Types of Land Ownership
There are two types of estate ownership of land in Kenya; freehold and leasehold.
This is absolute ownership of land as besides municipal rates, no other taxes are levied. The municipal rates are determined by the unimproved site value of the land.
In most cases, the land is owned by the government or by individuals /companies who lease the land for say 99, 999, 9999 years to the purchaser. Under such conditions, the leaseholder will transfer the unexpired term of the lease to the purchaser who will then take overpayment of the land rate and municipal rates which has to be paid before the transfers. The land rate is determined by the head lessor and depends on the locality and the property size. The municipal rate is determined by the City Council and locality of the plot.
Conditions of Sale
The purchaser pays a percentage of the purchase price, which is a government tax known as stamp duty. He also pays legal fees to the lawyer acting for him as per lawyer’s scale.
A deposit of the purchase price is payable on signing of a sale agreement and the balance on completion of registration, depending on what the vendor and purchaser have agreed.
Where leasehold land and the agricultural land is concerned, consent to transfer the land has first to be sought and this is the responsibility of the vendor but in some cases, can be the other way round depending on the understanding between the vendor and the purchaser. No consent is required where freehold land is concerned. There is also a presidential decree to plots on the 1st row and 2nd row for the beach.
N/B: It is imperative that the lawyer acting for the purchaser carries out a thorough search at the Lands Offices to ascertain that the land is free from all encumbrances before making any commitment.
Legal steps in purchasing land in Kenya
1. Identify, Search, Inspect
Identify the piece of land that you want at the lands registry so as to conduct a search. You will need a copy of the land title deed from the seller to facilitate the search. This takes around three days but you get to know the real owner of the land. It would be important to note whether there is any caution put against the land.
2. The Offer, Negotiate Price!
Once the buyer is satisfied with the search results as presented by their advocates from the lands registry and the company registry, then they will okay their advocate to prepare an offer. The advocate involved should prepare a letter of offer or intent showing the details of the seller and purchaser, the description of the property on offer, and the proposed purchase price and modes of payment.
3. Sale agreement, pay deposit
Once you all agree that’s the buyer and the seller there is need to ensure that the offer has both the terms and conditions included. It is normally drafted by the seller’s advocate and presented to the buyer’s advocate for approval. Upon the execution of the sales agreement, the agreed deposit is paid by the purchaser through their advocate to the seller’s advocate’s account.
4. Payment of land rates
A few years ago, the City Council of Nairobi “clamped houses” that had failed to remit rates. Buyers should be aware of such property because the payment of rates on land is a legal obligation of landowners and the seller should clear any pending rates on the land before completing the transaction.
5. Transfer documents and consent to the transfer
The seller’s advocate prepares transfer documents that will be executed by both the buyer and the seller. The transfer documents will only be executed after consent to transfer has been issued by the commissioner of lands.
For purposes of stamp duty, an application for valuation is always made to the government valuer, who makes a site visit to enable him or her to prepare the requisite valuation report. Stamp duty is important as it is used in registering the property.
A government valuer determines the duty to be paid. The valuation is done to determine the true value of the land on the open market as at the date of transfer. The intention is to gauge the value declared in the instruments presented for registration for purposes of ascertaining whether the value declared in the instruments will be raised or not.
7. Payment of Stamp Duty
It is the responsibility of the buyer to pay the stamp duty, a tax levied on all lands.
8. Registration of transfer
Once the registration process is complete, the legal ownership of the land shall have legally changed hands.
9. Exchange of documents
Upon receipt of the complete documents from the seller, the buyer is obligated, in exchange of the documents, to pay to the seller the entire balance against the land through his advocates to finalize the registration of the documents after paying the requisite stamp duty.