Understanding the bedrock of a legally sound real estate contract begins with an offer, consideration, and acceptance. The person making the offer must ensure clarity while the person accepting should consider and match the terms and conditions of the offer.
But which unseen elements in the contract make it legally binding and what are the most important questions before putting pen to paper?
Before we take a deep dive into the ins and outs of real estate contracts, it is important to note that seeking legal or professional advice from a reputable real estate agent will help make informed decisions.
Question 1: Is the property legally registered, and are all ownership documents in order?
Due diligence is a non-negotiable step in securing your real estate investments and your peace of mind. The first step after receiving your offer letter would be to check the legal fine print to ensure the property is legally registered and all ownership documents are in order.
How can you verify ownership and guarantee there are no ongoing disputes on the property? You need to independently verify the seller’s title and ownership documents through searches at the Land, Company (if applicable), Probates, and Courts registries. Engaging a surveyor will prompt a physical inspection of the property to verify the land size and boundaries match the official deed plans.
Importantly, any aspiring property owner should be aware that all registered land in Kenya is subject to overriding interests such as spousal rights over matrimonial property, trusts, and rights of way/water.
On the other hand, the seller is under legal obligation to provide key identification documents such as the National Identification (I.D. Number), Passport, and KRA Pin Certificate. If the seller happens to be a company, you can request for their Certificate of Incorporation and KRA Pin Certificate.
Question 2: What additional costs should I expect beyond the purchase price?
Smart home buyers know that the sticker price is just the starting point. It is important to outline what you’ll pay for your new property, the payment schedule (installments or cash), and the due dates.
While the property description details land size, title number, and location, you also need to pay close attention to the condition of said property. Some factors that may require immediate home improvements are normally not included in the purchase price, e.g., tiling for apartments, or landscaping for lands.
You also need to be prepared for any distribution costs involved which determines the obligation of each party involved in the transaction. Some of the common costs include:
Stamp duty – When buying property in the Kenyan market, it is important to keep in mind that the buyer is responsible for paying the stamp duty. This fee is calculated at 4% of the property’s market value (for properties within a municipality) and forms an integral part of the total acquisition cost.
Legal fees – To ensure a smooth and legally sound transfer of the property title, you’ll need a legal advisor. Their fees cover the requisites of ensuring the title is correctly transferred to you which is an additional expense by itself.
Title transfer costs – You’ll need to consider the title transfer costs paid to the land registry to formally recognize and record you as the new owner of the property.
Service charge – Among other things, most shared properties like apartments include a service charge payable periodically. These are fees paid by the property occupant to cover costs of managing and maintaining shared spaces and facilities in the property e.g., water, waste management, security, etc.
Question 3: Are there any restrictions on property use or modifications?
While you are excited to make the new space your own, it is important to seek clarification on the rules governing renovations, customizations, or property use within the development.
Knowing the rules and regulations will help you understand your full ownership rights in order to protect the value of your property.
While expert guidance is paramount, arming yourself with the right questions and conducting due diligence, empowers you from hopeful buyer to informed investor.