Land-based lending checklists - An update based on the decision in the case of Musa v Musa & 6 Others [2025] KECA 1283 (KLR)

Background

The Court of Appeal decision in Musa v Musa & 6 Others [2025] clarified that a registered land title obtained through fraud is void, regardless of whether a bank or third party acquired an interest in good faith. This has serious implications for collateral risk.

 

 Key Risk Exposure

• Banks relying solely on registered title risk loss of security if the title is later found to be fraudulent.
• In cases involving family land or succession, fraud or lack of proper consent is more likely.
• Third-party charges (e.g., mortgages) can be invalidated if the root title is void.

 

Policy Recommendations

1. Enhanced Due Diligence
• Investigate ownership history and succession documentation.
• Validate consents from all beneficiaries and spouses.
2. Document Authentication
• Insist on original transfer documents and cross-verification with the Land Registry.
• Use certified survey plans and match title details with registry records.
3. Legal Review Requirement
• All land-backed loans must undergo legal review by external counsel for:
• Source of title
• Validity of consents
• Risk of familial disputes
4. Contractual Safeguards
• Include warranties in facility agreements about clear and undisputed ownership.
• Require indemnities for misrepresentation and fraud.
5. Transactional Controls
• Avoid lending against titles that have changed hands within the last 12 months without solid background checks.
• Register cautions or restrictions early in the loan negotiation process.

 Action Required

Update their land-based lending checklists to incorporate these measures.

Reference

• Musa v Musa & 6 Others [2025] KECA 1283 (KLR)
• Full Judgment