By Jerameel Kevins Owuor Odhiambo
The off-plan property market in Kenya presents a compelling investment proposition, primarily due to the potential for discounted pricing and substantial capital appreciation upon project completion. Buying a property off-plan means you enter into a contract to purchase a house or apartment before its construction is finished, or sometimes even before it has begun.
In simple terms: you are buying a vision based on blueprints, floor plans, and artistic impressions, not a completed physical home. You typically pay the purchase price in staggered installments over the construction period. The main appeal is often a lower purchase price and the potential for the property’s value to increase by the time you receive the keys.
However, this sector carries significant legal and financial risks, evidenced by numerous cases of project delays, non-completion, and developer insolvency. To secure a credible house and protect one’s investment, a rigorous legal and regulatory approach, customized for the Kenyan environment, is absolutely essential.
The bedrock of a successful off-plan purchase in Kenya is comprehensive due diligence on both the developer and the project itself. This process is non-negotiable and must be led by an independent Kenyan conveyancing lawyer. First, the Developer’s Credibility must be established. The buyer’s lawyer should conduct a search at the Registrar of Companies to confirm the developer’s legal registration, directorship (via a CR12 form), and corporate history. This step aims to verify that the entity is legitimate and has a stable legal standing. Furthermore, an investigation into their track record is crucial: reviewing completed projects for timely handover and quality of finishes and seeking information on any past or ongoing litigation concerning their projects. An experienced, financially stable developer with a verifiable portfolio poses a significantly lower risk.
Secondly, the Project’s Legal and Regulatory Compliance must be verified. This involves confirming that the developer has secured all necessary statutory approvals before commencing construction and certainly before signing the Sale Agreement. The buyer must insist on seeing copies of:
Clean Title: A Title Search must be conducted at the relevant Lands Registry to confirm the developer is the registered proprietor of the land and that there are no undisclosed encumbrances, such as mortgages or cautions, registered against the mother title.
Land Use and Zoning Approvals: Verification of the approved Change of User and zoning permissions from the County Government is vital to ensure the multi-unit development is legal on that parcel of land.
Building and Environmental Permits: The developer must possess approved building plans from the County Government and a valid National Environment Management Authority (NEMA) license.
National Construction Authority (NCA) Registration: Confirmation that the project is registered with the NCA, assuring that the construction adheres to national standards. The absence of any of these is a major legal red flag that could lead to project halt or even demolition.
The Sale Agreement is the single most powerful legal tool for the buyer, and it must explicitly address the inherent risks of the off-plan model. Buyers must resist signing one-sided contracts often presented by developers and ensure the following protective clauses are included:
Payment Security (Escrow): To mitigate the risk of developer insolvency or fraud, the payment structure should ideally incorporate an Escrow Account. Payments made by the buyer should be held by a neutral third party (like the buyer’s lawyer or a trusted bank) and only released to the developer upon verification by an independent Quantity Surveyor (QS) that specific construction milestones have been achieved. This ties the buyer’s capital release to tangible project progress.
Time and Penalties: The agreement must stipulate a fixed Completion Date and a “Long Stop Date,” which is the final permissible date for completion. Crucially, it must include a clear and enforceable clause for Liquidated Damages (a pre-agreed financial penalty) payable by the developer for every day or month the handover is delayed past the contractual date. Without this penalty, the developer has little financial incentive to deliver on time.
Detailed Specifications and Misrepresentation: The contract must attach a comprehensive Schedule of Finishes and Fittings detailing the brand, quality, and colour of everything from floors to sanitary ware. This legally binds the developer to the advertised quality and provides a clear basis for legal action if the delivered unit is substandard, a common complaint in the Kenyan market.
Dealing with Encumbrances: If the project land is charged to a bank (a common practice for construction financing), the contract must include a legally binding undertaking from the developer and the bank to issue a Partial Discharge of Charge for the buyer’s specific unit upon payment of the purchase price. This ensures the buyer receives a clean title, free from the developer’s pre-existing debt.
The final stage involves securing the house and the title. Upon Practical Completion, the buyer must conduct a thorough Joint Inspection with the developer to create a Snagging List of defects. The developer is legally obligated to rectify these snags before final handover.
After handover, the contract must define the Defects Liability Period (DLP), typically a period of between 6 to 12 months, during which the developer is responsible for fixing any patent (visible) or latent (hidden structural) defects that emerge. Recent Kenyan regulations have sought to strengthen protection against structural defects, highlighting the developer’s responsibility here.
The final legal objective is Title Perfection. For apartment blocks, the developer must adhere to the Sectional Properties Act, 2020, which mandates the issuance of a Sectional Title to each unit owner. This is a critical protection, granting direct ownership and shared interest in common areas, replacing the less secure Sub-Lease model. The Sale Agreement must specify the timeline for the registration and issuance of this individual title deed.
By diligently verifying the developer’s stability, ensuring all regulatory compliance, structuring payments via an escrow mechanism, and securing robust contractual protections regarding time and quality, the buyer maximizes their legal and financial security, moving from a mere promise to the acquisition of a credible house in the Kenyan property landscape.
The writer is a legal researcher and writer