In Part 1 of this series on Transfer and Registration of Property in Kenya, we looked at some preliminary information that property buyers should have before considering a property purchase. Specifically:
- Land regimes in Kenya
- The land tenure systems under which private land is held.
- Key state actors engaged in the course of property transfers.
- Professionals that buyers should engage for the purpose of the transfer.
Transfer and Registration of Property in Kenya
In this Part 2 of the series, we delve into property due diligence and the steps and documentation to undertake in the transfer and registration of the property.
While it may seem obvious, aware of the different land regimes and tenure systems for private land, a buyer should, of course, ascertain that the subject property is classified as private land. It should also go without saying that the buyer should also ascertain the nature of tenure of the property and thereby be informed on the applicability of land rent and ground rates.
Naturally, tenure will also determine qualification for ownership (foreigners cannot own freehold property) thereby helping a purchaser determine what the process of Transfer and Registration of Property in Kenya will look like.
Transfer and Registration of Property in Kenya will entail the following steps:
Step #1: Applications for Clearance Certificates
Ideally, before placing a property for sale, the seller should pay any outstanding arrears on land rent and property rates. Thereafter, the seller should apply for and obtain land rent clearance and land rates clearance certificates. The clearance certificates indicate that the property is free and clear for transfer. Note that:
- Freehold property is not subject to the requirement of payments for either land rent or rates.
- Both these clearance certificates are required for the registration of the transfer of title from a seller to a buyer.
However, if the clearance certificates have not been obtained at the time the property is put on the market, a buyer’s recourse would be to deduct both the cost of any outstanding arrears (for both rent and rates) and any costs incidental to obtaining them (application fees and disbursements) against the purchase price. Land rent clearance is issued by the Ministry of Lands while the rates clearance certificate is issued by the local county government or municipal council.
Land rent is levied on leasehold land where the annual rent has been reserved. The land clearance certificate proves that payment of land rent is current. It is issued upon application once all outstanding levies are paid and is valid for one year from the date it is issued.
Step #2: Verification of Property Ownership
The buyer shall request the seller to provide a current copy of the property’s title deed which shall be used to perform a property search at the land registry under whose jurisdiction the property falls. The search shall confirm the identity of the owner(s) of the property. The objective of a search is:
- To confirm the real owner(s) of the property
- To confirm the status of the property, specifically to confirm if the title has been charged or has a caveat placed against its transfer.
Depending on the jurisdiction under which the property falls, the search may possibly be done online using the e-citizen platform or through manual records at the relevant land registry and should cost you KES 500.
Step #3: Verification of Property Status (Maps)
Purchase survey plans of the property. These specialized maps show delineated boundary locations, building locations and other physical demarcations. The maps can be obtained from Ministry of Lands, Department of Surveys. Specifically, a prospective buyer will want to obtain two maps – one showing the properties immediately surrounding the one under consideration, and the other giving the exact measurements of the subject property called the mutation map. Each will cost under KES 500.
Armed with these maps, the buyer can contract a surveyor to visit the property along with the seller to verify whether the details of the property on the official maps match with those physically on the ground. The verification will ascertain both the physical dimensions of the property as well as to the physical location of the property.
The importance of physical verification cannot be overstated. A prospective buyer will be able to ascertain any limiting factors that may impede enjoyment of the property such as riparian paths, road reserves, and wayleaves for trunk lines for mains electricity, water or for sewerage placed in close proximity to or on the property. While these may not necessarily be “deal-breakers” they can be and may even impact on the decision to purchase.
For example, where no provision has been made for a wayleave, a property situated close to mains power supply may become an unattractive proposition because no permanent structures may be constructed within 12 metres of the power lines. Acquiring a small plot where the shorter dimension of your property is next to such power lines may make the acquisition impractical because any improvements (construction on the land) may have to be made on only 60% of the land. With 40% of the property immediately unusable, the decision to buy may be impractical.
Physical verification will also be the opportunity to get a lay of the land, mark out the placement of the property’s beacons of the property or have a surveyor reestablish them on the day of the visit.
Step #4: Letter of Offer and Sale Agreement
Once terms and price have been negotiated and tacitly agreed upon, the buyer can commit to acquiring the property via the offer letter. The seller, through their lawyer, will then provide a written sale agreement.
Where the subject property falls within the legal definition of matrimonial property, then spousal consent must be sought irrespective of whether or not both spouses’ names appear on the title to the property. Spousal consent is often provided in the form of a written affidavit but at the stage of seeking consent for transfer, spouses must be physically present to affirm their consent. The law deems that spouses hold property as joint tenants and goes as far as to stipulate exceptions to that presumption, even where the property is registered in only one of the spouse’s names. Further, spousal consent must be sought for the purposes of charging, assigning, transferring or disposing of property deemed to be matrimonial property.
