Balancing Property Rights: Supreme Court Clarifies Limits of Renewal Rights and Buyer Protections in Leasehold Context

In a recent landmark decision, Harcharan Singh Sehmi & Another v Tarabana Company Limited & 5 Others (Petition No. E033 of 2023), the Supreme Court provided important guidance on lease renewal, pre-emption rights, and the limits of title protection where public land is allocated irregularly.

Key Takeaways for Purchasers, Developers, Financiers and other Investors

1. Pre-emption Rights
   These rights must be properly exercised as they do not override the legal requirement for formal renewal and registration. This decision reinforces the importance of diligently pursuing lease renewals and maintaining accurate records of communications with the authorities.
2. Effect of Expiry
   Upon expiry of a leasehold interest, the property reverts to the Government. Post-expiry continued possession without a renewed lease does not preserve rights or create equitable interest. Further, where land has reverted to the Government, any reallocation must comply with statutory procedures.
3. Legitimate Expectation
   A leaseholder who applies for extension before expiry and is in continuous occupation may have a legitimate expectation that the lease will be renewed. However, legitimate expectation has strict thresholds. There must be clear communication or promise from a public authority with capacity.
4. Silence or Inaction by Authorities
   Failure by the Government to act on a lease renewal application does not automatically amount to approval or preserve or extend the lease or entitle the lessee to continued legal ownership beyond expiry.
5. Limits of Bona Fide Purchaser Doctrine and Indefeasibility of Title
   A purchaser cannot rely on the doctrine of “Bona fide purchaser” or the defence of “indefeasibility of title” where the root of title is irregular or unlawful. Titles acquired in an unprocedural manner or through unlawful means are liable to cancellation.
6. Due Diligence
   Root of title due diligence (including confirming validity of original allocation and investigating any longstanding occupation) cannot be understated. The judgment builds on the Court’s decision in the Dina Management Limited v County Government of Mombasa & 5 Others Petition No. 8 (E010) Of 2021 (Dina Management case) which we discussed in our previous alert.
7. Remedies
   Legal remedies are available, and courts may reinstate lapsed leaseholds if a renewal application had been made in time, order evictions, and award substantial damages where unlawful allotments result in loss or demolition.

Background
H.S. Sehmi and J. Sehmi (the Appellants) were the registered leasehold owners of a parcel known as Land Reference Number 209/2759/9 in Ngara, Nairobi (the Property), having bought it in 1968. They had a 59-year lease, commencing in 1942 and expiring in October 2001. At least three months prior to the lease expiry, the Appellants initiated the process of seeking a lease extension. Despite correspondence from the Commissioner of Lands and “no objection” letters from the Director of Physical Planning and the Director of Survey, the lease was never formally extended.

In 2009, the Property was allocated to Rospatech Ltd (the 2nd Respondent) who subsequently sold it to Tarabana Co. Ltd (the 1st Respondent). The Appellants were evicted in 2014, prompting litigation in the Environment and Land Court (ELC) challenging the eviction and the legitimacy of the 1st Respondents’ title.

Litigation History

Environment and Land Court (2019)
The ELC found in favour of Appellants, held that their lease renewal application gave rise to legitimate expectation and declared the allocation to the 2nd Respondent unlawful and that the subsequent transfer to the 1st Respondent was tainted by the irregularity and fraud.

Court of Appeal (2021)
The CoA overturned ELC’s decision on the basis that at the time the Property was allocated to the 2nd Respondent, the Appellants’ lease had expired, and the Property had reverted to the Government. The court also held that the 1st Respondent was a bona fide purchaser.

Supreme Court (2025)
The Supreme Court overturned the CoA’s decision, and held that:

• First, by the time the Property was allocated to the 2nd Respondent, the lease had expired and the Property had reverted to the Government.
• Second, the allocation to the 2nd Respondent was unlawful, having failed to comply with the procedures under the repealed Government Lands Act.
• Third, the 1st Respondent was not a bona fide purchaser since the 2nd Respondent was incapable of passing a valid legal title, having acquired the same illegally. Further, the 1st Respondent did not conduct adequate due diligence and had constructive notice of the irregularities.
• Lastly, the Appellants had a legitimate expectation that their lease would be renewed.

The Court consequently ordered the Chief Land Registrar to cancel the title that was issued to the 1st Respondent and to restore the Appellants as the proprietors of the Property upon payment of applicable registration fees. The 1st Respondent was ordered to demolish structures and developments on the Property within 6 months. Notably, the 1st Respondent had created a charge over the Property which was consequently extinguished upon cancellation of the 1st Respondent’s ownership interest.

This decision serves as a landmark restatement of land tenure principles in Kenya. It is now clear that formality and procedure matter just as much as possession and good faith.

Should you have any questions on this legal alert, please do not hesitate to contact Adnan Khan, Nicole Gichuhi or Shellomith Irungu. 

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Contributors

1. Amollo Simba – Associate
2. Eden Nyagah – Trainee