The Constitution of Kenya guarantees every person the right to own property. A property owner is free to dispose their property as they will, and disposal of property in land has become a lucrative business in Kenya. With the supply of land remaining constant while the demand increases by day, land has become an invaluable commodity, desired and acquired by many. But just how easy is it to sell land in Kenya?
Selling property can be a complex process and without vigilance, a seller can easily stumble into pitfalls. Such pitfalls could cost a seller their investments and as such, the first step to selling property is to hire a lawyer. A lawyer will not only secure the seller’s interests in the transaction but also ensure legality in the completion of the transaction.
Secondly, it is important for a seller to open an Ardhisasa account. This is now mandatory if the sale property is situate within Nairobi County. All transactions within the County can only be done through the Ardhisasa platform. This means that the seller must first ensure that their property is verified, before it can be disposed. Additionally, this will facilitate the purchaser to conduct due diligence more efficiently and timeously.
Thirdly, the seller should also confirm whether the property is subject to conversion. Conversion is the process of migrating land from the repealed registration laws and aligning them with the current land laws. Learn more about conversion here. A seller cannot deal in the property until it has undergone the conversion process. If the subject property has been listed for conversion, the seller should ensure that the property is converted before they can sell it. One can be able to navigate through these processes with the help of a qualified lawyer.
The law requires all agreements for sale of land to be in writing, signed by all the parties and attested by a witness who is present when the contract is signed.This is a crucial stage where the seller needs a lawyer. The seller’s lawyer drafts the Agreement for Sale and negotiates the terms of the agreement on the seller’s behalf.
The seller n eeds to look out for the ‘Purchase Clause” which is vital in securing the vendor’s interests. It provides for the selling price and elaborates the manner in which payment is to be effected. This clause will be curved differently depending on whether the purchase is being financed or not. The lawyers also secure the vendor’s interests through a document known as a professional undertaking especially where the buyer is taking a loan facility to pay for the property. Professional undertaking is a promise given by an advocate to another qualified advocate, undertaking to do a certain action. This document enables the vendor to release completion documents upon assurance that they will receive the agreed purchase price.
The seller should also be keen not to allow the purchaser possession of the property before registration has taken place. This is because all the risks in the property are borne by the seller until registration of the transfer of the property is completed. This is risky since the seller can only evict such a person peaceably or by court order (i.e. the buyer must leave on their own volition and if not the seller has no choice but to go to court).
This stage mandates the seller to collate and surrender completion documents to enable the purchaser to register the transfer in their favour. The completion documents include the original title to the property, duly signed Transfer document, copies of the seller’s identification documents and KRA PINs.
Consents are essential completion documents that a seller is required to surrender to the purchaser to facilitate the process of registration. Consents help to validate land transactions by shielding the seller from a person who would have otherwise had a legal right to challenge the validity of the transaction. Such consents include Land Control Board Consent, Spousal consent. Most lawyers will require a seller who’s not married to swear an affidavit to that effect. This protects the seller from problems that could ensure thereafter. Once the seller has collated all the required completion documents, they are transmitted to the purchaser, upon payment of the remainder of the purchase price.
The actual transfer of interest in land is an obligation usually bestowed on the Purchaser. The seller’s mandate is to execute the transfer instrument. In the inception of Ardhisasa, the Seller’s obligations have been heightened to the execution and approval of the transfer on the Ardhisasa platform. This is to mean that both the Seller and the Purchaser must approve the transfer to signify that the transaction is voluntary.
The last facet of the transaction is fulfilment of tax obligations. The seller is required to pay Capital Gains Tax on the profit acquired on transfer of the property. Capital Gains Tax is payable on or before the actual transfer of the property, but not later than the 20th day of the month following the month during which the transfer was completed. Initially, the Capital Gains Tax payable was 5% of the capital gained from the transaction. Currently, with the inception of the Finance (Amendment) Act of 2022, the rate has been increased by 10%. Therefore, Capital Gains Tax payable is 15% of the gains obtained from the sale of the property.
It is paramount for sellers to involve professional and creditable lawyers whenever they are selling land. This ensures that they receive proper legal advice and vigilant representation in protection of their interests. The above-discussed process can be daunting and complex. However, a lawyer irons out the complexity and helps the seller to avoid unnecessary pitfalls in the process.
Article by June Njoroge Ngwele and Fridah Gatwiri