BY Nigel Shaw , Brenda Matu AND Azizah Timimi
Supreme Court of Kenya judgment: Due diligence crucial on potential property investments
In the recent case of Torino Enterprises Limited v Attorney General (Petition 5 (E006) of 2022), the Supreme Court (“court”) issued a judgment which could impact land acquisition procedures in Kenya. The court upheld its previous decision in the Dina Management case (as discussed here) affecting property investors and stakeholders in Kenya, and adds to the precedents in relation to due diligence in property transactions.
The court declared the Nairobi County which had replaced the defunct Nairobi City Council as the rightful owner of the disputed 90-acre land in the case involving Torino Enterprises Limited and the Department of Defence. Torino Enterprises Limited claimed to have acquired the suit property from Renton Company Limited after the certificate of title was issued to them in April 2001. Renton Company Limited had initially acquired the suit property via an allotment letter issued by the Commissioner of Lands. However, the court ruled that an allotment letter did not confer any interest in the land to Renton Company Limited and therefore did not prove legal ownership.
The court reiterated the appellate court’s determination, that the suit property was in fact not unalienated government land but rather private land and therefore, the Commissioner of Lands lacked the power to further alienate or allocate it to a third party. Emphasising the significance of land registration, the court also noted that upon the initial alienation of the land to Kayole Estates Limited in 1964, the suit property was then converted from unalienated government land to private freehold land. Despite the Department of Defence's occupation since 1986, they had failed to substantiate legal ownership, even with long-term occupancy authorised by the defunct Nairobi City Council and the Commissioner of Lands.
A key takeaway in this case is the significance of conducting due diligence before buying land. The court held that Torino Enterprises Limited did in fact fail to conduct sufficient due diligence on the property prior to the purchase. Since the Department of Defence was already occupying the property at the time Torino Enterprises Limited purchased the property, they could not rely on the doctrine of an “innocent purchaser for value”.
The case emphasises how crucial it is to conduct thorough due diligence, including undertaking site visits on the property, prior to any potential property acquisition in Kenya.
ENS | Kenya | Managing Partner
ENS | Kenya | Senior Associate
ENS | Kenya | Pupil