The Business Laws (Amendment) Act came into force on 18th March 2020. The law has amended various statutes in order to facilitate the ease of doing business in Kenya. This article seeks to analyze the practicality of the amendments and how they are likely to impact the Real Estate and Commercial Sectors.
- The Use and Recognition of Electronic Signatures.
- Section 3(6) of the Law of Contract Act has been amended to provide that a document may be executed, either physically or by an advanced electronic signature.
- The Registration of Documents Act and The Land Registration Act have also been amended to allow for electronic signatures to be affixed on documents registered under both regimes.
- Section 4 of the Registration of Documents Act has been amended to effect the filing of the documents both electronically and physically.
Indeed, the use of electronic signatures facilitates the efficiency of business transactions as it saves on time and expenses in dispatching documents for execution and dispenses with the need for physical presence which is especially instrumental in the wake of the Corona Virus Pandemic.
However, the use of electronic signatures is coupled with certain foreseeable risk factors:
- The risk of fraudulent or unauthorized use through hacking. This calls for risk mitigation strategies to be employed by all parties concerned such as passwords, firewalls or the use of encryption codes to prevent alteration of documents.
- Further, section 45 of the Land Registration Act, which provides for verification of signatures by the Registrar, a public officer or any other person as prescribed by law, has not been amended to dispense with the requirement for the physical attendance of the parties in instances where their signatures need to be verified.
By retaining this provision, it is counter intuitive as it still requires physical appearance of signatories before the officials required to witness their signatures which causes implementation challenges for e-signatures.
- Electronic Filing of Documents
Section 3 of The Registration of Documents Act has been amended to provide that the Principal and Coast Registries may be maintained in electronic form.
Section 4 of the Act has also been amended to allow documents registered under the Act such as powers of attorney to be filed electronically. This gives legal backing to the initiative by the Ministry of Lands and Physical Planning to digitize land records to ease the property registration process.
- Electronic Stamping of Documents
Sections 2 and 119 of The Stamp Duty Act (CAP 480) have been amended to provide for electronic stamping. This amendment is useful in providing an alternative means of stamping documents after assessment for Stamp Duty payment, other than physically franking them as has been the normal practice.
There have been instances in the past, where franking of documents has been delayed due to malfunctioning of the requisite franking machines. Furthermore, the number of franking machines is limited with, some district registries such as Ngong and Thika not having the machines.
The use of electronic stamps ameliorates this challenge in the stamping of documents and promote efficiency in the land registration processes.
- Electronic Signing and Sealing of Survey Plans, Deed Plans and Other Documents under the Survey Act.
Sections 2, 5 and 32 of the Survey Act Cap 299 Laws of Kenya, have been amended to allow for electronic processing, signing, sealing and general authentication of survey plans, deed plans and other documents under the Survey Act such as letters of authority from the Director of Surveys to facilitate entry upon land for purposes of making or supervising any survey or resurvey.
Further, section 30(1) of the Survey Act as amended by the Business Laws Amendment Act allows a Surveyor who executes a survey in accordance with the Act to send all the plans, field notes and computations to the Director of Surveys by electronic means.
From the foregoing amendments, it is evident that technology is being employed as a mechanism to facilitate the ease of doing business in the Surveyors’ Sector.
- Recognition of Electronic Title Deeds
The Kenya Information and Communication Act, previously exempted recognition of electronic signatures on documents of title. This exemption has been amended by the deletion of section 83 B 1 (c) of the Act. Consequently, title deeds may be signed electronically and may be availed or retained by the Lands Registry in electronic form.
As legal practitioners, we are of the opinion that the following aspects will need to be addressed to effectively implement this aspect:
- The completion of digitization of the land’s records through the ongoing land validation process;
- Setting up mechanisms to ensure that incidences of fraud do not arise; and
- The adoption of the Land Registration (Electronic Land Transactions) Regulations.
- Dispensation of some Completion documents such as Land Rent and Rates Clearance Certificates and Consents
The Business Law Amendment Act has deleted Sections 38 and 39 of the Land Registration Act. These sections provided that Land Rates and Land Rent Clearance Certificates together with consents from the relevant authorities are requisite completion documents for registration of interests in land depending on whether the property is leasehold or freehold.
The deletion of the foregoing provisions implies that the Rates and Rent Clearance Certificates together with the necessary consents are no longer a requirement for registration of various interests in land.
However, it is noteworthy that the following discrepancies remain under the Land Registration Act;
- While the commissioner’s consent has been dispensed with, the Land Control Act is still in force. Therefore, any disposition of interest in freehold property, is still subject to obtaining the relevant Land Control Board’s Consent.
- Section 55(b) of the Land Registration Act has not been amended. This section provides that where it is expressly stated in a lease, that the lessee shall not sublet, transfer or charge without consent of the lessor, then the Registrar shall not proceed with any dealings except where the consent is duly issued.
Therefore, in instances where the property is a sublease and there is a management company, the lessor’s and management company’s consent need to be procured.
- Also, section 56 (c) of the Land Registration Act is still in place, thus the land rent clearance certificate and the consent to charge has to be presented to the Registrar before registering a charge over leasehold property. This implies that the same continues to be a requirement for registration.
- Although the Law Society Conditions of Sale 2015 is not binding, it is a persuasive document in the drafting of Agreements for Sale. Condition 8.4.1(c) and (d) provides as part of the vendor’s obligations, to provide original land rent and rates payment receipts over the property for the preceding 3 years as part of the completion documents.
- Therefore, there is a grey area, as to whether these documents have been entirely exempted under law for the disposition of interests in land.
- Also, noting that payment of outstanding land rates under Section 28 (g) of the Land Registration Act is an overriding interest, banks and other financial institutions may have their interests in charged properties compromised where hefty amounts of rent and rates remain unpaid.
- Dispensation of Requirement of a Company Seal in Authentication of Company Documents
The provisions on maintaining and affixing of a common seal for execution and authentication of documents by companies under Sections 35, 37, 38, 39, 42 and 43 of the Companies Act No 17 of 2015, have been deleted. From the foregoing, Companies shall not be required under any circumstance to maintain a company seal. This will enable companies to save up on the costs of preparation of seals and utilize the funds in other administrative functions and also minimize the cases of erroneous sealing of documents where the seals do not match the company names.
In conclusion, we opine that the foregoing amendments have the capacity to ease the process by which business is transacted in the country making it more efficient and cost-effective which is especially useful in the wake of the Covid-19 Pandemic.
Notably however, the delay in the enactment of the Land Registration (Electronic Land Transactions) Regulations creates a lacuna as there are currently no regulations in force to guide the implementation of the amendments allowing for electronic signatures and electronic filing of documents.
In light of the foregoing, it is recommended that clear regulations are enacted to provide guidelines on how electronic processing, filing, execution and stamping of documents is to be effected and that further the loopholes outlined hereinabove are addressed by harmonizing provisions of the relevant laws to ensure seamless implementation of the amendments.
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