Turbo Highway Eldoret Limited & another v Bank of Africa Kenya Limited; Kenol Kobil Ltd (Applicant) (Environment & Land Case 364 of 2015) [2017] KEELC 3868 (KLR)
The bottom line
#A Kenyan court ruled that a bank selling repossessed land must first offer it to the leaseholder at a fair valuation, though the sale itself was lawful.
What this practically means
#Executive summary
#Key legal issues
#Whether the lessor required the lessee's consent before charging the property
No - the lease contained no such clause, so the property was properly charged to the Bank
The court examined the lease instrument and found no term obliging the lessor to inform or obtain the lessee's consent before charging. If the parties had intended such a restriction, it would have been stated expressly in the lease. In the absence of such a clause, the argument that the charge was irregular for want of consent fails.
Priority of the registered lease over the later registered charge
The lease, registered first in time, took priority and the Bank is deemed to have had notice of it, but priority did not curtail the statutory power of sale
Applying sections 31 and 42 of the Registered Land Act (Cap 300), interests rank by order of registration and a later proprietor is deemed to have notice of earlier entries. The lease was registered in 2007, the charge in 2011. The purchaser would therefore buy subject to the lease encumbrance, but the Bank retained its right to sell on default.
Effect of the lessee's first right of purchase on the chargee's power of sale
The statutory power of sale is modified: the Bank must first offer the property to the lessee on the terms of Clause 6 before auctioning it
Clause 6 gave the lessee a first right to purchase at a price assessed by three independent valuers, and barred the lessor from offering to any other person without first offering to the lessee. Since the Bank took with notice of the lease, its power of sale is exercised subject to that right; only if the lessee declines or fails to accept may the Bank sell by auction or to others.
Legal principles established
#- Under sections 31 and 42 of the Registered Land Act (Cap 300), interests appearing in the register have priority according to the order of presentation, and a later proprietor is deemed to have notice of earlier registered entries
- Where a lease contains a right of first purchase, the chargee's statutory power of sale must be exercised so as to honour that right
Court orders
#- 1.The Bank, in disposing of the property in exercise of its statutory power of sale, to first offer the land parcel Eldoret Municipality/Block 12/131 to the applicant in the same terms as provided for in clause 6 of the lease
- 2.If the applicant does not exercise its right of purchase within the time stipulated in Clause 6 of the lease, the Bank be at liberty to offer the suit property for sale in the manner stipulated by law in exercise of its statutory power of sale
- 3.Each party to bear his/her own costs
- Jurisdiction invoked
- Original jurisdiction of the Environment and Land Court over land matters (suit transferred from Eldoret ELC)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Turbo Highway Eldoret Limited & another v Bank of Africa Kenya Limited; Kenol Kobil Ltd (Applicant) (Environment & Land Case 364 of 2015) [2017] KEELC 3868 (KLR)", Case Analysis (2017). Not stated in the excerpt (application dated 6 May 2016 in the suit commenced 12 August 2015). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/3868/eng@2017-03-07
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.