What Are The Steps To Buying Land In Kenya?

What Are The Steps To Buying Land In Kenya?

Buying land in Kenya can be a complex process that requires extensive research and due diligence. Purchasing land in Kenya requires following several important steps to ensure the process goes smoothly.

Steps to Buying Land in Kenya

Here are the steps to follow when buying land in Kenya:

Step 1: Identify the Type of Land You Want to Buy

The first step is to determine the type of land you want to buy. Land in Kenya is categorized as agricultural, residential, commercial, industrial, recreational, riparian reserves, forest land, national parks and reserves, wildlife corridor, gazetted historical sites, flight paths, among others.

The categorization of land is referred to as zoning. You should, therefore, enquire from both the National and County Governments whether the land in question is available for use, registered and suitable for the purpose for which you want to buy it.

Determine the size, location, and intended use for the land based on your needs and budget. Physically visit the site to inspect it.

The fastest way to find land to buy in Kenya is by searching online. When using a property portal such as BuyRentKenya, you can filter your search according to location and price, two of the most common things people consider when searching for land. You can also ask for recommendations from your networks to advise on locations where they know there is available land for sale.

Step 2: Carry Out a Land Search

Once a suitable land is identified, conduct a search at the Ministry of Lands office to confirm ownership and establish any encumbrances on the title. Also check with the county government for any unpaid land rates.

You need to carry out a search of the land and the seller to ensure that the name on the title matches the said owner of the land. It is best practice to have a lawyer assist you in the process of purchasing any type of property.

If you are buying land outside Nairobi, you will need to conduct a search at the respective Registry where the land is located.

For instance, if the land is in Machakos, check with the Survey office in Machakos. Different counties have different charges for this search. The Ministry of Lands has all the contact details for Land Registries.

Step 3: Ground Verification & Due Diligence

After carrying out a land search, you need to visit the land to verify that it exists and that it is in the condition that the seller has described. This is important to avoid buying land that has been grabbed or has disputes.

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Conduct due diligence by checking county development plans, visiting the local physical planning offices, talking to neighbors and visiting the site to determine any issues like disputes, flooding, access roads etc.

Step 4: Ask for the Mother Title

The mother title is the original title deed for the land. It is important to ask for it to verify that the seller is the rightful owner of the land. The mother title also contains important information about the land, such as its size and location.

Get the Two Land Maps. The two land maps are the survey map and the beacon map. The survey map shows the exact location of the land, while the beacon map shows the beacons that mark the boundaries of the land. It is important to verify that the maps match the land on the ground.

Step 5: Conduct a Land Valuation

Have the land valued by a professional valuer to determine the market price and ensure you are not overpaying. The valuation will also be required for paying stamp duty.

A land valuation is important to determine the market value of the land. This helps you to negotiate the price with the seller and avoid overpaying for the land.

Step 6: Draft a Sale Agreement

Hire a lawyer to prepare a sale agreement capturing all the terms and conditions agreed between the buyer and seller. Key details include the purchase price, payment schedule, completion date etc.

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The sale agreement is a legally binding document that outlines the terms and conditions of the sale. It should include details such as the purchase price, payment terms, and the date of completion.

Step 7: Land Control Board Consent

File for consent from the Land Control Board through the lands office to allow transfer of the title. This helps minimize land fraud.

Step 8 Payment of Stamp Duty

Pay stamp duty to KRA which is 4% of the land value for urban areas and 2% for rural areas. The valuation report will guide the amount payable.

8. Transfer of Ownership

The lawyer will prepare the transfer documents and lodge them with the Ministry of Lands to effect the transfer and issuance of a new title in the buyer’s name. This involves registering the transfer with the Ministry of Lands and obtaining a new title deed.

9. Registration of Title

Upon confirmation of payment of stamp duty, the new title deed will be registered under the buyer’s name to complete the transfer process.

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10. Post-completion

The buyer should conduct a fresh search after completion to confirm the land is now under their name. Fencing and notifying neighbors also helps secure the land.

Following these key steps will ensure a smooth land buying process in Kenya. Seeking professional advice is highly recommended when purchasing land.

