.
- Ignoring digital transition requirements under Ardhisasa.
9. Conclusion: Importance of Legal Precision
Perfecting securities over immovable property in Kenya demands legal diligence, compliance with statutory procedures and timelines, and timely registration. The process protects both lenders and borrowers by ensuring transparency, prioritisation of interests, and enforceability of obligations.
Given the complexity and risks of invalid perfection (especially in matrimonial and agricultural contexts), parties are strongly advised to engage legal counsel with experience in land law, property transactions, and secured lending.
How Njaga & Co Advocates Can Help
At Njaga & Co Advocates LLP’s Property & Real Estate Law, we streamline the process of securing and perfecting charges over immovable property, ensuring full compliance, enforceability, and risk mitigation.
- Drafting & Registration of Charges
- Obtaining Necessary Consents (LCB, Spousal, Lessor)
- Navigating Ardhisasa & Digital Transactions
- Enforcement & Debt Recovery Strategies
Contact us today for professional assistance in securing and perfecting your property rights and financial interests.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified advocate for personalized legal guidance.
