Case: Sehmi & Another v Tarabana Company Limited & 5 Other (Supreme Court Petition No. E033 of 2023)

Court: Supreme Court of Kenya

Date of Judgment: 11 April 2025

Background

The dispute concerned property that had previously been held under a lease. Before the lease expired, the appellants applied for its extension. The application was received by the relevant government offices, including the Commissioner of Lands, the Director of Physical Planning and the Director of Survey. No objection to the proposed extension was communicated to the appellants. However, the application remained pending for several years.

After the lease expired, the property was subsequently allocated to the 2^nd Respondent. The new allottee eventually transferred the property to the first respondent, who obtained a title over the property. The appellants challenged the validity of the subsequent allocation and title. One of the key arguments raised by the purchaser was that it had acquired the property as a bona fide purchaser for value without notice and should therefore be protected.

The dispute eventually reached the Supreme Court for determination.

Key Issues:

The Supreme Court considered whether a purchaser could rely on the defence of an ‘innocent purchaser for value without notice’ where the title they acquired originated from an unlawful or irregular allocation of public land.

The Court also considered whether previous leaseholders could have a legitimate expectation that their lease would be renewed, after they had applied for renewal before the expiry of the lease.

Court's Decision

The Supreme Court found in favour of the appellants and overturned the decision of the Court of Appeal. The Court held that:

The allocation of the property to the second respondent was procedurally flawed and illegal and therefore, the first respondent could not rely on the doctrine of a ‘bona fide purchaser for value without notice’, because the title acquired was not founded on a valid legal estate.

The court also found that the appellants, by submitting the application for extension to the relevant authorities, had a legitimate expectation that their application for extension of the lease would be considered.

The Supreme Court consequently directed the Chief Land Registrar to cancel the first respondent's title and register the appellants as proprietors.

The Court further ordered that the structures and developments on the property be removed or demolished within six months, subject to the supervision of the relevant authorities.

Court's Reasoning

The Supreme Court considered Section 26 of the Land Registration Act, which provides that a certificate of title is prima facie evidence that the person named as proprietor is the absolute and indefeasible owner. However, the protection is not absolute. A title may be challenged where it is shown that it was acquired through fraud or misrepresentation, or where it was acquired illegally or unprocedurally.

The court on the question of being an innocent purchaser stated that it requires more than simply buying the property. The Court explained that a successful claim of bona fide or innocent purchaser requires, among other things: Innocence or good faith; Purchase for value; and Acquisition of a valid legal estate. The Court held that where the original holder had no valid legal estate to transfer, a subsequent purchaser cannot rely on lack of notice of the illegality to obtain protection under the innocent purchaser doctrine.

The Court also addressed the appellants' expectation that their lease would be extended. The Court explained that legitimate expectation may arise where a public authority has made a clear and unambiguous representation, the expectation is reasonable, and the representation was made by an authority competent to make it. In this case, the appellants had made their application for extension before the lease expired. Their application had been received and remained pending for a prolonged period without a communicated decision. The Court therefore found that they had a legitimate expectation that their application would be fairly considered and determined.

Implications of the judgement for Property Buyers

 The decision is a reminder that purchasing land should involve more than simply checking whether the seller has a title deed.

i. Before purchasing property, a buyer should consider obtaining an official search and verifying the information contained in the land records.

ii.  A physical inspection can reveal important information that may not appear on a title search.

iii. The innocent purchaser doctrine cannot be used to protect a purchaser where the title itself originated from an illegal or irregular allocation of public land.

Land transactions often involve significant financial investments. Professional legal advice can help a buyer identify potential problems before money changes hands.

Conclusion

The Supreme Court's decision in Sehmi & Another v Tarabana Company Limited & 5 Others is an important reminder for anyone purchasing land in Kenya. Proper due diligence before purchasing property can help identify problems before they become expensive legal disputes.