What Is The Role Of A Lawyer In The Process Of Buying Land In Kenya

When buying land in Kenya, a lawyer plays a critical role in ensuring that the transaction is legally compliant and secure. Here are some of the key roles of a lawyer in the land buying process:

1. Conducting Due Diligence: A lawyer will conduct extensive due diligence to verify the authenticity of the title and ensure that the land is free from any encumbrances or disputes. This helps to minimize the risk of fraud and other related malpractices.
2. Preparing Legal Documents: A lawyer will prepare all the necessary legal documents required for the land transaction, including the sale agreement, transfer forms, and consent forms from relevant authorities.
3. Advising on Legal Matters: A lawyer will provide legal advice to the buyer on all legal matters related to the land transaction, including stamp duty, land rates, and land control board clearance.
4. Reviewing Documents:  The lawyer reviews the title deed, survey maps, sale agreement, and other documents to ensure they are legitimate and accurate.
5. Facilitating the Transfer of Ownership: A lawyer will facilitate the transfer of ownership by ensuring that all legal requirements are met, including payment of stamp duty, obtaining consent from the land control board, and registering the new title deed under the buyer’s name.
6. Representing the Buyer’s Interests: A lawyer will represent the buyer’s interests throughout the land-buying process, ensuring that their rights are protected and that they get value for their money.
7. Dispute Resolution: The lawyer helps in resolving any disputes that may occur between the parties during the buying process.
8. Managing Risks: The lawyer identifies potential risks and finds ways to mitigate them through due diligence, proper documentation, and compliance.

In summary, a lawyer plays a critical role in ensuring that the land buying process in Kenya is legally compliant and secure. They conduct due diligence, prepare legal documents, advise on legal matters, facilitate the transfer of ownership, and represent the buyer’s interests.

It is highly recommended to engage a lawyer when buying land in Kenya to ensure a smooth and secure transaction.

Legal Requirements for Buying Land in Kenya

• Conduct a search at the Ministry of Lands office to verify ownership and confirm there are no encumbrances on the title
• Obtain a copy of the title deed from the seller to verify they are the legitimate owner
• Get a copy of the seller’s national ID and KRA PIN certificate to confirm their identity
• Conduct a search at the local county office to check for any unpaid land rates
• Acquire survey maps from the Ministry of Lands or a licensed surveyor to determine boundaries
• Ensure the seller has obtained necessary consent from relevant authorities to transfer the land
• Sign a legally binding sale agreement prepared by a lawyer to protect interests of both parties
• Obtain clearance from the Land Control Board for the transaction
• Have the land valued by government valuer to determine stamp duty payable
• Pay stamp duty to Kenya Revenue Authority based on land value
• Facilitate transfer of ownership by signing transfer forms at Ministry of Lands
• Register the new title deed under the buyer’s name after confirming stamp duty payment
• Conduct a fresh search after completion to confirm the land is now under the buyer’s name

The key requirements involve confirming ownership, verifying seller’s identity, checking for encumbrances, signing a sale agreement, paying stamp duty, transferring ownership, and registering the new title. Hiring a lawyer and valuer is highly recommended to ensure compliance with all legal requirements when buying land in Kenya.

What Are The Legal Documents Required For Buying Land In Kenya

When buying land in Kenya, there are several legal documents that are required to ensure a smooth and secure transaction. Here are the key documents:

1. Title Deed: This is the legal document that proves ownership of the land. It is important to verify the authenticity of the title deed before making any payments.
2. National Identity Card: The buyer or their lawyer should obtain a copy of the seller’s national ID to confirm their identity.
3. KRA PIN Certificate: The seller’s KRA PIN certificate is required to verify their tax compliance status.
4. Sale Agreement: This is a legally binding document that captures all the terms and conditions agreed between the buyer and seller. It should be prepared by a lawyer.
5. Land Control Board Consent: This is required to allow transfer of the title and minimize land fraud.
6. Survey Maps: These are obtained from the Ministry of Lands or a licensed surveyor to determine the boundaries of the land.
7. Stamp Duty Payment Receipt: This is proof of payment of the stamp duty, which is calculated based on the land value.
8. Land Rent and Rates Clearance Receipts: These are required to confirm that all land rates have been paid up to date.
9. Relevant Consents from the Ministry of Land: These are required for certain types of land, such as agricultural land.
10. Signed Land Transfer Documents: These are prepared by the lawyer and lodged with the Ministry of Lands to effect the transfer and issuance of a new title in the buyer’s name.

It is important to ensure that all the required legal documents are in order before completing the land purchase transaction. Seeking professional advice from a lawyer and valuer is highly recommended to ensure compliance with all legal requirements when buying land in Kenya.

