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Kenya: Overstepping Boundaries – Court of Appeal Reverses ELC Decision in Property Foreclosure Dispute

13 May 2024
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Introduction

The Court of Appeal in Civil Appeal No. E055 of 2022 – Bank Of Africa Kenya Limited & 1 Other v TSS Investment  Limited & 2 Others has determined that the Environment and Land Court (ELC) has no jurisdiction to hear and determine disputes over mortgages, charges, or any contract that is not connected to or incidental to the “use” of land. 

TSS Investment Limited defaulted on a loan secured by two parcels of land, leading the Bank of Africa (the Bank) to initiate foreclosure proceedings, with Garam Investments Auctioneers facilitating the auction. During this process, tenants claiming long-term tenancies filed a lawsuit to halt the sale, arguing that they were not notified about the charge and that the sale would disrupt their businesses, despite their tenancy agreements not being officially registered. 

The ELC initially granted an injunction, pausing the auction. However, the Bank challenged this decision at the Court of Appeal, arguing that the ELC overstepped its jurisdiction which is primarily concerned with land use and environmental issues, not financial securities.

Finding

Facing this jurisdictional challenge, the Court of Appeal, asserted that such disputes fall under the purview of the appropriate civil courts, which handle cases involving the enforcement of financial securities.

The Court of Appeal concluded that the ELC did not have the jurisdiction to handle the case as it primarily involved the enforcement of financial securities (charges) rather than direct issues of land “use”, environment, or land occupation which are within the ELC’s domain. The Court emphasized that such financial matters fall under the jurisdiction of civil courts, highlighting the specialized function of the ELC which is confined to environmental and land use disputes, as enshrined in the Constitution of Kenya. Finally, the Court outlined that ‘a charge is a disposition that has no direct contractual relation to the “use” of a chargor’s land’.

What this means for you

The judgment clarifies critical aspects of jurisdiction and procedural rights in property-related disputes, emphasizing the specialized functions of different courts within the Kenyan judiciary.

The Court’s decision particularly explains that disputes involving financial securities, such as charges and mortgages, fall under the jurisdiction of civil courts, not the ELC. It reinforces the rights of financial institutions to enforce security interests, ensuring that debt recovery through property sales is conducted without undue interference, as long as statutory requirements are met. The judgment also specifies that non-owner occupants, like tenants, typically lack the standing to contest foreclosure actions.