Land for sale

If purchasing a land through a mortgage, understand the rates of the mortgage and how much you will need to repay later.

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Planning to buy land? Step by step guide will protect you from fraudsters

What you need to know:

  • Increase in appetite for land amongst a growing middle class has seen an increase in cases of fraud.
  • It is upon the buyer to take precautionary measures to ensure they do not fall victim to fraudsters.

The rise in consumer spending power and subsequently the appetite for home ownership amongst Kenya’s growing middle class has seen the prices of land shoot up to rates higher than in most advanced economies. In just a decade, an acre of land which cost Sh49 million in Nairobi now costs Sh150 million.

A recent report released by real estate firm, Hass Consult, reveals that within just four months from March 2021 to July, land prices shot up by up to 6 percent in satellite towns of Nairobi and by more than 2 percent in upmarket areas within the city.

An acre of land in Ngong which cost Sh23.7 million in March increased by 6.07 percent to Sh25 million in July, while the price of an acre increased by 4.2 percent in Mlolongo to Sh29.8 million, 3.28 percent in Tigoni to Sh25.2 million and 2.76 percent in Donholm to Sh70.8 million.

This is not all, an acre in Nyari rose by 2.18 percent to Sh107.9 million while in Gigiri, an acre of land now costs more than Sh232 million.

The increase in appetite for land and the desire for home ownership amongst the country’s growing middle class has subsequently seen an increase in cases of land fraud, where unscrupulous dealers especially prey on first-time buyers.

Though the recently launched National Land Management System is set to play a big role in curbing fraud through promoting transparency in land transactions, there are still elements which the system does not address.

For instance, the system does not address elements such as the history of the land in question to know whether there are disputes involved, the quality of the land, the correct value of the land, and other critical issues often overlooked such as drainage of the land.

It is, therefore, upon the buyer to take precautionary measures to ensure they do not fall victim to fraudsters.

True owner of the land

Anthony Havelock, Head of Agency at Knight Frank Kenya, says the first step therefore, after identifying a piece of land that is satisfactory in convenience, size, soil type or location, is to enquire whether it is registered and available for use by conducting a land search using details on the title deed, which you will need to acquire from the vendor.

Previously, you had to walk into the lands registry offices at the county and national levels to get this kind of information, but this process has been made simpler through the National Land Management System which integrates all land data on one platform.

“Conduct a search to know the true owner of the land, to know whether the land has a restriction such as a caveat, unpaid rates, or a bank charge, to know the exact size of the land as captured in the land records, to know the history of the land, and to know the rent payable to the government, if there is any,” says Havelock.

Upon ascertaining that the land is available, Havelock points out that it is advisable to instruct the services of a licensed land surveyor to verify dimensions of the land and confirm the availability of boundaries.

Once that is established, the next step would be to instruct the services of a reputable agent to get you a market estimate of the value of the land, thereby protecting you from possible exploitation from the seller or brokers. A good agent will also help you get the best deal on the land.

He says you should also instruct the services of a conveyancing lawyer, the aim to receive appropriate legal representation throughout the sales process.

A lawyer will also help you to verify documents such as wills, letters of administration of a deceased’s estate, and letters of allotment. Exchange of monies throughout the land transaction process is also safest when done through lawyers as opposed to directly from the purchaser to the vendor.

“While these services might cost you some money at the beginning, it is a cost worth bearing because it saves you from losing millions of your money to unscrupulous dealers,” says Havelock.

Binding agreement

He adds that due diligence on the land in question can also be done through asking land owners nearby questions regarding the legitimate owner of the land as well as the history of the land ownership to find out whether there are disputes involved. Other general questions that are often overlooked include those that will tell you about the state of the drainage, availability of water and reliability of electricity.

Once you are certain that the land in question is fit for purchase, you can instruct your advocate to prepare a letter of offer. The letter of offer is not a legal document, rather, a binding agreement between the two parties involved that proves commitment.

“Some letters of offer demand that buyers pay a requisite down payment of at least 10 percent of the purchase price immediately on signing it. Alternatively, the buyer and seller can mutually agree to open an escrow account which their advocates would oversee until completion of the sale. You should, however, avoid paying a booking fee, or deposits that exceed 10 percent of the purchase price of the land,” advises Havelock.

After the letter of offer is signed, the seller’s advocate will draw up a sale agreement indicating the names of the buyer and seller, the agreed-on price, the mode of payment and documents to be supplied by the seller to facilitate registration of the transfer of land to the buyer.

Before signing it, you will need to facilitate the area land control board (LCB) comprising of the area elders and the county commissioner with a fee ranging between Sh1, 000 to Sh5, 000 to ascertain legality and transparency of the trade.

The consent from the LCB, together with other documents such as land rent certificate, sale agreement, old title deed, KRA pin, land search, rates clearance from county and transfer instrument shall then be forwarded to the National Land Commission to get a consent to transfer ownership of the land. This costs Sh1,000. 

The buyer would then be required to pay for a stamp duty charged at the rate of 4 percent of the value of land in urban areas and 2 percent for rural areas to the Commissioner of Domestic Taxes, before proceeding to settle the balance of the agreed payment to finalise the trade and become the legal owner of the property. Once that is done and you have acquired the piece, you can fence it to restrict encroachment.

If purchasing the land through a mortgage, Havelock advises, understand the rates of the mortgage and how much you will need to repay later. The threshold of getting a mortgage through Kenya Mortgage Refinance Company is to have a salary of Sh150,000 and above, but those earning less than this can either pool together, or approach cooperatives and saccos to acquire loans.