RealEstateGuru254

Sectional Properties Act, 2020 is the law that was enacted for the administration of sectional properties in Kenya. If you intend to buy or own sectional property in Kenya such as an apartment, flat, maisonette or townhouse in a gated development, commercial office or any other property that subsists as a unit within another building or that represents a share or section of a larger property, then it would be ideal to have some basic knowledge before making the purchase.

In December 2020, the current law passed replacing the Sectional Properties Act 1987. The law was enacted in principle to align the legal administration of sectional properties with the Land Act and Land Registration Act, 2012 and with the Constitution of Kenya, 2010 following the repeal of several land administration laws.

For instance, following the process of devolution, the approvals for sectional properties fell under the purview of the municipalities and local authorities, whereas today, that mandate falls to the country governments. Their registration previously fell under the Registered Land Act which was repealed and replaced by the Land Registration Act of 2012

The Act applies to leasehold properties with unexpired residue terms of not less than 21 years and requires conversion of all long-term sub-leases intended to confer ownership of apartments, flats, maisonettes, townhouses, villas, go-downs or offices to conform to the Sectional Properties Act, 2020 and the Land Registration Act, 2012.

In this episode, Monica Mwangi, an advocate of the High Court of Kenya, and I begin by discussing what sectional properties are, and thereafter understanding the fundamental differences between the two laws (Sectional Properties Act (No. 21 of 2020) and Sectional Properties Act 1987).

We also discuss the changes that the new regime of law makes to the administration of sectional properties and how that affects property investors. One of those changes is that unlike in the past when long-term leases were issued, now, a certificate of title (if the property is freehold) or a certificate of lease (if the property is leasehold) is issued.

We also delve into the motivations behind enacting the new law, underscoring the major changes it makes to address the glaring gaps that were not addressed under the Sectional Properties Act 1987.

It is well worth noting that at the time of its enactment, the Act was widely embraced as a welcome change to the administration of sectional properties because of the protections it offered property investors with units in such buildings.

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Off-plan home purchasing schemes are often the subject of mixed sentiment in the property market in Kenya.

On the one hand, off-plan home purchasing schemes are considered an ideal pathway for home buyers to secure homeownership due to the perceived property discounts, flexible payment plans and other benefits often attached to these schemes. I say “perceived” because that’s the impression that is created. Is this the reality though, or is this just the marketer’s spin?

On the other hand, given the number of these off-plan home purchasing schemes that have failed to deliver on homebuyers’ expectations, those that were ostensibly set up to take advantage of unsuspecting homebuyers and those that may have collapsed without actually delivering homes to investors, it is easy to see that they carry an inordinately high level of risk which one must consider carefully before engaging with the property developers pushing them in the market.

In his book, Don’t Buy That House, Nashon Okowa makes a case for investors to exercise prudence, caution and tenacity in arriving at the decision to purchase property in off-plan home purchasing schemes. He elaborates in great detail on a methodology that home buyers can use to make a clear-headed, rational assessment of their decision. In this episode, I provide a review of this book, including some of my personal sentiments on the subject of investing in property in off-plan home purchasing schemes with a view to helping investors understand some of the pertinent questions they ought to pose whenever they are considering the decision. Don't Buy That House. 

At least not until you have read this book.

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In this episode, we continue the conversation around selling property in a depressed market by offering advice to a client who presented her specific scenario of the challenges she was facing attempting to dispose of her property.

We further demystify the misconception that selling property in a depressed market is solely about price by considering several scenarios to demonstrate the need for sellers to become acutely aware of the market.

Selling a property in a depressed market requires a robust and dynamic approach to positioning property offers as well as understanding the market sufficiently in order to change tack or strategy as the need arises.

Depressed markets require a keener understanding of the market. We take a close look at a scenario that challenged a client who had been attempting to sell her property for more than two years in a depressed market.

Here are some basic issues that require a deeper understanding when attempting to sell property in a depressed market:

• What is the condition of the market?
• Which factors specific to your property work in your favour - neighbourhood, location, amenities and utilities - and how can you leverage the unique selling points of our property to attract prospects?
• Who are your prospective buyers and where can you find them?
• How can you build an avatar of your prospects so that you can position your offer for maximum visibility and effectively target quality leads?
• What factors should influence your pricing decision and how can you use market information to strategically adjust pricing based on your target prospects and the leads you're generating?
• What basic measures can you take to improve the attractiveness of your offer (perception of value) that don't just target pricing?
• What is "willing buyer, willing seller" and fair market value? How can an understanding of these basic market principles help you adjust your expectations during the marketing process?
• How can you partner with property agents and other industry professionals to effectively position your offer?

Building clear narratives of the market, understanding the USPs of your property and ensuring you have an adaptable strategy to selling not may help unlock your selling goals faster.

It's a lot harder to make a sale when supply dramatically outstrips demand. However, it is possible if you are willing to put some "elbow grease" into the endeavour.

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Welcome to today’s episode of the RealEstateGuru254 Podcast, where we demystify the world of real estate in Kenya. In today's episode, we'll be discussing property encumbrances and how they can affect the transfer of ownership.

• What are encumbrances?
• What are the different types of encumbrances?
• the process by which they are placed on property?
• Who can place encumbrances on a property?
• How would you know if a property has an encumbrance?
• How do encumbrances get dispensed with?
• How do encumbrances affect the property transfer process?

