FAQs on the Process of Buying a House/Apartment in Kenya
Real estate in the form of houses and apartments is considered a favourable asset for investment in Kenya especially in the main cities of Nairobi, Mombasa, Kisumu and in tourist areas like Malindi, Lamu, Nanyuki, Naivasha and Diani. Below, I outline the frequently asked questions I receive at Koya and Company Advocates, when I am taking my clients through the process of buying a house or apartment in Kenya.
What Due Diligence Should I Undertake?
- It is imperative to conduct a land search at the land’s registry in the location where you want to buy land; the point here is to confirm the ownership of the land you intend to buy.
- The land registry search is either conducted online via the ecitizen platform or you can lodge the application for search at the Lands office in the locality where you intend to buy the land . This land search will also reveal encumbrances on the land such as charges, mortgages where the land is used as security for a loan or caveats which prohibit anyone from dealing with or otherwise disposing of the land.
- Further if you are buying land from a developer company or a company that sells land, your lawyer needs to conduct a company’s search on the Seller company to see that the company indeed exists and that it is in good legal standing and that the land it intends to sell to you is not encumbered or otherwise disputed
Purpose of the Agreement for Sale
- Thereafter the Seller and his Advocate will draft the Agreement for Sale setting out the terms of the sale and one should play close attention to details such as whether the land is freehold or leasehold; whether it is agricultural land or not; the reversionary interest in the land etc.
- Pay particular attention to your duties as a shareholder of the management company that will be taking care of the entire housing development or estate. Pay close attention to the duration remaining on the leasehold (most land in the cities is held on a long-term leasehold basis as opposed to freehold).
How Much to Deposit as Purchase Price?
- This depends on the Agreement of Sale and ordinarily amounts to 10% of the purchase price.
What Happens on Completion: Handover the Requisite Land Transfer Documents and Payment of Full Purchase Price?
- On Completion, the Completion documents consisting of the original title, transfer document, Land rates clearance certificate, stamp duty valuation form, land rent clearance certificate, consents e.g., spousal consent are handed over in order to facilitate registration of the transfer of the apartment/house.
- On the other hand, the Buyer pays the remainder of the Purchase Price.
Is Stamp Duty Payable on Land Purchase/Transfer in Kenya?
- The Buyer then pays stamp duty on the land assessed on the value of municipal land at a rate of 4% and the value of rural land at a rate of 2%.
- Thereafter the application is lodged at the Lands Registry for registration of the transfer against the title.
- The transaction is completed and the Buyer receives a certificate of leasehold (rarely a certificate of freehold if buying in the city).