Private Settlements: A Fast, Flexible Path to Property Deals in Kenya

Private settlements are unfamiliar to many, but they can offer great benefits for both buyers and sellers. In particular, for properties that present unique opportunities or whose disposal presents unique challenges, private settlements can be very ideal.

In Kenya, the usual way to handle property transactions is within a 90-day window. This isn’t set by law but is a widely accepted practice. Sometimes, plot sellers offer longer payment terms, like 6 to 12 months, especially for lower-end markets. With private settlements, these periods, for example, can be extended to much lengthier periods for the fulfilment of conditions upon which the agreement sets out conditionally, as long as both parties concur.

Private settlements offer a personalized touch, often leading to quicker sales and better outcomes for both parties. With the rise of private mediation, these kinds of transactions are gaining attention. Whether you’re in Kenya or part of the diaspora, private settlements could change the way you invest in property.

What Are Private Settlements?

Private settlements are property deals negotiated directly between a buyer and seller, or by parties who wish to make a self-determined agreement they co-own without subjecting themselves to court-determined action, public auction or listing of these properties. These deals are customized to meet the specific needs of both parties, making the process more efficient and tailored.

For example, a buyer and seller might enter into a private settlement to create a seller-financed deal that extends their transaction timeline to as many as three years or any other agreed period, depending on their agreement.

Another example would be when beneficiaries of an inherited property, who might be in dispute or lack the resources for probate, work with a developer under a joint venture. They can establish a joint venture through a private settlement, agreeing to terms that protect everyone’s interests. In this way, beneficiaries can progressively exit ownership of the property until the conclusion of probate, while the developer can enhance the property’s value and profit from it.

Similarly, a married couple undergoing divorce, can make a private settlement for the division of their marital properties and have their agreement adopted as part of their divorce decree without prejudice.

They give the parties confidentiality to handle their matters outside of public purview.

While they are by and large considered a course of action taken only where disputes between parties subsist, private settlements are also “curative” in their nature and can be used to reduce the risks that would arise from disputes.

Benefits of Private Settlements

• Speed and Efficiency – Quick Sales: They allow for quick deals. Sellers can skip the long process of listing, marketing, and waiting for offers, making it ideal for those needing a fast sale. They can also avoid lengthy legal processes by having a clear agreement that outlines their goals.
• For instance, a family with an inherited property that hasn’t undertaken succession of their deceased relative’s property would usually have to wait until that process is completed. If a buyer presents, even if the family can prove ownership, it’ll be tough to sell before succession. However, a private settlement can be drafted, detailing terms that protect both parties. This might include the buyer’s rights to the property and a payment schedule tied to the succession progress. Private settlements offer a streamlined process that is more direct, efficient and less bureaucratic.
• Tailored Agreements – Bespoke Transactions: Private settlements let buyers and sellers create agreements that fit their specific needs, including payment plans, possession dates, and unique conditions.
• Confidentiality – Privacy: These deals are more discreet than public sales, keeping the details and parties involved confidential.

Scenarios Where Private Settlements Excel

• Probate Properties & Properties That are Subject of Property Division in Divorce Matters – Selling properties under probate can be tough. They offer a streamlined solution for heirs wanting a quick sale, reducing the emotional stress of public sales. Also, properties that are subject to division when divorce happens are ideal for distribution or sale under a private settlement if the couple divorcing can agree to terms that are mutually beneficial to both of them and a prospective buyer should they choose to secure a quick exit under an amicable agreement.
• Seller-Financed Transactions – Flexible Financing Options: When sellers offer financing, private settlements allow flexible terms that benefit both parties. This can include customised interest rates, repayment schedules, and down payments, making property buying easier for those who might not get traditional bank loans.
• Urgent Sales Required – Immediate Cash Sales: Sellers facing financial issues or urgent relocation can benefit from private settlements by getting immediate cash offers and closing deals quickly. Private settlements in such instances would be ideal for buyers looking to get bargains with inherited properties, or even those sellers in distress.
• Unique Properties – Niche Market Sales: Properties with unique features or in niche markets might struggle to find buyers through public listings. They allow targeted negotiations with interested parties, ensuring the property is sold to someone who values it.

Features Making Private Settlements Attractive

• Personalized Negotiations: Direct communication between buyer and seller allows for more personalized and flexible deals.
• Cost Savings: Avoiding real estate agent fees and marketing costs makes the transaction more cost-effective, freeing up money for other needs.
• Legal Flexibility: Private settlements allow for tailored legal agreements that meet the unique needs of both parties.

Potential Drawbacks of Private Settlements

• Lack of Market Exposure: Public listings reach a broader audience and provide market feedback. Without this, sellers might miss out on potential buyers and market insights.
• Risk of Unfair Terms: Sellers might negotiate from a weaker position, leading to poorly negotiated deals. Professional mediation can help ensure fair terms.
• Gaps in Due Diligence: Buyers must conduct thorough due diligence since private settlements may lack the oversight and transparency of traditional transactions. While these deals can offer great bargains, buyers should always insist on high levels of due diligence before proceeding.

Conclusion

Private settlements provide a bespoke, efficient, and confidential approach to property transactions, making them an attractive option in many situations. Whether dealing with probate properties, seller-financed deals, or urgent sales, private settlements can yield favourable outcomes for both buyers and sellers. However, it is crucial to navigate these transactions carefully, ensuring fair terms and thorough due diligence.