And, what needs to happen before the ownership of property that has been placed under an encumbrance can be transferred?

So, what exactly is a property encumbrance? Why is it critical that any property investor make it a priority in Understanding Property Encumbrances and how they affect the property transfers and registration?

Simply put, an encumbrance is a claim or a burden on a piece of real estate that affects the owner's ability to use or sell the property. There are many different types of encumbrances, including cautions, caveats, charges, liens, easements and more.

Did you know that a registered lease whose term is unexpired serves the same purpose as any other type of encumbrance? Well, neither did we!

Did you know that the Government can place a restriction on a property that may be the subject of disputed ownership, property that may be the subject of compulsory acquisition, or that may be the subject of fraud or that may have been acquired using illegal proceeds?

Go figure!

So, what does all of this mean for someone who is looking to transfer ownership of a property, for example, you who may be looking to purchase a property that is under an encumbrance?

Understanding Property Encumbrances and how they affect the property transfers and registration is a key to the due diligence process. Thoroughly check for any encumbrances before attempting to transact on any property.

If you're buying a property with a registered charge on it, for example, you'll want to make sure that the charge has been discharged before you make any payments because the transfer cannot happen before the charge has been discharged.

And if you're selling a property, it's important to make sure that any easements or other encumbrances are disclosed to the buyer so that there are no surprises down the line. What surprises may occur down the line you ask? Well, I have seen a seller attempt to sell a vacant plot that was adjacent to a power line which would have rendered nearly 40% of the property unusable for any permanent structures. To an unsuspecting buyer, this would have been a “deal-breaker” say if they intended to use the land for home construction or development of a commercial property.

In conclusion, property encumbrances can have a significant impact on the transfer of ownership. It's crucial to be aware of any encumbrances that may be affecting a property and to handle them properly before completing a transfer. Thanks for tuning in to the "Real Estate 101" podcast. Join us for our next episode, where we'll be discussing the different types of property ownership and how to choose the right one for you.

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This episode is a follow-up to last week’s episode where we sought to understand the preliminary measures one takes before purchasing property in Kenya. In today’s episode, we want to understand, in broad strokes, how the transfer and registration process works.

Today, Monica Mwangi and I look more in-depth at the actual transfer and registration of property in Kenya.

Specifically, we attempt to address these questions:

• What should be captured in an agreement of sale between a buyer and a property seller?
• What are some of the standard practices around the agreement of sale, including the term, deposit and more that both a vendor and buyer of property should have a keen awareness of?
• What is the “reasonable pre-estimate of loss” incurred by the seller in the event of default by the buyer?
• What is the standard practice in the event that the seller reneges on the agreement of sale?
• What consents are required for the registration of transfers of property? What they are and why they are necessary for the transfer and registration process?
• A basic overview of the requirements by the Matrimonial Property Act as regards spousal consents.
• Are unmarried individuals transferring property to a buyer required to provide spousal consent?
• What is an affidavit of marital status and why is an unmarried person required to provide one?
• What is the capital gains tax acknowledgement slip and some exemptions to capital gains tax?
• What is the full list of completion documents required for the registration of a transfer of property?

Having a basic understanding of the registration of transfers of property is essential to any property investor. Hopefully, this information will help you to proactively engage with the process whenever you are in the market.

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What measures can Kenyan property investors take to ensure that their best interests are taken care of whenever they purchase a property?  Especially, how do Kenyans in the diaspora ensure that even though they may be acquiring property “sight unseen”, the property of their interest can and will be duly transferred to themselves?  Is it enough to merely seek the help of professionals during the acquisition process and if not, what else can a buyer do to protect their interest in a property? In today’s episode of the RealEstateGuru254 Podcast, our legal expert, Ms Monica Mwangi, discusses how property acquisition should be safely undertaken. We delve briefly into the following: 

1. Which property(ies) qualify as “buyable” 
2. Land tenure systems in Kenya and what type of property can be purchased. Specifically, we also address property that one should not attempt to purchase, or otherwise interfere with. 
3. We look at land tenure systems for private land addressing their ownership documents and who can own such property – including ownership of property in Kenya by foreigners. 
4. We discuss the due diligence process that a prospective buyer should undertake in-depth. Here we consider both the process as well as the professionals that should be engaged. 
5. We address the importance of ascertaining the ownership of the property. This includes the property’s “legal availability” for transfer and registration to a prospective buyer. 
6. We consider briefly specific reasons that may prevent the transfer of a property to a prospective buyer, and what measures should be undertaken to ensure that the interests of both parties, the buyer and the seller, are protected. 

It is important to have a basic understanding of land regimes and tenure systems for private land in Kenya and to be keenly aware of the implications that may come with owning that property, depending on its tenure. 

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Welcome to the RealEstateGuru254 Podcast. In this episode, we will share with you the journey that led us to create the podcast, where it all began, who we are and what values we espouse, why we are creating the podcast and what we are all about. We hope that you will join us on this journey and that you will gain insights into the real estate market in Kenya. We have many goals with the RealEstateGuru254 Podcast, but the big shall be to create a community of knowledgeable, market-savvy property investors seeking growth through their everyday and diverse experiences. RealEstateGuru254 is a hub that promotes real estate market intelligence in Kenya by deepening interactions and encouraging collaboration between investors, industry professionals and the broader marketplace.