In
Kenya, locals and foreigners are permitted to buy commercial and
residential real estate/lands located within a town or municipality
without any restrictions whatsoever provided that comply with the laid
down procedures.
However,
for the agricultural land, foreigners or privately-owned companies
whose shareholders are not all Kenyan citizens are not permitted to buy
such land unless where such transaction has been exempted from the
provisions of the Land Control Act by the president pursuant to section
24 thereof. The land control boards, which are established under the
said Act, are prohibited from granting consent to transfer in respect of
persons or companies that do not qualify to hold agricultural land.
Under
the new Kenyan Constitution 2010, persons who are not a citizen of
Kenya as well as companies whose shareholders are not Kenyan citizens
can only own land on a leasehold basis for a term not exceeding 99
years. In other words, such persons cannot own land on freehold tenure.
In summary, the procedure for buying land in Kenya is as detailed hereinbelow.
N/B:
Buyers need to use professional and reputable lawyers whenever they are
buying land in Kenya to receive proper legal advice and representation
in the entire sale process and thus avoid unnecessary pitfalls and
dealing with cons. Equally important, the purchaser should avoid making
any payment directly to the vendor or his agent, and such monies are
better channeled through his lawyer so that he can take the requisite
precautions.
1. Identification of the Land
The
process of land purchase starts with the buyer identifying suitable
land for purchase. One can enlist the services of a reputable real
estate agency firm to assist him in identifying suitable land for
purchase and connect him to the seller. Once the land has been
identified, the buyer should endeavor to visit the site and satisfy
himself or herself that the land meets the desired criteria including
its physical location and boundaries.
2. Conducting the requisite searches and preliminary investigations
Land in Kenya is registered under three registration regimes
The
previous land registration laws (that is, The Government Lands Act, the
Registration of Titles Act, and the Registered Lands Act) have now been
repealed and replaced by the Land Act, the National Land Commission
Land, and the Land Registration Act. The Land Registration Act provides
for a registration unit in every district and the land registries
established under the repealed laws are still operational.
The
buyer or his lawyer should get a copy of the title and National
Identity Card of the seller and conduct the requisite searches both for
the land at the relevant lands office and also of the person named in
the title as the registered owner at the Registration of Persons Bureau.
The latter will help to confirm that the purported owner of the land
is the real owner of the land an impostor.
To
conduct a search, one is required to file a search application form and
attached a copy of the title deed. The search is then required to be
lodged at the registry and the requisite search fees (current at KShs.
500/- paid. It takes 2-3 days to get search results from the Lands
registry. The search result should be able to reveal the following
details:-
(i) the registered owner of the property;
(ii) its size;
(iii) any encumbrances registered against the titles like prohibitions, court orders, cautions, and caveats;
If
the search results are satisfactory, one should also check whether the
land is included in the Report by the Commission of Inquiry on the
Illegal and Irregularly Allocated Land, commonly known as the Ndung’u
Land Report.
Moreover,
it is usually prudent for the owner to enlist the services of a
registered surveyor who shall be able to confirm the beacons on the land
and conduct further preliminary checks at the Survey Department.
3. Price and terms negotiation and the sale Agreement
If
the proposed buyer is satisfied by the preliminary investigation and
check highlighted in 2 above, he should, together with his advocates, or
alone, engage the vendor or his agent for purposes of discussion and
agreeing on the terms of sale including the price and the terms of
payment. Usually, the buyer is required to pay a 10% deposit and the
balance of the purchase price upon completion of the sale transaction.
Once
the parties have agreed on the terms of sale, the Vendor's advocates
should prepare the sale agreement and send the same to the vendor for
his approval.
The
sale agreement will set out the terms of sale including the name of the
parties, the purchase price and mode of payment, the completion period
(which is usually 90 days) and the completion documents to be furnished
by the seller/ vendor to enable registration of the transfer of property
in favor of the purchaser. Invariably, the sale agreement will
incorporate the Law Society Conditions of Sale (1989 Version), which is a
codification of the customary terms of sale adopted by the Law Society
of Kenya, and these terms will apply, by reference, to the agreement of
the parties unless otherwise excluded or varied by the parties in their
agreement. It is also common for the sale agreement to incorporate a
suitable arbitration clause, which provides for a mechanism of ease
dispute resolution.
Where
the balance of the purchase price is being financed by a bank or
financier, the same should be stated in the sale agreement. In such a
case, the transfer of land in favor of the purchaser and the charge over
the property in favor of the financier are registered concomitantly,
and once the original title and security documents have been forwarded
to the financier by the financier's advocates, the financier shall
settle the financed balance of the purchase price to the Vendor or his
advocates.
It
is important to note that where the purchase is being financed in the
payment of any part of the purchase price, any part of the purchase
price that is not being financed must be paid to the vendor's advocates
and the purchase's advocates or the advocates acting for the financier
must furnish the vendor's advocates with a suitable professional
undertaking to secure the payment of the financed balance of the
purchase price. If such undertaking is satisfactory to the vendor's
advocates, he should forward the requisite completion documents to the
financier's advocates to undertake the stamping and registration
formalities.
Once
the terms of the sale agreement have been agreed between the parties,
the agreement is engrossed and executed by the parties or their power of
attorney. The purchaser should be the first to sign the sale
agreement, which should be forwarded to the vendor's advocates for the
vendor's execution accompanied by the deposit cheque or evidence of the
payment of the same.
Once
the vendor has executed, the vendor's advocates should note to present
it for stamping with duty (currently KShs. 200 for the original and
KShs. 20 for each counterpart) at the land's office. This is important
because of the rule that unstamped documents cannot be accepted by a
court of law as evidence in the event of a dispute.
