A process that should be straightforward as it is guided by comprehensive property and land laws, buying and selling real estate in Kenya is far from straightforward, however. Instead, buyers have to deal with slow documentation processes that are marred by corruption, where buyers either have to know the right people or have to offer bribes to quicken the processes.
All hope is not lost, with extensive implementation of new reforms such as the new land reforms, buying and selling property in Kenya will improve and existing laws will be applied to the letter.
To ensure you abide to Kenyan laws guiding real estate transactions and to avoid pitfalls such as being fleeced, it is advisable you seek legal representation when buying/selling property in the country.
Land Registration
In Kenya, land is registered under:
- The Land Act
- National Land Commission Land
- Land Registration Act; offering registration in all districts
Land Control Act
- Formulated under the Land Control Act, land control boards are forbidden by law to award assent to transfer agricultural land to companies and people who are not eligible to hold it.
Foreign & local investment of real estate in Kenya: the process
Under the new Constitution, non-citizens and companies with shareholders who are non-citizens are barred from owning property on freehold tenure. The law allows them to own property on lease for a period that does not exceed 99yrs.
- Both local and foreign property investors are allowed by law to purchase residential and commercial real estate situated in towns and within municipalities without any restrictions so long as they adhere to the legal procedures put in place.
- However, foreigners and private companies with shareholders who are non-citizens of Kenya are barred by law to buy agricultural land except where such purchase is exempted by provisions of Land Control Act, SEC 24.
Property identification
Once an investor has searched for and identified a suitable property, he or she should strive to visit and assess the real estate to ensure that:
- It actually exists
- It meets your needs and expectations such as physical location and access to infrastructure
- Its conditions are favorable and worth in investment
Note: there is a viewing fee applied when visiting properties for sale. Fees vary by type and size.
Conducting requisite search
A lawyer or the buyer must then obtain copies of the National Identity Card and property title from the seller and carry out requisite searches at lands office and Registration of Persons Bureau.
- This step is very important to verify that the said owner is truly the titleholder of the property.
- To carry out the search, you are required by law to file a copy of the title deed and a search application form and lodge it at the registry.
- The charges for requisite search are Ksh500.
- Land registry obtains the results within 2-3 days.
Results from the search should show
- The registered title holder of the property
- Property size
- Any pending issues registered against the property such as court orders, caveats and prohibitions, etc.
Additionally, it is important to:
- Verify whether the property is illegal or irregularly acquired as contained in Ndung’u Land Report filed by Commission of Inquiry on Illegal and Irregular Allocated Land.
- Procure a registered surveyor to not only establish the beacons of the property but also check out the land at the Survey Office.
Negotiation and sale agreement
Satisfactory preliminary checks should be followed by negotiations about terms of sale between the buyer and seller with the presence of their respective legal team.
- Negotiations entail discussions about the price of property and terms of payment
- 10% of the total amount is paid upfront as down payment and the balance is paid when the sale transaction is complete
- Agreement of terms by both parties set ground for preparation of a sale agreement by the seller’s advocate, who then seeks approval from the seller.
A sale agreement contains
- Terms of sale
- Purchase price
- Terms of payment
- Payment completion period
- Completion documents that facilitate the property transfer
- Law Society Conditions of Sale are often included
When both parties accept the sale agreement, they execute it with the buyer signing first followed by the seller. Finally money changes hands.
- A stamp duty costing Ksh200 is then obtained from lands office as required by law to ensure that in case of a dispute, the signed documents are admissible to court.
Transfer of property ownership and stamp duty
Once the buyer’s advocate has prepared the transfer, both parties approve and sign.
- The seller is responsible for acquiring every requisite completion document needed to effect property registration to the buyer.
- The buyer is then liable for the stamp duty fees payable to the Kenya Revenue Authority in line with Chapter 480 in the Stamp Duty Act of laws of Kenya.
- Prior to determination of duty, the seller must apply for property valuation by lodging signed valuation for stamp duty form and transfer of property form to the Land Office.
- A stamp duty declaration, assessment and pay-in slip is then filled at Lands Office.
Once stamp duty is obtained and transfer process is complete, law requires that transfer documentations together with the following documents are booked for registration:
- Original title deeds
- Stamp duty declaration
- Assessment and pay-in slip form
- Land rates clearance certificates
- Transfer consents
- Valuation for stamp duty form
Property registration: the final stage of property transfer
When the buyer obtains the registered property transfer, the law advises verifying registration of the same by conducting a property search.
Permission to develop
In case the property owner intends to develop the purchased property, he or she is required to go to relevant local authority and get requisite development authorization.
Often, the owner will be requested to:
- Commission an environmental impact assessment report to determine if the intended development has adverse environmental effects
- Get an environmental license from environmental body-NEMA.