Jitters rise as courts protect matrimonial properties
Both parties in a matrimonial property such as a house must agree for it to be used as security for a loan.
Lenders are increasingly losing properties that had been used as collateral to advance loans to customers after emerging that they failed to seek consent from one of the spouses before giving out the money.
In a recent judgment, High Court Judge Wilfrida Okwany restrained Stima Sacco from selling a house to recover Sh10 million, saying the deposit-taking organisation was to blame for not conducting proper due diligence.
She said spousal consent is very crucial in the loan transaction and that the sacco should have conducted due diligence before advancing the money to the man identified as DOO. This is because the house, which was used as security is matrimonial property.
“I further find that the plaintiff provided uncontroverted proof that she was the 3rd defendant’s legal wife as at the time the suit property was charged to the 1st defendant and that under Section 79(3) of the Land Act her consent was required in order to validate the charge,” the judge said.
Section 79 (3) of the Land Act states as follows: “A charge of a matrimonial home, shall be valid if any document or form used in applying for such a charge, or used to grant the charge, is executed by the chargor and any spouse of the chargor living in that matrimonial home, or there is evidence from the document that it has been assented to by all such persons.”
Section 93 of the Registered Land Act states that; “Subject to any law to the contrary if a spouse obtains an interest in the land during the subsistence of a marriage for the co-ownership and use of both spouses or all spouses, such property shall be deemed to be matrimonial property and shall be dealt with under the Matrimonial Act.”
Spousal consent
Further, Section 28 of the Land Registration Act recognises spousal rights over matrimonial property as an overriding interest. “Spousal consent is, therefore, required before a spouse can sell matrimonial property. In the absence of such a consent, the sale becomes null and void.” Courts have held in previous decisions.
The evidence adduced in court showed that DOO was married to PA but they divorced and in an agreement signed in court in April 2018, the parties agreed that the house remains as matrimonial property.
PA testified that the property was apportioned to their son in line with their mediation agreement and that she was collecting rent from the property for their children’s upkeep.
She argued that the former husband used the property as security without her consent nor did he consult her. PA said she learnt that the property was being sold when Legacy Auctioneering Services showed up to proclaim it. She later searched and discovered that it had been charged to Stima Sacco.
Further, PA said she was not served with statutory notices and notification of sale, a move she, said renders the planned sale illegal. The sacco defended itself saying the DOO took the loan and defaulted hence the decision to auction it.
On spousal consent, the sacco said DOO was accompanied by a woman identified as L, whom he introduced as his wife. L had an affidavit and which the acco used as evidence to confirm that the couple had agreed to charge the property.
In the judgment, Justice Okwany said DOO did not involve his wife in the loan transaction thus contravening the law, making the charge defective and therefore, incapable of enforcement.
Monogamous marriage
The judge said Stima Sacco should have gone the extra mile to verify the relationship between the DOO and L before accepting the loan application. The judge said an affidavit per se, cannot be taken as proof of marriage. “It did not escape the attention of this court that by reporting the matter to the investigative bodies, the 1st defendant realised that he had been duped 3rd defendant into believing that the said Linda was his wife,” Okwany. Section 12 of the Matrimonial Property Act provides that: - “An estate or interest in any matrimonial property shall not, during the subsistence of a monogamous marriage and without the consent of both spouses, be alienated in any form, whether by way of sale, gift, lease, mortgage or otherwise.’
Last September, High Court judge Joel Ngugi ruled that where banks fails to carry out reasonable due diligence or otherwise acts negligently or fraudulently by failing to discover or avert its mind to the unregistered equitable interest of a party to a parcel of land, any charge registered in favour of the bank is invalid.
The Nakuru resident judge said without formal consent from one spouse, lenders are obliged to establish the status of property registered in the name of the other partner before agreeing to charge it.
According to the judge, financial institutions must perform their due diligence to confirm the unregistered equitable rights of the other spouse, and failure to do so makes the charge invalid.
