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Due Diligence When Buying Property in Kenya

Due Diligence When Buying Property in Kenya: The Importance of Green Card Searches and the Ndungu Land Report

Investing in property in Kenya requires meticulous due diligence to protect against legal complications. Whether verifying ownership, conducting Green Card searches, or reviewing the Ndungu Land Report, every step is essential to making a secure investment. Partnering with experienced legal professionals like WKA Advocates ensures your property transactions are transparent, compliant, and risk-free.

Investing in property is a significant financial commitment, requiring careful planning and verification to avoid potential legal and financial pitfalls. Conducting thorough due diligence ensures that the property in question is legitimate, free from disputes, and has a clear title. In Kenya, two critical elements of due diligence are the Green Card search and checking the Ndungu Land Report. Here’s an expanded guide on what this entails and other crucial considerations.

What is Due Diligence in Property Transactions?

Due diligence involves the systematic verification of legal, financial, and environmental aspects of a property before finalizing its purchase. This process protects the buyer from potential disputes or hidden liabilities and ensures compliance with Kenyan property laws. Key components of due diligence include:

  1. Ownership Verification
    Confirm the seller’s legitimacy by ensuring they hold the legal title to the property. This can be done by conducting an official search at the Land Registry.
  2. Title Deed and Encumbrance Search
    Verify the title deed’s authenticity and ensure the property is free from any claims, mortgages, disputes, caveats, or unpaid taxes.
  3. Physical Inspection and Survey
    Physically inspect the property and engage a licensed surveyor to verify the boundaries and ensure they align with the official land maps.
  4. Zoning Regulations and Liabilities
    Assess compliance with zoning laws, building codes, and ensure there are no unpaid land rates or rent.
  5. Checking for Squatters
    Ensure the property is free of squatters and that the seller has resolved any associated issues before the transfer of ownership.
  6. Environmental and Geotechnical Assessments
    Conduct environmental assessments to identify any potential risks such as soil contamination or flooding.
  7. Infrastructure and Accessibility
    Evaluate the availability of essential infrastructure such as roads, water, electricity, and sewage systems.

Understanding the Green Card Search

For properties under the Land Titles Act (LTA), a Green Card search provides vital ownership information. The Green Card is a central document containing the history of ownership, transactions, and encumbrances related to a property. However, properties under the Registered Titles Act (RTA) and Government Land Act (GLA) do not generate Green Cards. For these, verification is conducted through title deeds and lease certificates at the relevant land registry.

Key Steps for Green Card and RTA/GLA Searches:

  • Confirm the title deed’s authenticity.
  • Conduct a land registry search to verify no legal disputes or financial claims exist.
  • For leasehold properties, ensure compliance with lease terms and government regulations.

The Ndungu Land Report: A Critical Tool for Buyers

The Ndungu Land Report is a government document highlighting properties acquired through fraudulent means or illegal allocations. Buying land listed in this report can lead to legal challenges or government reclamation. Therefore:

  • Verify the property is not mentioned in the report.
  • Consult a legal expert for assistance in identifying potential risks.

Additional Considerations for Comprehensive Due Diligence

To minimize risks further, include the following in your due diligence process:

  1. Engage with Local Authorities and Community
    Gather insights on development plans and potential conflicts in the area by consulting local authorities and residents.
  2. Use Escrow Accounts for Transactions
    Escrow accounts provide a secure way to handle payments during the property transfer process, protecting both buyers and sellers.
  3. Obtain Home Insurance
    Home insurance offers protection against damages, theft, or natural disasters, safeguarding your investment.

Why Choose WKA Advocates for Property Transactions in Kenya?

WKA Advocates specializes in guiding both local and international clients through Kenya’s property purchase process. Their services include:

  • Green Card searches for properties under the LTA.
  • Title deed verification for RTA and GLA properties.
  • Ndungu Land Report checks to ensure properties are not flagged for illegal acquisition.
  • Comprehensive legal advice to navigate complex property laws.

With a proven track record of handling property transactions for expatriates, foreign investors, and United Nations staff, WKA Advocates has established itself as a trusted name in property law in Kenya.

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Tips for Foreigners, Investors, and Expatriates Looking to Buy Property in Kenya

Tips for Foreigners, Investors, and Expatriates Looking to Buy Property in Kenya

Investing in Kenyan real estate is a rewarding opportunity, but it requires careful planning and expert legal assistance. From navigating ownership laws to ensuring compliance with zoning regulations, the process can be complex. With WKA Advocates, you gain access to top-tier legal advice tailored to your unique needs, ensuring a smooth and secure property purchase.

