Do not trust that rosy brochure

Some real estate brochures carry more promise than the reality.

They showcase pristine homes in a tranquil community, complete with well-lit streets and access ways, golf courses, clubhouses, gyms, and saunas while what is actually on sale is a vacant plot without any commitments for the infrastructure or any extras.

It is understandable that many buyers are enthralled by the aggressive marketing and make their decisions with expectations that the roads, street lights, and other add-ons will be provided later to serve the plots.

But unless the formal sale agreements commit the sellers to certain deliverables with clear timelines, the picturesque estate and dream house may not be achieved, at least not as showcased.

A buyer who bought the dream as captured by the brochures but failed to have this mirrored in the formal documents may feel short changed when reality dawns, but there is nothing he can do.

The absence of credible consumer protection laws in Kenyan statutes means that such buyers often get the short end of the stick.

The sellers are able to ring-fence liability from any promotional misstatements by appropriate wording in sale agreements, which override any oral or written representations or misrepresentations preceding the agreements.

Accordingly, a duty is imposed on the buyer to carry out due diligence on the title being acquired, and to ensure that the agreement for sale reflects the word and spirit of the transaction.

The Latin phrase caveat emptor, which means “let the buyer beware”, has been used to highlight the duty of the buyer to look out for himself and make decisions based on independent assessment and verification.

Buyer least informed

Most real estate transactions involve two principals — the buyer and the seller — guided from start to closing by several professionals such as real estate agents, lawyers, and financiers. Invariably, the buyer is generally the least informed about the nuances of the transaction and is the one in need of protection.

In Kenya, buyers have often relied on the terms of the contract, the diverse legal statutes, and the common law to cobble together some measure of protection.

But the new Constitution heralds a fresh beginning in the way property transactions are carried out by providing for the enactment of consumer protection laws.

Generally, these are special laws that protect end users of information, products, and services by promoting fair trade and ethical standards.

In real estate, such laws should ensure that sellers are held accountable for the correctness of the information they disseminate to buyers to avoid deceit and fraud.

Section 46 of the new Constitution deals with consumer rights and provides, in part, that consumers have a right to goods and services of reasonable quality.

The section provides that consumers have the right to information necessary for them to gain full benefit from goods and services.

In addition, consumers also have the right to the protection of their economic interests. Parliament is enjoined to enact legislation to provide for consumer protection and for fair, honest, and decent advertising.

The Constitution provides that consumer protection laws should be in place within four years from the date it came into effect.

Section 46 of the Constitution is likely to be interpreted widely to usher in comprehensive consumer protection laws, including those regulating real estate and credit and mortgage transactions.

Guidance from lawyers

In some countries, certain transactions, such as loan closing and settlement, have to be undertaken with guidance from lawyers to ensure that the borrowers are fully informed about the obligations they assume as well as all the key milestones of the transaction.

Some laws require a period of reflection before the contract becomes formal and binding.

With the imminent enactment of credible consumer protection laws, sellers of real estate will now have to get used to another equally famous Latin phrase, caveat venditor, which means “let the seller beware”, a euphemism for being your brother’s keeper.

Thus, sellers may find that information contained in brochures will bind them, and that any deviation may give rise to a claim in damages for fraud or breach.

The writer is a partner at Walker Kontos Advocates. Send your property questions to [email protected]