Obligations of Parties to an Off-plan transaction

 

1.0 Duties of the Developer

The duties of a developer can be drawn out as follows;

1. Adherence to Contractual Obligations on Financing Agreements

Developers must ensure that they carry out their end of the bargain with investors/lenders. This includes adhering to set timelines for completion of the project, making payments at the agreed timings to their lenders and generally acting responsibly with regards to their contractual obligations.

When dealing with a property that is Charged, the Chargee's consent must be obtained for any dealings involving the property, such as selling or leasing it. The consent protects the Chargee's interests and the interest of the person acquiring the interest. Failure to secure this consent constitutes a breach of the Charge agreement, potentially leading to legal action, foreclosure or forced sale of the property.

Section 59 of the Land Registration Act and Section 87 of the Land Act provide that it is the duly of the Chargor to obtain the written consent of the Chargee prior to dealing with any property. This includes properties in an off-plan development. Once the consent of the Chargee is obtained, a partial discharge of the charge can be procured for purposes of transferring the property, free of encumbrances.

2. Stakeholder Engagement

It is essential to engage and communicate effectively with all parties involved when carrying out land dealings. If any overriding interests exist on the property or material conditions that affect dealings with the title of the property, it is important to notify all relevant parties to the transaction and especially those seeking to acquire the interest in the property.

3. Financial Management

Effective finance management is crucial for every development project to succeed. Developers are responsible for making sure that money is spent wisely and financial commitments are fulfilled. Financial irregularities or poor management may result in default proceedings such as auctions which cause irreparable damage to stakeholders.

2.0 Duties of a Purchaser

2.1 Conduct due diligence

When purchasing an off-plan property, the Purchaser is expected to conduct due diligence for purposes of verifying the validity of the title and the legality of the transaction. This includes confirming its ownership, the physical status of the property, reviewing the legal approvals and determining financial encumbrances associated with the property.

Part of the due diligence would require assessing the credibility of the developer. The track record and credibility of the developer is crucial in assessing whether the developer is likely to fulfill their obligations. The purchaser must probe the history of the developer and determine whether there are patterns that would indicate potential risks such as stalled projects or litigation disputes that arose from their projects.

2.2 Recognizing the provisions of the Sale Agreement

A crucial stage in off-plan purchases is contract exchange. It binds you legally to purchase the property at the asking price, even if the market rates change in the future. It is the duty of the purchaser to examine all the details thoroughly before executing the contract. It is crucial to read the provisions on the anticipated completion date, interest on late payments and key terms such as default provisions to make sure that they understand the expectations from every party to the Sale Agreement which on the part of the purchaser would mainly entail payment of the purchase price.

The Key Aspects of Sectional Properties Act (2020)

Kenya's Sectional Properties Act (SPA) of 2020 regulates the ownership and management of apartments, townhouses, flats, maisonettes, and offices. The SPA was passed to simplify the process of acquiring and managing sectional units, and to give owners more autonomy.

The Sectional Properties Act (SPA) of Kenya allows for the division of buildings into units that are owned by separate individuals. The SPA also establishes common areas, such as gyms, lobbies, and playgrounds, that are owned by the unit owners as tenants in common.

The SPA applies to both Kenyan citizens and foreign nationals, but there are some differences in what each can own:

·       Kenyan citizens: Can hold both leasehold and freehold sectional titles

·       Foreign nationals: Can only hold leasehold sectional titles for up to 99 years

Generally, the SPA allows owners to acquire an independent title deed for their unit, as opposed to a lease where the owner's interest is registered against the main title. The SPA also establishes a Corporation to manage the property, including maintaining it, enforcing bylaws, and paying insurance premiums.

Here are some key aspects of the SPA:

Sectional units

A sectional unit is a space within a building that's defined by its walls, floors, and ceilings. Sectional units come with a distinct share of the building's common areas.

Titles

The SPA allows owners to acquire an independent title deed for their unit, rather than having their interest registered against the main title for the land. Kenyan citizens can hold either freehold or leasehold sectional titles, and can hold the title for more than 99 years.

Dispute resolution

Disputes related to by-law violations are handled by an internal dispute resolution committee. The committee can make decisions without limit on penalties. Decisions made by the committee can be appealed to the Environment and Land Court.

Conversion of long-term leases

To convert a long-term lease to a sectional title, an applicant needs to provide a sectional plan, sub-lease or long-term lease, and a copy of the title. After conversion, the registrar will issue a certificate of title or lease to the unit owner.

The SPA replaced the Sectional Properties Act of 1987. The new law was created in response to challenges with the previous act, as well as the Constitution of Kenya, 2010, and advancements in the banking and building industries.

Conclusion

The SPA includes penal sanctions for non-compliance, such as fines of up to KES 20,000,000 or one year in prison

Official search and a Registry Index Map (RIM) in land transactions in Kenya

An official search and a Registry Index Map (RIM) are both important documents in land transactions in Kenya:

Official search
A search of the land registry for the property being sold. This is often done before drafting a sale agreement. The search can be done electronically for land in Nairobi or other digitally-enabled registries, or physically for up-country registries.

Registry Index Map (RIM)
A map that shows the location, boundaries, and shape of a piece of land. It also shows the general region around the land. The RIM is often more informative than the title deed because it visually confirms the land's existence and location. 

The RIM is obtained from the Survey of Kenya after the official search. It's an essential document that provides proof that the land is legally owned and accurately mapped. The RIM is updated with any changes to the land, such as subdivisions or amalgamations.

Can An Advocate appoint administrators in a succession process?

No, an advocate cannot appoint administrators of an estate, but they can assist with the estate administration process:

·       Identifying beneficiaries: An advocate can help identify the beneficiaries and next of kin who may be entitled to share in the estate.

·       Preparing documents: An advocate can prepare and file the documents required to apply for probate or administration.

·       Advising on claims: An advocate can advise on claims made against an estate.

·       Advising on tax: An advocate can advise on tax compliance matters and post mortem planning.

·       Preparing estate accounting: An advocate can assist with the preparation of the estate accounting.

The Succession Process in Kenya

The process for instituting a succession in Kenya involves filing a petition in court, paying fees, and publishing a notice in the Kenya Gazette. The process is more complex if there is no valid will.

Here are the steps for instituting a succession in Kenya:

1. File a petition

A surviving dependent, such as a child or spouse, files a petition in court to obtain letters of administration.

2. Gather documents

The petition must include the following documents:

·       A letter from the local area chief with details of the deceased's dependents

·       A certified copy of the death certificate

·       IDs of the beneficiaries and the people petitioning the court

·       Affidavits to identify the deceased's assets and liabilities, and to justify the proposed administrators

·       A guarantee from sureties to cover any losses if the administrator breaches their duties

3. Pay fees

The court will issue an invoice for fees, which include court filing and gazettement fees.

4. Publish a notice

The petition is published in the Kenya Gazette to notify the public of the application and allow for objections.

5. Get letters of administration

If there are no objections within 30 days, the petitioner will receive the grant of letters of administration.

6. Identify beneficiaries

The administrator, with guidance from the court, identifies the beneficiaries who are entitled to inherit.

7. Distribute the estate

The administrator distributes the estate assets after settling taxes and debts.

The Law of Succession in Kenya, also known as the law of inheritance, determines what happens to a person's estate after their death.