For professional legal assistance with your property transaction, contact WKA Advocates today. Let us help you navigate Kenya’s real estate market confidently and maximize your investment potential.

Buying property in Kenya as a foreigner, investor, or expatriate offers promising opportunities but comes with unique challenges. To make the process seamless, understanding the legal landscape and engaging the best property lawyers in Kenya is critical. Here’s an in-depth guide to help you navigate property transactions in Kenya with confidence.

Understand Ownership Laws for Foreigners

Foreigners are allowed to buy property in Kenya but are subject to specific restrictions. Ownership of land is limited to leasehold tenure with a maximum term of 99 years. To ensure compliance with Kenyan property laws, consult WKA Advocates, one of the top property law firms in Kenya. Our legal team will guide you through the applicable regulations to secure your investment.

Conduct a Full Property Inspection

Before committing to a purchase, carry out a thorough inspection of the property. This includes assessing the structure for any defects or necessary repairs. Engaging property experts ensures you make an informed decision. Additionally, WKA Advocates can connect you with trusted professionals to handle due diligence processes, including title verification and property history.

Understand Total Costs Involved in Property Purchase

Purchasing property in Kenya involves more than just the listed price. Buyers should account for additional costs such as stamp duty (ranging from 2% to 4% of the property’s value), legal fees, and registration costs. Our experienced lawyers at WKA Advocates will provide you with a detailed breakdown of all associated costs, ensuring transparency throughout the transaction.

Comply with Land Use and Zoning Regulations

Kenya’s zoning laws vary depending on location. Whether you’re considering a luxury villa in Kitisuru, an apartment in Parklands, or a commercial property in Westlands, you need to understand local land-use restrictions. At WKA Advocates, we specialize in offering tailored legal advice on zoning and planning compliance, so your property aligns with your intended use.

Secure Financing Before Starting Your Search

If you plan to finance your purchase through a mortgage, obtaining pre-approval is a critical first step. This allows you to set a clear budget and focus your search on properties within your financial range. We collaborate with leading financial institutions to help expatriates and investors secure competitive mortgage terms.

Research Neighborhoods for the Best Investment Opportunities

Kenya’s real estate market is highly diverse, offering options ranging from high-end residential properties to lucrative commercial spaces. Areas such as Runda, Muthaiga, Karen, and Westlands are renowned for their luxury and potential for capital appreciation. On the other hand, emerging neighborhoods in Nairobi and surrounding cities like Thika and Kitengela offer budget-friendly options with significant growth potential. With insights from WKA Advocates, you can make informed choices about your preferred location.

Why Choose WKA Advocates for Your Property Transaction?

WKA Advocates is recognized as one of the best property law firms in Kenya, specializing in real estate transactions for both local and international clients. With extensive experience in conveyancing, land law, and property disputes, our legal team provides unmatched expertise to protect your interests. Whether you’re investing in a luxury home in Kilimani, a commercial property in Westlands, or an apartment in Parklands, we are your trusted legal partner.

Our services include:

  • Title searches and due diligence.
  • Drafting and reviewing sale agreements.
  • Advising on compliance with foreign ownership laws.
  • Guidance on tax implications and closing costs.
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LEASES AND LICENSES

LEASES AND LICENSES IN KENYA

Differentiating between “leases” and “licenses” can be complex, especially within the real estate sector in Kenya. These terms are often used interchangeably, but they carry distinct legal implications that assign varying rights and responsibilities to the involved parties. For those participating in property transactions in Kenya, understanding the differences between leases and licenses is crucial. This knowledge helps in selecting the appropriate agreement type, ensuring your rights and interests are protected and legal disputes are avoided.

This newsletter breaks down the components and classifications of leases and licenses and outlines the distinctions between them.

A. Leases in Kenya

According to Section 2 of the Land Act, 2012, a lease is defined as the grant of the right to exclusive possession of property for a specified period. In simpler terms, this means the lessee (tenant) has exclusive use of the property, excluding even the lessor (landlord). Leases are commonly used for property transactions in Kenya and confer significant rights to the lessee.

Key Elements of a Lease:

  1. Exclusive possession: The tenant must have exclusive possession of the property.
  2. Defined interest: The lease must relate to a specific interest in land.
  3. Defined premises: The property being leased must be clearly identified.
  4. Definite period: The lease must specify a definite period, as per Section 56(a) of the Land Act.

