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Due Diligence Process Explained in Kenya: A Supreme Court Ruling Sets Precedent

A recent Supreme Court ruling has shed light on the importance of due diligence in property transactions in Kenya. In Dina Management Limited v County Government of Mombasa & 5 others (Petition 8 (E010) of 2021), the court delved into the principles of property due diligence, setting a new precedent for future cases.

The Case

The case involved a dispute between a property owner and the County Government of Mombasa over a beach property located along Nyali Beach. The government bodies challenged the validity of the property owner’s title, alleging that it was obtained through illegitimate means. The property owner argued that they were a bona fide purchaser for value, with a valid and legal title.

The Supreme Court’s Ruling

The Supreme Court ultimately ruled in favor of the property owner, but not before conducting a thorough examination of the due diligence process. The court referenced previous cases, including [Samuel Kamere v Lands Registrar, Kajiado Civil Appeal No. 28 of 2005][2015] eKLR, which outlined the three key elements required to be considered a bona fide purchaser for value:

  • Acquiring a valid and legal title
  • Carrying out necessary due diligence
  • Paying valuable consideration

The court also drew parallels with [Republic v. Minister for Transport & Communication & 5 Others Ex Parte Waa Ship Garbage Collector & 15 Others Mombasa HCMCA No. 617 of 2003][2006] 1 KLR (E&L) 563, in which Justice Maraga emphasized the importance of nullifying titles obtained through illegal means.

The Significance

The ruling underscores the significance of due diligence in property transactions and serves as a reminder to prospective buyers to conduct thorough research before finalizing a purchase. It also highlights the need for courts to scrutinize titles more closely to ensure that they are valid and legally obtained.

Key Takeaways

  • Due diligence is essential in property transactions
  • Buyers should conduct thorough research before finalizing a purchase
  • Courts should scrutinize titles more closely to ensure validity and legality

Conclusion

The Supreme Court’s decision in Dina Management Limited v County Government of Mombasa & 5 others (Petition 8 (E010) of 2021) has set a new precedent for due diligence in property transactions in Kenya. As such, it is essential that all parties involved in property deals take heed of the court’s ruling and prioritize thorough due diligence to avoid potential legal pitfalls.

[2015] eKLR: https://www.example.com [2006] 1 KLR (E&L) 563: https://www.example.com