It
is important to note that the deposit monies should be held on
stakeholders' terms (as trustee) by the Vendor's advocates pending the
completion of the sale and should not be released to the vendor unless
otherwise agreed by the parties. Moreover, where the purchase price is
paid in full, the same should be held on stakeholder's terms by the
vendor's advocates until completion of the sale transaction, which is
signified by the registration of the transfer at the lands office in
favor of the purchaser. For this reason, the purchaser must insist on
the vendor's advocates being a reputable firm of advocates, and where
the vendor's advocates cannot be trusted, the monies should be held in a
joint account in the name of the vendor's and the purchaser's advocates
or an independent escrow agent.
4. Preparation of the Transfer and Getting the Completion Documents
The
transfer is usually prepared by the purchaser’s advocate and approved
by the vendor’s advocate. The documents should also be signed by both
parties.
Unless
otherwise stated in the sale agreement between the parties, the vendor
usually has to obtain all the requisite completion documents, which are
required to effect the registration of the property in favor of the
purchaser) at his own costs. These documents include:-
(a) The original title for the property
(b) The transfer of property duly executed by the vendor/ seller (in triplicate);
(c) Identity Card/ Certificate of Registration of the vendor/ seller and Pin Certificate;
(d)
Three(3) passport-sized photographs of the seller/vendor. If the seller
is a company, photographs of two of its director or a director and
company secretary and their Pin Certificate will also be required;
(e) Land Rent Clearance Certificate for the Property, where the land is a leasehold from the Government;
(f) Rates Clearance Certificate for the Property issued by the relevant local authority (if applicable);
(g) original receipts evidencing the payment of rates and rates;
(h)(h)
Consent to transfer the property issued by the Commissioner of land,
the relevant land control board, or where the land is a leasehold from a
local authority, the consent is issued by the Town Clerk of the
relevant local authority.
(i)Valuation form duly completed by the Vendor or his advocate;
If the property is a flat/apartment or office space and comprised the of a lease, additional completion documents will include:
(a) the original lease for the property and the transfer of lease duly executed by the parties, as appropriate;
(b) the consent by the lessor and/or the management company, incorporated in the transfer of lease,
(c) the letter from the management company confirming that the seller has paid all the outgoings;
(d) the original share certificate in the management company;
(e) the transfer of share form duly executed by the parties;
(f) Form D in respect of the share transfer duly signed by the company's auditors;
5. Stamping and Registration Formalities
The
purchaser is usually responsible to cater to the costs of the stamp
duty on the transfer of property and registration charges. The stamp
duty on the transfer of property is collected by the Kenya Revenue
Authority and is payable pursuant to the provisions of the Stamp Duty
Act, chapter 480 of the laws of Kenya. Before duty is determined, the
vendor's advocates must apply for the valuation of the property at the
Land Office, which is undertaken by the government valuers, who are
required to determine the market value of the property. This application
is done by lodging the duly signed transfer of property and the
valuation for stamp duty form duly signed by the vendor or his advocates
(referred to above).
Once
the valuation has been completed, the market value of the property (not
necessarily the value indicated by the transfer) will be indicated on
the original transfer of property by the collector of duties.
Thereafter, the vendor's advocates will need to present the documents to
the lands office for assessment of the duty payable. This is done by
filling a form known as the stamp duty Declaration, Assessment, and
Pay-in Slip, which is complicated in quadruplicate.
As
stated before, the stamp duty is collected by Kenya Revenue Authority
and should be paid to the Commissioner of Domestic Taxes through various
banks which have been appointed as collecting agents. Currently, these
banks include Kenya Commercial bank Limited (KCB), and National Bank of
Kenya Limited (NBK).
Once
the duty has been paid over the counter through the collecting either
of the collecting agent banks, the documents are then lodged at the
lands office for stamping with duty. The collector of stamp duties will
normally stamp the documents once he is satisfied that the collective
amount of stamp duty has been paid.
The following are the rates applicable on the transfer of land:-
Where
land is in a municipality- the duty is 4% of the market value of the
land as determined by the Government valuer. The market value may be
higher than the value indicated by the parties in the transfer
documents.
Where
land is agricultural or outside a municipality- the duty is 2% of the
market value of the land as determined by the Government valuer.
In respect of a charge or mortgage – the duty payable is 0.1% of the mortgage amount.
Once
the transfer of land or charge over the property has been stamp duty
with duty, the transfer documents accompanied by the original titles,
land rent and rates clearance certificate, consent to transfer, the duly
completed valuation for stamp duty form, and the stamp duty
declaration, assessment and pay-in-slip should be booked of
registration.
Where
the purchaser is being financed, the charge over the property and
consent to charge must also be booked or lodged for registration
together with the transfer.
6. Registration
The
final process of land purchase is the registration of the transfer in
favor of the purchaser, or the transfer of property/lease and the charge
in favor of the purchaser and the financier, as the case may be.
Once
the duly registered transfer has been released to the purchaser or his
advocate, it is important to verify registration by conducting a search
of the property.
Where
the purchaser is being financed, the duly registered documents
including the original title for the property, transfer, and the charge
are forwarded to the financier to enable it to settle the balance of the
purchase price. These will be held by the bank/financier until the loan
has been repaid in full.
7. Development Permission
Where
the property is intended for use in the construction or erection of a
building, after the purchase, the owner will be required to obtain the
requisite development permissions from the relevant local authority.
If
the proposed development is likely to have any adverse impact on the
environment, the owner will also be required to commission an
environmental impact assessment report and obtain an environmental
license from the NEMA before undertaking any development on his
property.
