What Happens If I Deal With a Lease Without Approval?

Part XVII of the Land Act 1996 does not merely discourage unapproved dealings. It voids them and criminalises some of them. The consequences are worth setting out on their own.

First consequence: the dealing is void

Void is the strongest word available. Not voidable at someone’s election, not merely unenforceable — of no effect at all. So:

• no leasehold estate passes to the buyer;
• there is no enforceable obligation on the seller to transfer;
• nothing can be registered under the Land Registration Act, so the buyer never becomes registered proprietor and never obtains indefeasibility; and
• a lender cannot take a good registered mortgage over what the buyer did not acquire.

Second consequence: the section 129(2) offence

Note carefully what is prohibited: not only disposing, but entering into a contract or agreement to dispose. The offence is complete on signing. A seller whose improvement conditions are unfulfilled commits it by executing the contract, whatever happens afterwards.

The exception is prior approval on special grounds of an urgent or exceptional character under section 129(1)(b). “Prior” means before the contract.

Third consequence: the share-dealing rule

Section 129(3) closes the most obvious avoidance route — selling the company instead of the land.

Three points:

• the penalty is five times the section 129(2) figure — the drafters plainly regarded this avoidance as the more serious;
• the prohibition covers dealing with the shares generally, not merely selling them; and
• section 129(5): for subsection (3), a disposition does not include a transmission — so shares passing on death or insolvency are not caught.

Fourth consequence: the 28-day lodgement offence

Even where a dealing is approved, section 128(4) requires the grantee or transferee, within 28 days of execution of the instrument, to present it to the Department for endorsement with a certificate of approval and to lodge a duplicate or certified copy.

Failure is an offence under section 128(5): a fine not exceeding K5,000, with a default penalty not exceeding K500.

What is not caught

• Customary land — Part XVII does not apply (s 127). But section 132 independently makes most dealings with customary land void.
• Leases with five years or less remaining, and with no option taking them past five years — outside the definition of “leasehold estate”.
• Transmissions — title acquired on the death or insolvency of the owner is expressly excluded from “controlled dealing”.
• Permitted dealings — those prescribed as not requiring approval.
• Resource interests — dealings with estates or interests under the Forestry Act 1991, the Mining Act 1992 or the Petroleum Act (Chapter 198) are not controlled dealings (s 128(7)).

Can a void dealing be fixed?

Not retrospectively validated by the parties — but the underlying transaction can usually be redone properly:

1. Establish why approval was or would be refused. Under section 128(3) the Minister must notify reasons for a refusal. Usually it is rent arrears or unmet improvement conditions.
2. Cure the defect. Pay the rent to date; complete the improvement conditions.
3. If the conditions cannot be met, apply under section 118(2) for relaxation or modification on the ground of special hardship, and under section 83(5) for remission or postponement of rent.
4. Or seek prior special-grounds approval under section 129(1)(b), showing grounds of an urgent or exceptional character.
5. Then execute a fresh instrument, conditional on approval, and lodge it within 28 days.