CS Wahome asks Senate to reject Real Estate Regulation Bill 2023

Lands Cabinet Secretary Alice Wahome. [Edward Kiplimo, Standard]

Lands Cabinet Secretary Alice Wahome has asked Senate to reject the Real Estate Regulation Bill 2023 that seeks to regulate the real estate market that has a turnover of over Sh100 billion annually.

Wahome said her ministry is at an advanced stage of reviewing the Estate Agents Act with some aspects relating to the registration and regulation of estate agents in the Bill, sponsored by Trans Nzoia Senator Allan Chesang, being incorporated in the revised Estate Agents Act.

The CS, who appeared before the Senate Lands and Environment Committee in Nairobi on Monday, said the regulation of professionals is not a devolved function but under the national government while development approvals is under county governments.

“The Real Estate Regulation Bill 2023 is a good initiative in as far as it seeks to regulate real estate investors who intend to sell their properties off plan using parts of the funds contributed by purchasers. It should however exempt those who do not wish to offer properties off-plan,” said Wahome.

She told the committee, chaired by Nyandarua Senator John Methu, that most of the challenges faced are from developers who start developments and use purchasers' deposits towards the construction or to meet subdivision and infrastructure costs while subdivision and titling is incomplete.

Wahome said that the Bill seeking to regulate real estate agents and developers creates fundamental flaws as the registration of professionals and real estate projects are quite different.

The Cabinet secretary said that real estate agency is a distinct profession with training up to university and its regulation is already covered under the estate agents cap 533 of the laws of Kenya.

“I propose that the registration and regulation of the real estate agents remain as contained in the Estate Agents Act, this is consistent with other professional regulatory boards like the Surveyor Board, Physical Planners Board and Engineers Board of Kenya,” said Wahome.

She pointed out that the Bills seem to confuse an estate agent with a developer when it defines an estate agent as ‘a person who sells, offers for sale or offers for rent a piece of land, building or any other part of a building’ without qualifying that this is done on behalf of others and could be interpreted that developers are estate agents.

Wahome said that the Bill allows investors to use up to 75 per cent of the purchasers’ deposits towards development, ideally, developers and persons or entities dealing construction of property for sale, subdivision and sale of land should invest their own money to finalise the processes of construction, subdivision and titling.

The CS said that the current practice of purchasers contributing towards the acquisition and development of private properties in the hope the said developers will finalise the construction and subdivision have no legal basis, with the investors out to make profits which are not shared with purchasers.

“In the event of off-plan sales, regulations should be provided to protect the purchasers’ funds, allowing developers to use up to 75 per cent of the purchasers’ fund exposes the purchasers to loss of funds in the event of default. This is tantamount to borrowing funds by investors without sufficient safeguards,” said Wahome.

She pointed out that the real estate sector and development in particular involves physical planners, surveyors, lawyers, architects, engineers and quantity surveyors whose roles should be taken to account while the Bill seems to concentrate on registration and regulation of estate agents and real estate projects.

Chesang in the Bill, which will be going to the second reading in the Senate, said the real estate sector has witnessed a lot of fraud hence the need for a regulatory regime as the current regulatory regime has been ineffective.

“The Bill establishes a Real Estate Board to among others regulate and register real estate agents and real estate projects,” said Chesang.

The Bill further provides for the functions of developers, obligations of developers on the veracity of an advertisement or prospectus, entering into agreements for sale, adherence to approved plans and project specifications by developers.

The Bill outlines the obligations of developers in case of transfer of a real estate project to third parties, insurance of real estate projects, transfer of title and compensation for loss on behalf of purchasers.

The Bill also deals with rights and duties of purchasers where they are entitled to obtain the information relating to approved plans, layout plans along with the specifications, approved by the competent authority and such other information and to know schedule of completion of the project.

“The Bill, if passed, will take care of the needs of purchasers, including the provisions for water, sanitation, electricity and other amenities and services as agreed to between the developer and the purchaser in accordance with the terms and conditions of the agreement for sale,” said Chesang.

This Bill seeks to have the Real Estate Board formed to advise the national and county governments on the regulation and development of the real estate sector.

“The Real Estate Board will be responsible for licensing real estate agents, maintain a public database with information on real estate agents and real estate projects registered under this Act with such details as may be prescribed,” said Chesang.

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