Buying property in Kenya? Read our Kenya property buying guide
Busam Properties step-by-step guide to buying property in Kenya. January 29, 2018
The purchaser begins with identifying a suitable property for purchase. One needs to enlist the services of a reputable real estate agency/firm to assist in identifying a suitable property.
The buyer then should endeavour to visit the site and satisfy themselves that it meets the desired criteria including its physical location and boundaries, and thereafter make a formal offer or expression of interest.
After an offer has been accepted, buyers should conduct due diligence to verify the ownership and other material aspects pertaining to the property and documentation etc.
The vendor also conducts due diligence on the buyer. If the due diligence process is successful, both parties then instruct their advocates to proceed to the contract stage.
The procedure may vary slightly depending on whether one is buying a completed property (ready for occupation), land or an off-plan property.
In the former, after paying the deposit, the transaction is completed within a defined closure period, normally 90 days from date of signing the sale agreement (although parties can mutually agree on any closure period that suits them). In the latter, after paying the requisite deposit, buyers normally pay a percentage of the purchase price in equal instalments until the project is completed.
Once the sale agreement is signed by both parties, the deal becomes legally binding and enforceable under the law of contract. The buyer is required to pay a deposit of at least 10% of the purchase price (or such other amount as may be agreed by both parties) upon signing the sale agreement.
The deposit is held by the seller’s advocates as stakeholders pending completion of the transaction in accordance with the terms of the sale agreement.
Alternatively, the buyer and seller can mutually agree to open a joint escrow account mandating both advocates to oversee the purchase funds until completion of the sale.
Buyers will normally then forfeit a percentage, or all, of the deposit if they default or are refunded the said deposit if the seller is unable to complete the transaction. It is important that every instrument effecting a disposition in land is executed by each of the partiesconsenting to it.
Execution under the relevant Kenyan law consists of the person appending his/ her signature or affixing his/ her thumbprint or other mark as evidence of personal acceptance of the instrument. Execution by a corporate body, association or any other organisation should be done in the presence of an Advocate of the High Court of Kenya, a magistrate, a judge or a notary public.
On the completion date, buyers are required to pay the full balance of the purchase price in exchange for the completion documents from the seller.
Once the buyer’s advocates are in receipt of the completion documents, they make arrangements for the property to be assessed for Stamp Duty by a Government Valuer and subsequently stamping of transfer documents. Thereafter, they proceed to lodge the property for registration in favour of the buyer.
After the registration process, the seller’s advocate is legally permitted to release the full proceeds of the sale to the seller.
Consequently, the buyer is officially handed over possession of the property and becomes the new legal owner.
The certificate of title issued by the Registrar upon registration, or to a purchaser of land upon a Transfer by the seller is taken by all courts as prima facie (at first appearance) evidence that the person named as the proprietor of the land is the absolute and indefeasible owner.
It is also possible to purchase land in Kenya without being in the country. One can assign a lawyer to go through the whole process on their behalf through the power of attorney.
Buyers will incur certain transactional costs when buying either residential or commercial property in Kenya.
Buying Residential Property
Stamp Duty/Land Tax: This levy is centred on the property value and the State relies on the amount returned by the Government Valuer or the purchase price agreed upon; whichever is higher:
• 4% for land/property within a municipality
• 2% for agricultural land or property outside a municipality
• 1% if a property is registered as a company and transfer is by way of shares rather than title
Legal fees: Each party pays for their own legal fees based on a percentage of the purchase price on a scale stipulated in the Advocates Remuneration v Amendment Order, 2014. Thevonly exception which appears to be a common practice, is where buyers are required to pay legal fees for both parties when buying an apartment.
The argument for this is based on the fact that the seller’s lawyer is the one who does registration for all the leases onvbehalf of the buyer.
Agency fees: The agent is paid by the party who instructs them either by the seller who instructs the agent to market the property or the buyer who instructs the agent for a property acquisition. The fee is on a scale capped at a maximum of 3% of the property’s value.
Registration and disbursement fees: Buyers are generally responsible for the cost of registration of titles in their name(s) together with other disbursement costs as may be advised by the seller’s advocate.
Foreigners’ Purchasing Regulations
Just like Kenyan citizens, foreigners are permitted to buy commercial and residential properties/land located within a town or municipality without any restrictions whatsoever, provided that they comply with the laid down procedures. The only restrictions are on owning agricultural land, freehold titles and first row beach plots along the Kenyan Coast.
Article 65 of the Kenyan Constitution limits foreigners to holding only leasehold titles for a maximum of 99 years but permits future renewals on condition that the subject property held under that title is economically active and it is not required for public use purposes. This therefore means that if a foreigner purchases a property held under a freehold title, it will revert to a long term leasehold tenure.
The restriction also applies to companies that are not wholly owned by citizens or property held in trust whose beneficiary is not a citizen.
This note is meant to give a very basic indication of the purchasing process and no liability is assumed as each interested person should seek local professional advice.