Exploring the ramifications of the Supreme Court Ruling on property title-based loans by banks

  • 26 Jun 2023
  • 4 Mins Read
  • 〜 by Kennedy Osore


The groundbreaking ruling delivered by the Supreme Court of Kenya in the case of Dina Management Limited v. County Government of Mombasa & 5 others (Petition No. 8 (E010) of 2021) carries substantial implications for banks that provide secured financing based on property titles. This ruling has far-reaching consequences, not only for property investors and stakeholders in Kenya but also in terms of setting a precedent for the due diligence required in property transactions.

The genesis of the case can be traced back to the County Government of Mombasa, which initiated legal proceedings against Dina Management Limited. The county government asserted that Dina’s beachfront property, registered as private land, was actually public land. This dispute escalated to the point where the county government forcefully entered the property and demolished the entire perimeter wall facing the beachfront. After a series of legal proceedings, the case ultimately reached the Supreme Court of Kenya, which delivered a final and conclusive verdict on the matter.

In its ruling on April 21, 2023, the Supreme Court upheld the decisions previously made by the Environment and Land Court as well as the Court of Appeal. The court determined that the actions taken by Dina Management Limited in regard to the beach property were unlawful and unprocedural as they obstructed public access to the beach. It reaffirmed that the property in question was designated as public land, reserved for public utility, and therefore could not be subsequently sold or treated as private property.

Additionally, the Supreme Court affirmed that the initial allocation and issuance of the beach property title to former president Daniel T. Arap Moi was conducted in an irregular manner. As a result, subsequent purchasers, including Dina Management Limited, did not obtain a valid legal interest in the property. The court emphasised that bona fide purchasers bear the responsibility of verifying the validity and legality of the property titles they acquire. Merely possessing a title document does not automatically confer bona fide purchaser status, especially when the authenticity and legitimacy of the title are called into question.

Implications for banks and other financial institutions

  • Invalidation of subsequent transfers

The Supreme Court’s ruling has established that if the initial acquisition of a property title is found to be unprocedural or unlawful, all subsequent transfers of the title become invalid. This has significant implications for banks that have provided financing based on a title with an irregular or unlawful root. In such cases, the security interest the bank holds may be deemed invalid. To mitigate this risk, banks must ensure that the property titles they rely on as collateral have a valid and lawful origin. Conducting thorough due diligence on the title’s acquisition process is crucial to safeguarding the bank’s security interest and protecting against potential legal complications in the future.

  • Requirement for thorough due diligence

The Supreme Court ruling necessitates that banks undertake a thorough investigation of property titles prior to extending financing. The judgement underscores the responsibility of bona fide purchasers, including banks, to substantiate the validity and legality of the acquired property title. Simply possessing a title document is inadequate to establish bona fide status, especially when the root of the title is called into question. Banks are thus required to exercise caution and conduct comprehensive examinations of the title’s history, ensuring compliance with legal procedures. By doing so, banks can mitigate the risks associated with potentially flawed or irregular property titles and make informed decisions when providing financing.

  • Potential loss of security

The Supreme Court ruling suggests that if a bank has already extended financing based on a title with an irregular or unlawful root, its security interest could be jeopardised. If the ownership of the property is subsequently challenged and the title is declared invalid, the bank may encounter obstacles in enforcing its security rights or recovering the outstanding debt. This situation can leave the bank vulnerable to potential losses and legal complications. It is imperative for banks to carefully assess the validity and legality of property titles before providing financing to mitigate the risks associated with invalid or disputed titles.

  • Increased due diligence burden

Undertaking a comprehensive investigation to verify the validity of property titles can pose a significant burden for banks. The ruling emphasises that official searches conducted at land registries do not provide sufficient insight into the root of the title. As a result, banks may be required to implement more rigorous due diligence procedures, going beyond the official searches. This could involve conducting independent verifications of the title’s history, ensuring compliance with legal requirements, and establishing its authenticity. While this may increase the complexity and time required for due diligence, it is necessary for banks to ensure the integrity of the titles they rely on for financing purposes.

  • Risk management and mitigation

In light of this judgement, it is prudent for banks to reassess their lending practices and enhance their risk management frameworks. Strengthening internal processes, such as conducting thorough legal vetting of property titles, ensuring proper documentation, and implementing robust verification procedures, can significantly mitigate the risks associated with potential title irregularities. By prioritising these measures, banks can proactively safeguard their interests and minimise the likelihood of encountering complications arising from flawed or unlawful property titles.

  • Engaging legal experts

To ensure the legality and validity of property titles before providing financing, banks should engage legal experts, such as specialised real estate and conveyancing lawyers. These legal professionals can offer valuable guidance in conducting comprehensive due diligence and help identify any potential risks associated with the title. By leveraging their expertise, banks can enhance their ability to navigate complex legal considerations, mitigate potential pitfalls, and make informed decisions when extending financing based on property titles.


The Supreme Court’s judgement is expected to broaden the scope of due diligence required in property transactions, thereby emphasising the need for increased caution. However, conducting a comprehensive investigation into property titles can be a challenging undertaking, especially considering that official searches conducted at land registries do not provide full insight into the root of the title.

Banks offering financing based on secured property titles must be mindful of the implications stemming from this landmark ruling. To safeguard the interests of both banks and property purchasers, it is imperative to prioritise thorough due diligence and ensure the validity of the title’s root. By doing so, banks can mitigate risks and navigate the evolving landscape of property transactions in line with this precedent-setting judgement.