What Are The Tax Implications Of Buying Land In Kenya

Buying land in Kenya has several tax implications that buyers should be aware of. Here are some of the key tax implications of buying land in Kenya:

• Stamp Duty: This is a tax on the transfer of property ownership and is payable by the buyer. The stamp duty rates vary depending on the value of the property being transferred
• Capital Gains Tax: This is a tax levied on the gain accrued upon the transfer of property situated in Kenya, whether it was acquired on or before January 2015. The rate of this tax is 5% of the gain and is paid by the seller or the transferor of the property
• Corporate Income Tax: Real estate companies in Kenya are subject to corporate income tax, which is calculated at a rate of 30% of the net income of the company. The net income is calculated as the company’s total revenue minus allowable deductions and expenses
• Withholding Tax: Rental income is subject to a 10% withholding tax which applies to rent payable for commercial and residential property
• Legal Fees: When purchasing property, it is highly advisable that a person engages the services of an advocate to represent them in the contemplated transaction. This will obviously attract payment of legal fees
• Value Added Tax (VAT): VAT is charged against legal fees at the prevailing rate

Here is a summary of the key taxes related to buying land in Kenya as a real estate company:

Taxes on Buying Land

• Stamp Duty: 2-4% of property value, paid by buyer upon transfer
• Higher rates for expensive properties (over KES 20 million)
• Paid within 30 days of transaction

Taxes on Selling Land

• Capital Gains Tax: 5% of gain, paid by seller
• Gain is sale price less adjusted cost basis (purchase price plus improvements)
• Paid before property transfer

Taxes on Rental Income

• Residential Rental Income Tax: 10% of gross monthly rent
• Commercial Rental Income Tax: 30% corporate tax or individual graduated scale
• 10% rental withholding tax on commercial and residential rent
• Returns filed and taxes paid monthly

Other Costs

• Legal fees, valuation fees, registration fees
• Land rent, rates clearance certificates
• Agent commissions if applicable

So in summary, the main taxes are stamp duty, capital gains tax, and rental income tax. Proper record-keeping and compliance is essential to avoid penalties.

It is important to note that some of these taxes can be passed on to someone else, such as a tenant or an occupier, who is not the owner of the property

It is also important to consult a tax or legal expert to guide you so that you do not incur any penalties for unpaid tax.

What Are The Common Challenges Faced By Foreign Buyers When Buying Land In Kenya?

Foreign buyers face several challenges when buying land in Kenya. Here are some of the common challenges:

• Leasehold tenure: Foreign companies can buy land in Kenya, but it must be leasehold (99-year lease) and not gazetted for agriculture. If the land is not either of these, it cannot be purchased by foreign companies
• Financing: Foreign buyers may face challenges in obtaining financing from local banks for property purchases
• Withholding tax: Foreign buyers may be subject to withholding tax on professional fees at a higher rate than local companies
• Corruption: The land sector in Kenya is plagued by corruption, which can lead to fraud and land grabbing. This can discourage potential investors and affect the country’s economy
• Weak systems in government: The land sector in Kenya is characterized by weak systems in government, which can lead to issues such as missing files, double land registration, and illegal allocation
• High land prices: Land prices in Kenya’s urban areas are rising at a higher rate than the economy can sustain. This can make it difficult for investors to find affordable land
• Scams: Fraudsters take advantage of illiterate landowners and loopholes in land policies, leading to scams that can result in the loss of land. It is important to follow the proper legal procedures and engage the right professionals throughout the entire process to avoid falling victim to a scam

Here are some of the common challenges faced by foreign buyers when buying land in Kenya:

Legal and Regulatory Challenges

• Restrictions on freehold land ownership – Foreigners can only own land on leasehold basis for up to 99 years. Freehold ownership is only for citizens.
• Limitations on owning agricultural land – Foreigners require approval from the Land Control Board to own agricultural land.
• Complex land laws and regulations – Foreign buyers may find it difficult to navigate the legal requirements around land transactions in Kenya.
• Risk of land scams and fraud – Fake title deeds, double allocations, missing records make it risky for foreigners.

Transactional Challenges

• Difficulty in obtaining financing – Local banks may not finance foreign buyers so they have to make cash purchases.
• Language barriers – Negotiating and completing transactions in English or Kiswahili can be difficult.
• Due diligence challenges – Vetting land records and ownership history is complex for outsiders.
• Tax obligations – Foreigners may struggle with capital gains tax, stamp duties and land rents.

Operational Challenges

• Management difficulties – Overseeing the land from abroad can be problematic.
• Vulnerability to land grabs – Unoccupied land is prone to encroachment and adverse possession.
• Lack of local knowledge and networks – Foreigners may lack insights on the area, market, and key contacts.

Recommendations

• Engage a local lawyer to guide on legal requirements and due diligence
• Partner with locals who understand the market and can oversee operations
• Thoroughly research the land records, ownership trail and local dynamics
• Be ready to make cash purchases as financing may be difficult
• Understand all the taxes and costs involved before committing

In summary, foreign buyers face challenges related to tenure, financing, taxes, corruption, weak government systems, high land prices, and scams when buying land in Kenya.

It is important to conduct due diligence, follow proper legal procedures, and engage the right professionals to avoid these challenges.