Legal requirements in property transaction

By Harold Ayodo

Many first time investors in real estate are unaware of how not to buy property.

?Eventually, prospective land or homebuyers lose fortunes to fraudsters over lack of knowledge in transactions.

?In some cases, the buyers lose their savings to trusted sellers who are either close friends or even relatives.

For starters, the multi-billion shilling real estate sub-sector is lucrative but also abuzz with fraudsters out to milk dry unsuspecting buyers of their hard-earned money.

Moreover, there are also cartels that are always hawk-eyed to ensure that their interests are catered for during transactions at the Ministry of Lands.

Majority of the swindlers in real estate are on the loose awaiting to pounce in areas where demand for property is high.

For instance, areas in the outskirts of Nairobi such as Syokimau, Mlolongo, Ngong, Ongata Rongai and Kitengela are green pastures for con artists. So are many other parts of the country.

Additionally, Nairobi remains the area where prospective investors have lost fortunes to the smart con artists.

Mostly, buyers who use bogus estate agents and brokers instead of registered professionals in transactions are the worst hit.

For instance, legal property transactions require services of a registered architect, estate agent, lawyer, surveyor and valuer, which some investors overlook to cut costs.

There are others who burn their fingers after taking mortgages to buy dream homes without prior knowledge of consequences of defaulting.

In most cases, commercial banks seize the property and auction after borrowers continue to default after elapse of grace periods.

Back to first time buyers. Some purchase property from buyers even without exchanging legal documents.

Take the case of our reader Tom Musyoka who says he realised that he paid for a plot in Ngong without exchanging any documents with the seller.

?“I paid Sh1.5 million in cash to the seller who has been my business colleague for nearly 15 years and started construction,” Musyoka says via email.

Counter claim

Unfortunately, a couple emerged to claim the quarter acre plot where Musyoka had already laid the foundation of his family home.

“My friend who sold me the land assured me that he would transfer the title deed to my name within three months but I am now sceptical,” Musyoka says.

According to Musyoka, the couple that claimed the plot showed him a copy of a title to the land with them as joint registered owners.

And now, Musyoka asks of the legal documents required to transfer the plot from the name of the seller to his.

“I may have overlooked several legal requirements in purchasing the property as it was my first investment in real estate,” he says.

?First, Musyoka should have sought the services of a registered lawyer to guide him in the transaction.

Conducting an official search at the Ministry of Lands would enable him know the registered owner of the plot before paying Sh1.5 million for it.

Furthermore, paying cash for a house or a plot does not make you the owner, as legal documents must be lodged at the Ministry of Lands.

Apart from the lawyer drafting a sale agreement stipulating details of the transaction and signed by both buyer and seller, more is involved.

Other required documents to complete transfers at the Ministry of Lands include the original title deed and a consent to transfer signed by the Commissioner of Lands.

Vital documents

There are also transfer forms — in triplicate —with passport size photographs of the buyer and seller affixed complete with signatures and attestation by the conveyancer (property lawyer).?

Also required are land rates clearance certificate from the Ministry of Lands as proof that the seller settled the dues with the Government.

A land rates clearance certificate from the municipality is an indication that the seller has paid up revenues with the local authorities.

Copies of national identity cards and Personal Identification Number (PIN) of both buyer and seller attested by advocates as true copies of the original are also needed.

It does not end there. The buyer must pay stamp duty, which, is charged at four per cent of the value of the property within urban areas.

For property located in rural areas, stamp duty is charged at two per cent of the current value of the property.

For instance, an apartment that sells for Sh10 million would attract stamp duty of Sh400,000 in urban areas while the same property in rural areas would attract revenue of Sh200,000.

Nevertheless, payment of stamp duty is among revenues that cartels used to rip the Ministry of Lands off billions of shillings annually.

But recently, the Ministry of Lands automated its services making it difficult to evade payment of the revenue.

With all the documents, the lawyer presents them at the Ministry of Lands to transfer the name of the seller to the buyer in the title deed. That is the legal procedure.