Kenya Real Estate: Buying/Selling Laws and Procedures

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.

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A Brief History of Real Estate: The Fee Simple Ownership

Arthur Wellesley (1769-1852), Duke of Wellington, is reputed to have been the one to exclaim ‘All good things come from England, but cavalry is not one of them’ while facing Napoleon’s French Army at Waterloo on June 18, 1815. Wellesley had learnt his military trade in India applying his study of the art of war and had became a master of the reverse-slope tactic – keeping his forces screened from artillery fire behind the brow of a hill. At Waterloo, however, Wellesley’s Armies were outwitted by Napoleon. The French Emperor had imitated Wellesley’s tactics by positioning 200 heavy artillery guns behind a ridge at La Haye Sainte. When the Hussars and Dragoons cavalrymen led by Lord Uxbridge attacked in the famous Charge of the Scots Greys, Napoleon commanded the guns on the topline of the ridge and one of the epic artillery bombardments in history began. It was at this very moment, at the height of the Charge and while his 3,000 cavalrymen were being slaughtered by the rapid artillery fire of Napoleon’s heavy guns, that the phlegmatic English General is reputed to have exclaimed his now famous remark, directed at Lord Uxbridge who had apparently ordered the Charge without Wellesley knowing it. The day was saved by Gebhard von Blucher (1742-1819), Field Marshal of Prussia, who led the assault of the Kaiser’s Prussian Cavalry against the French right wing, thus causing the entire French line to collapse.

Wellesley’s famous remark has been retouched several times throughout the years, depending on one’s point of view. The British dropped the second part – the reference to the ill-fated cavalry charge – thus creating the popular short version ‘All good things come from England’ – period. When about a century later Britain had the unwise idea of attacking the Ottoman Empire and the British and French Armies were fighting the Turks side-by-side in WWI, General Mustapha Kemal – the English-speaking Commander of the Turkish Garrison and victorious defender of Gallipoli – paraphrased the English dictum after 289 days of siege by turning it, somewhat deprecatingly, into: “No good things ever come from England”. And Mahatma Gandhi throughout his teachings of non-violent conflicts resolutions makes reference to the fact that “All good things come from India”.

Alas, no matter what your point of view is, I shall submit to readers of my Blog that “at least two good things comes from England” : Fee Simple Ownership and Organized Real Estate.

English real estate law (or ‘Estate Law’ as it was known back then) was imported, through colonization, into the earlier forms of law in the U.S.A., Canada, Australia and New Zealand. Many of these states, or their territories, have since modified this historical law, to varying degrees. A study of the old feudal land system of England provides us with an invaluable glimpse of legal history regulating the most valuable asset of them all: land. In medieval times, land was the sole form of wealth and it depended primarily on possession. You had it, you owned it. You wanted it, you fought for it. You found it, you kept it. There were no courts or police force ready to recognize or enforce “legal rights” as we know them today. All this changed with the Norman conquest of England in 1066. William decreed that he owned all of the land in England by right of conquest. Not one acre of England was to be exempted from this massive expropriation. This sudden vacuum of privately-held land was promptly filled by a variety of huge land grants given by the new King to either his Norman officers or to those of the English who were ready to recognize him as king. The device used by the King to control and administer his land was that of tenure. Tenure was the key component of the feudal system. The King struck a bargain with a Lord for a large chunk of land. The Lords that held their tenure directly from the King were called Tenants-in-chief. It was this group of persons who formed the basis of English aristocracy and began, by the process of subletting the King’s land, the implementation of the feudal system.

Tenures were of a variety of duration known as “estates” and the Fee Simple Estate was the most extensive and allowed the Tenant to sell or to convey by will or be transferred to the Tenant’s heir if he died. In modern law, almost all land is held in fee simple and this is as close as one can get to absolute ownership in common law. It was in this context that the British began their dominion over the seas and their explorations which led to the modern nations of Australia, Canada, New Zealand and the United States of America. The concept of developing an informal association of local real estate agents originated in the United States in the 1880s, and by the turn of the century about 15 Real Estate Boards had been established. The National Association of REALTORS® (NAR) was formed in the U.S. in 1908 with 19 boards and one state association. Organized real estate in Canada is almost as old as the country itself. The very first Real Estate Board was set up in 1888 in the growing community of Vancouver. Back then, a commercial lot on Hornby Street near the Hotel Vancouver sold for $600. The Vancouver Board – as it was known then – was active until the start of the First World War, when operations were suspended. It resumed in 1919, and has been operating ever since.

The distinction of the oldest, continuous running Board belongs to Winnipeg, Manitoba. It started in 1903, and the Winnipeg Real Estate Board was the first in Canada to celebrate its 100th anniversary. The Toronto Board was incorporated in 1920, followed by boards in Ottawa, Hamilton, Regina and Victoria in 1921. More than half of the existing Real Estate Boards in Canada were created after 1955, in part because of the evolution of the “Photo Co-Op System” that was introduced in 1951. That was the forerunner of today’s MLS®, introduced in 1962. The Co-op System not only created a need for an organization to establish rules and promote co-operation among agents, but also to provide funds to operate a real estate board. That’s when technology first changed the real estate industry.

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