Borrowers suffer as banks reject titles to give loans

President Kenyatta and Lands CS Charity Ngilu when he visited Ardhi House, Nairobi, on May 8, 2014. PHOTO | PSCU 

In Summary

• Due to the supremacy battle, some financial institutions are reluctant or even declining to accept newly issued titles as collateral for loans.
• Trouble for the title holders began after the NLC published a notice advising land owners that leases renewed by Mrs Ngilu’s office are null and void.

By JUSTUS WANGA
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Banks and property owners are bearing the brunt of the raging dispute between Cabinet Secretary Charity Ngilu and the National Land Commission.

Due to the supremacy battle, some financial institutions are reluctant or even declining to accept newly issued titles as collateral for loans.

A number of title holders who spoke to the Sunday Nation said they have been put on a waiting list or asked to provide additional security for their loans.

Commission chairman Muhammad Swazuri has gone to court to stop the Land Cabinet Secretary from renewing leases. A ruling on the case is pending.

Trouble for the title holders began after the National Land Commission last month published a notice in the press advising land owners that leases renewed by Mrs Ngilu’s office are null and void and that it is only the Commission which is empowered by law to do so.

Although most of them were uncomfortable going on record for fear that coming out might jeopardise their chances of getting loans, those affected say they stand to lose out on a number of projects they had initiated.

“I recently bought a quarter (acre) piece of land in Kitengela but as soon as we were through with the transfer, I approached a lender to help me develop it but they suddenly grew cold feet when NLC and the Cabinet Secretary failed to agree,” Mr Arthur Oloo, a plot owner, said.

Kenya Bankers Association chief executive officer Habil Olaka said that banks had adopted a cautious approach to avoid losing out.

“The effect (of the fallout) is certainly being felt. It is likely to slow down growth in the real estate sector and of course the banking industry because banks are not ready to risk until there is clarity on the matter,” Mr Olaka said.

He said several loan applications had been put in abeyance until the ministry and the commission agree on the way forward.

ADDITIONAL SECURITY

“The matter is at the core of validity of the title. As long as there is a standoff between the two, banks will not accept them, in fact customers are being asked to get alternative collateral or in some cases additional security,” he added.

Lawyer Paul Ndung’u, author of the Ndung’u land report on illegal land acquisition, says the sanctity of a title deed is critical and the least a bank wants to do is mortgage a lease whose validity is in question.

“Land is a key factor of production and the cloud of confusion will stall the economy as everything else revolves around it, so I can understand where the banks are coming from,” he said.

The lawyer said the solution to the constant wrangling between Ms Ngilu and Dr Swazuri is amending the Land Act to clearly separate their roles.

“It shouldn’t be too hard for the two parties to sit, review the Act and agree on roles each will play,” he said.

Mr Ndung’u said apart from the hurdles new lease holders face when dealing with banks, the feud has also paralysed operations at Ardhi House.

“Old leases are not being processed; all correspondence files on various old leases have been locked in the basement of Ardhi House for the last five months now and no officials are allowed in there even after earlier indications by the Cabinet Secretary that things would change in August,” Mr Ndung’u said.

Mr Ibrahim Mwathane, chairman of Land Development and Governance Institute, called on the two to put the public interest first.

“The Commission and the Cabinet Secretary have one client, the public. And, at all costs, the public should not suffer because of their actions. Who is to sign or authorise leases should be an internal affair,” he said.