The fees charged for legal representation on property transactions are subject to the value of the property and as prescribed in the Advocates Remuneration Order.
Step #5: Application for Transfer Consent and Payment of Deposit
Once the Sale Agreement has been approved and signed by all the parties to the transaction and their witnesses, the transfer consent documentation shall be prepared and all the attendant transfer documentation attached including the buyer’s and seller’s identification documents, their PIN certificates and photographs. The buyer shall proceed to pay the stipulated deposit amount for the transaction to proceed and the transfer shall proceed.
For leasehold property, applications for consent shall be sought from the Commissioner of Lands office whereas, for freehold property, consent is issued by the Land Control Board. The seller must book an appointment with the Land Control Board (LCB) under whose jurisdiction the property falls. This board only meets once every month to process consents for transfers and the fee for the consents is usually KES 1,000. However, there is also a Special Land Control Board meeting which can be booked if the consent is sort urgently or where the parties do not wish to be constrained to wait for the subsequent meeting. The fee for booking outside of the monthly meeting is KES 5,000.
The Land Control Board essentially goes through the formality of ensuring that the seller has not violated any rights attaching to the property (for example matrimonial rights/spousal consent) and that the seller has made aware his intentions to sell the property to those who may be impacted by the sale (especially family members who would either attempt to thwart the sale or later on infringe upon the rights of the buyer).
Step #6: Pay the Balance of Agreed Purchase Price & Stamp Duty
At this stage, the transfer of the property from the seller to the buyer has been approved but has not yet been registered. There is no impediment stopping the buyer from dispensing with the payments to the seller at this point.
Before a transfer can be registered, the buyer is required to pay for stamp duty. The buyer initially obtains a payment authorization slip online via the Kenya Revenue Authority Itax portal and then proceeds to make payments via bank deposit. The current stamp duty rates are 4% of the valuation amount for lands within municipalities (leasehold property) and 2% for land outside municipalities (freehold property). The valuation of the property is not necessarily the sale price but the valuation of the property as determined by the government valuer.
Step #7: Registration of Transfer
Having dispensed with any dues to the seller, sought the approval from the Land Control Board approving the transfer and paid all stamp duty charges, the transfer of the property from the seller to the buyer can now be registered.
With the approved consent, a recent search (not older than 6 months), the clearance certificates for land rent and rates, the survey maps, sale agreement, personal documentation (identity, PIN, passport photos) and a copy of the title deed, the buyer can then proceed the Ministry of Lands and Physical Planning to apply for change of ownership. The cost for registration of change of ownership is KES 5,000.
Step #8: Issuance of Title Deed & Verification of Registration Status (Search)
Once a transfer is registered, the Ministry of Lands will issue a title deed to the new owner of the property issued in his/her names. To ascertain that the transfer has been registered, the new owner should go back to the land registry and apply for a search to be undertaken on the subject property. The search should now reveal the new legal owner and title bearer of the subject property. Following the transfer, all rights and responsibilities attaching to the property are assigned to the new owner.
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Transfer and Registration of Property in Kenya: Conclusion
- Get Professional Help: The process of acquiring property can be lengthy and arduous. It is important to work through the process using professional help to mitigate on losses of time and even money. An experienced valuer, real estate agent, surveyor, and conveyancing lawyer are some of the professionals you should line up before acquiring a property.
- The process detailed in this series provides in-depth information on how possession and ownership rights are transferred and assigned from one owner to a subsequent owner in the open market. It also details the process by which the transfer is registered in law. Of course, the owner of a property may acquire rights to ownership through other means such as inheritance or by acquiring the property at public auction.
- Additional Processes: While the process of registration will remain the same, there may be variations to the process by which the transfer happens when the property is transferred and registered through inheritance or through an acquisition made at a public auction. For instance, in the event of a sale of the property at an auction, there are additional events that may happen such as the discharge of a charge or the transfer of a charge depending on whether or not the acquisition is financed.
- Special note for leasehold properties: When acquiring leasehold property, take special note of the unexpired term of the lease as this will impact on the “viability of your acquisition. Note that the transfer will be registered for the term of the unexpired lease period. The period of the unexpired lease will have an impact on the purpose for which the property can be used and also on whether the new owner shall be able to finance improvements to the property, and the nature of the improvements the new owner can make to the property.