These elements are essential for establishing a lease agreement, offering security and legal protection to both parties involved.

B. Licenses in Real Estate

A license is defined by the Land Act as a permission to use land that would otherwise constitute trespass. Licenses do not provide exclusive possession and are often used for short-term or specific-use agreements, such as for public land or community property.

Types of Licenses:

  1. Contractual license: Created by an agreement between parties, granting rights under specific terms.
  2. Bare license: Simple permission without formal agreement, which can be revoked at any time.
  3. License coupled with interest: A license that is tied to an interest in the land, granting more robust legal rights.

Licenses are generally easier to revoke compared to leases, as they provide fewer legal protections.

C. Key Differences Between Leases and Licenses

 

LEASE LICENSE
1. Grants a lessee a proprietary interest in the property. This is a more substantial legal interest, typically allowing the lessee exclusive possession of the property for a specific period under the lease agreement terms. A mere permission that allows the licensee to use the property for a particular purpose, but does not confer exclusive possession. It grants a personal privilege that does not amount to an interest in the property.
2. Is granted for a fixed period, which can be short-term or extend up to several years, depending on the agreement. Tends to be more temporary.
3. Lessees enjoy significant legal protections under the law. For instance, eviction typically requires formal legal procedures and the fulfillment of specific conditions outlined in the lease agreement. Offers less legal protection against eviction or termination of the agreement. The licensor can often terminate a license more freely, subject to the terms stated in the licensing agreement.
4. Can be transferred or assigned to others unless the lease specifically restricts this. Generally cannot be transferred unless the license expressly allows it. This non-transferability is due to the personal nature of licenses.
5. Creating a lease usually requires more formal documentation, which might include registration with relevant authorities, especially for longer durations. Can be created informally and typically does not require registration. Even verbal agreements can be upheld if proof of terms and licensee’s reliance can be demonstrated.
6. Irrevocable unless the terms provide otherwise. Revocable and can be revoked by the licensor more easily unless it is irrevocable under specific conditions (e.g., a license coupled with an interest).

Get Expert Legal Advice on Leases and Licenses in Kenya

At WKA Advocates, our Real Estate, Conveyancing, and Construction Law department is dedicated to providing expert legal guidance on property transactions, including lease agreements and licenses. Whether you are leasing property or considering a license agreement, we ensure that your rights, obligations, and interests are fully protected under the law.

We hope this guide clarifies the differences between leases and licenses in the Kenyan real estate sector. For further legal assistance, feel free to contact us:

WKA Advocates
info@wka.co.ke | wakilihub.co.ke/ | +254 798 035 580
Nairobi Hub: Parklands, Valley View Business Park, 6th Floor, City Park Drive, Off Limuru Road

Authors
William Karoki, Founding Partner
Florence Mwende, Associate
Erick Karangatha, Candidate Attorney

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real estate

Property Lawyers in Kenya

Property Lawyers in Kenya – Expert Conveyancing and Real Estate Services

At WKA Advocates, we provide expert legal representation in all areas of conveyancing and real estate development projects. Our Conveyancing and Property practice has extensive experience in advising clients on property transactions, construction law, and real estate matters. If you’re looking for top real estate lawyers in Nairobi, our team offers comprehensive legal services across all aspects of property law.

Best Real Estate Lawyers in Nairobi

Our highly skilled property lawyers in Nairobi are equipped to handle a wide range of real estate transactions. From acquisitions to sales, leasing, and developments, WKA Advocates has built a reputation as one of the best law firms in Kenya for real estate law. Whether you’re an investor, developer, or property owner, we ensure all legal aspects of your property dealings are managed efficiently and effectively.

Kenya Property Lawyers – Trusted Legal Counsel

At WKA Advocates, our Kenya property lawyers provide professional legal counsel with years of experience in property law. We have successfully handled various cases and legal matters for a diverse range of clients, from private property owners to large real estate developers. Our trusted team of property attorneys ensures that clients receive personalized legal solutions for every case.

Experienced Kenya Property Lawyers

When you choose WKA Advocates, you’re partnering with some of the most experienced property lawyers in Kenya. Our team fully embraces each case, delivering more than just legal advice. We are dedicated to protecting our clients’ interests, ensuring that each case is handled with care, precision, and a strategy tailored to achieve the best outcomes.

Real Estate Legal Services for Developers, Investors, and Property Owners

At WKA Advocates, we have the technical expertise to advise on all aspects of real estate projects, including structuring complex developments for commercial and residential properties. Our services include the acquisition and disposal of land, title processing, lease extensions, subdivisions, and drafting construction contracts. We represent real estate investors, developers, commercial and residential property owners, and private clients.

