What does the transfer of property mean?
- The transfer of property is when the ownership of a property is moved from one person to another person. This happens when a property is sold or when the owner of the property dies and leaves the property to another person.
- Ownership is a right and the evidence of ownership can be found in a legal document called a title deed.
- The title deed must be registered at the Government land registry office for it to be valid.
What is an agreement of sale?
- When a purchaser makes an offer to buy the property of the seller (owner of property), and the seller accepts the offer of the purchaser, an agreement of sale comes to existence.
- An agreement of sale is a contract containing the terms and conditions of the sale of the property negotiated between the purchaser and the seller, such as:
- property description, for example, if it is an apartment it will be described as “Apartment NO 4 on 3rd floor block B together with one parking slot erected on LR NO. 209/ 123456 situate in Nairobi District” or if it Land it will be described as whole that parcel of land measuring 50 by 100 or 0.05 HA of title no LR NO. 209/ 123456, NAIROBI BLOCK 1/12345/78 etc.;
- personal information about the purchaser and seller, for example, their names, ID and PIN numbers, postal address;
- purchase price and/or deposit, if any, payable;
- details of the advocate instructed to transfer the property if you are using an advocate;
- estate agent fees or commission payable, if any;
- any other conditions the agreement of sale is subject to, for example, the purchaser obtaining a loan from the bank to finance the purchase (“mortgage”).
- According to the Kenya law of contract an agreement of sale of property will only be valid if it is in writing and signed by both the seller and the purchaser.
- An oral agreement of sale is not binding in law.
- The agreement of sale forms the basis for the transfer of property. Without a valid agreement of sale, and compliance with the terms and conditions contained therein, the process of transfer of property can be compromised.
How is the purchase price of the property payable?
- The payment of the purchase price may be made in cash or by obtaining a loan or mortgage.
- The agreement of sale may provide for a deposit being payable by a certain date.
- The payment of a deposit demonstrates a commitment by the purchaser to purchase the property but it should be paid after confirming the property is authentic by conducting a due diligence on the property.
- When the purchaser is unable to pay the full purchase price, the purchaser can obtain a loan or mortgage. The purchase price may then be secured by a bank guarantee.
- The purchase price or bank guarantee must be given to the advocate representing the seller, pending the transfer of the property. On the request of the purchaser or seller, the purchase price may be invested into an interest bearing bank account as the process of transfer is still being done.
- Normally, it is safer and advisable that the full purchase price may only be payable to the seller on registration of the transfer at the lands office.
How does the transfer process work?
The complete transfer of property process can take up to between 60 to 90 days. There are different phases involved in the transfer of a property, these phases are:
- Negotiations:the purchaser and seller meet and negotiate on the price. The negotiations can be done through an agent or directly. In other instances, the purchase price is fixed and there is not room for negotiations.
- Due diligence: it is advised that the purchaser should conduct a search over the title of the property to establish if the property is genuine and if the seller is indeed the owner of the property. A further due diligence can be done at the survey department, the Ndungu report, National Environmental Management Authority (NEMA), Kenya airports Authority, Kenya Civil Aviation Authorities, Kenya railways and national parks authorities.
- Drafting and signing of sale agreement:As soon as all the information and documents have been collected, an agreement is drafted (recommended by a lawyer or employ Lawyer101) and request the seller and purchaser to sign them.
- Payment of deposit: the purchaser maybe required to pay a deposit to the seller or his advocate after signing the sale agreement. It is highly advised that the deposit is paid to the sellers advocate to hold until the transfer is completed but the deposit can still be paid directly to the purchaser.
- Collection of documents: the seller is required to collect all the relevant documents to facilitate the process of transfer of the property e.g. original title deed, copy of ID/passport of seller, copy of KRA PIN, original rates or rent clearance certificate, consent to transfer, spousal consent (if seller is married) and signed transfer document.
- Clearance certificate:Obtaining a clearance certificate from the municipality or national government, confirming that all amounts in respect of property have been paid for the last two years.
- Valuation and Payment of stamp duty:upon obtaining all documents the property is valued by KRA valuer to determine the current value and thereafter pay stamp duty on the transfer. Stamp duty tax is either 2% for freehold properties or properties out of the municipalities of 4% for leasehold properties of properties within the town zoning.
- Registration:The documents are prepared for lodgement (submission) of the documents necessary for registration at the ministry of lands offices in the relevant county registry. Once the transfer and other documents have been lodged it, takes the ministry of lands about 7 – 14 working days to examine these documents. If the ministry of lands is satisfied that the requirement for the transfer of property has been met, the transfer of property is registered and a new title issue or entry of the new owner is made on the title.
- Completion:Once registered, the necessary calculations and payments relating to the sale, for example, the estate agent’s commission, purchase price and so on. The balance of purchase price or full purchase price is sent to the seller and the purchase takes full possession of the property.
What else should a person know about the transfer process?
- Normally there are at least 2 advocates involved in the transfer process, being the sellers advocate and purchaser’s advocates. Sometimes they can be more if the bank is involved to finance
- The purchaser and seller should pay their own legal fees or other costs unless agreed otherwise
- The purchaser who is getting a mortgage or financing from the bank is required to pay the banks advocate legal fees.
- The costs relating to the transfer of property are:
- stamp duty to KRA;
- consent to transfer from county or national government
- consent to charge if getting a loan
- rates payable to the county government;
- advocates fees
- registration cost at the government registry
- fees to the relevant banks.
- The registered title is given to the purchaser if the property was paid for in cash, alternatively the purchaser’s bank if a mortgage or loan was registered over the property.
For more inquiry about Purchase & Sale of property please chat us on the chat option through our Wakili 101 mobile APP or www.wakili101.com and our dedicated team of advocates will respond to you immediately.