Comprehensive Legal Services in Real Estate

Our real estate lawyers in Kenya provide legal services in the following areas:

  • Real estate sales and purchase processes
  • Land use and planning
  • Joint venture agreements
  • Shareholder agreements
  • Real estate dispute resolution
  • Investment planning
  • Real estate tax and tax planning

For reliable and expert property law services in Kenya, WKA Advocates is your trusted legal partner.

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real estate

WHAT IS THE LAWFUL PROCEDURE FOR A LENDER TO SELL YOUR PROPERTY IN CASE YOU DEFAULT IN LOAN PAYMENTS?

The Legal Procedure for Lenders to Sell Property in Case of Loan Default in Kenya

In Kenya, many borrowers secure loans from banks and financial institutions by offering their property, particularly land, as collateral. This collateral is legally known as a “charge” on the property. Unfortunately, borrowers often default on loan repayments, leading to the sale of their properties through public auctions. A critical question arises: Do lenders follow the lawful procedure in exercising their statutory power of sale when a borrower defaults?

A key case that provides insight into this issue is Basil Criticos v. National Bank of Kenya Limited (Civil Appeal No. 80 of 2017). On April 28, 2022, the Court of Appeal ruled in favor of Basil Criticos, awarding him Kshs. 2,284,101,000 (KES 2.2 billion) for the improper sale of his property, LR No. 5865/2. The court found that the sale was unauthorized, improper, and irregular, violating the legal procedure under the Land Act, 2012.

The Law Governing Statutory Power of Sale in Kenya

The statutory power of sale is governed by the Land Act, No. 6 of 2012, which sets out clear steps a lender must follow before selling a charged property. If these steps are not followed, the sale may be deemed improper, as seen in the Criticos case. Below are the key legal requirements lenders must adhere to:

  1. Issuing Statutory Notices: The lender must issue a statutory notice to the borrower within one month of the default, as per Section 90 of the Land Act. This notice provides the borrower with an opportunity to rectify the default.
  2. Notice of Sale: Under Section 96, the lender must serve a notice of sale and wait for a period of at least 40 days before proceeding with the sale.
  3. Valuation of the Property: The law mandates that a certified land valuer must assess the property to ensure it is sold for no less than 75% of its market value, as stipulated in Section 97.
  4. Good Faith and Duty of Care: The lender must sell the property in good faith and with due diligence to avoid any exploitation of the borrower. Any surplus proceeds from the sale must be remitted to the borrower.

The Case of Basil Criticos: Lessons on Improper Property Sale

The landmark Basil Criticos case sheds light on how banks may act inappropriately when exercising their statutory power of sale. In High Court Case HCCC 132 of 2009, the National Bank of Kenya sold LR No. 5865/2 for Kshs. 55 million following a default on a Kshs. 20 million loan. However, Criticos argued that his liability as a guarantor should have been limited to the initial loan amount. He also claimed that the property, co-owned with Mama Ngina Kenyatta, was sold for much less than its market value of over Kshs. 3 billion.

While the High Court ruled in favor of the bank, dismissing Criticos’ counterclaim, the Court of Appeal later overturned this decision. The appellate judges found that the property had indeed been sold below its market value and that Criticos’ liability as a guarantor was limited. They awarded him Kshs. 2.2 billion in damages.

The Supreme Court Decision

National Bank of Kenya sought to challenge the Court of Appeal’s decision in the Supreme Court. However, the Supreme Court dismissed the application, affirming the appellate ruling that Criticos was entitled to damages for the unauthorized sale of his property.

Proper Exercise of Statutory Power of Sale

The Criticos case serves as a warning to both lenders and borrowers. Banks and other financial institutions must ensure they adhere strictly to the legal procedure before exercising the statutory power of sale. Key compliance measures include:

  • Issuing the correct statutory notices within the specified timelines.
  • Ensuring the property is accurately valued and sold at a fair price.
  • Conducting the sale transparently and in accordance with the law.

Borrowers, on the other hand, should be vigilant and ensure they understand their rights, especially when their property is at risk of being sold.

For legal guidance on the statutory power of sale or other property-related matters, contact WKA Advocates at info@wka.co.ke or visit wakilihub.co.ke/. Our office is located at Valley View Business Park, Parklands, Nairobi.

Authors: William Karoki – Partner
Florence Mwende – Associate