Paying a deposit can make a property purchase feel official. However, it should not be the point at which you begin investigating the property.
A buyer should conduct appropriate due diligence before committing significant money.
Whether you are purchasing an apartment, townhouse, maisonette or standalone house, requesting and reviewing the right documents can help you identify ownership issues, outstanding charges, restrictions and other concerns.
“A beautiful house is not enough. Before you pay a deposit, make sure the documents behind the property make sense.”
1. Copy of the Title Document
One of the first documents a buyer should request is a copy of the property’s title document. The title helps identify the registered proprietor and property details. However, simply seeing a copy of a title is not enough. A buyer should independently verify the property’s registration information through an official search.
2. Official Land Search
An official land search is an important part of property due diligence. The State Department for Lands explains that a search certificate verifies ownership status and identifies encumbrances such as charges, cautions and restrictions. The current listed charge for an official search certificate is KSh 1,000. This matters because a property can have issues that are not obvious from an advertisement or a simple copy of a title.
“Never confuse a copy of a title with independent verification of the title.”
3. Seller’s Identification Documents
The buyer’s advocate should verify the identity of the person selling the property.
Depending on the circumstances, this can involve identification documents and PIN information. The purpose is to establish that the person entering into the transaction is properly identified and has the legal capacity or authority to sell the property. Where a company owns the property, additional corporate documentation may be required.
4. Sale Agreement
Before paying a deposit, the buyer should understand the sale agreement and its conditions. The agreement should clearly identify the parties, property, purchase price, payment arrangements, completion period and obligations of the parties. Kenyan law requires contracts for disposition of an interest in land to meet specific requirements relating to writing, signatures and witnessing. Recent Kenyan court decisions continue to apply these requirements. This is why a buyer should have an advocate review the agreement before signing or making a substantial payment.
5. Rates and Rent Clearance
Depending on the property, buyers should establish whether applicable land rates, land rent or other statutory obligations are up to date. Outstanding obligations can complicate the transfer process. The State Department for Lands lists rent clearance among the documents required in relevant land-transfer transactions.
6. Approved Building and Property Documents
For developed property, buyers should also investigate the development itself. Depending on the property, relevant documentation may include approvals, plans, occupation-related documentation and other records applicable to the development. This is particularly important where you are purchasing a newly developed house, apartment or townhouse.
The objective is to establish that what you are buying corresponds with the approved and registered property.
7. Documents for Apartments
Apartment purchases require additional attention. Ask for documentation relating to the apartment unit, ownership structure, management arrangements and applicable service charges. You should also understand whether there are outstanding service-charge obligations and how the development is managed. The apartment may look perfect during a viewing, but the financial and management arrangements can have a major effect on ownership.
8. Seller’s Authority to Sell
If someone is selling property on behalf of another person or entity, establish their authority to act. This can be especially important where the seller is:
- A company representative
- An executor or administrator
- An attorney
- A representative of a trust
- Acting on behalf of another registered owner
The relevant authority should be independently verified.
9. Existing Mortgage or Charge
A property may be subject to a mortgage or another registered charge. The State Department for Lands explains that a charge represents a lender’s legal interest in property used as security for a loan. If the property is charged, the buyer’s advocate should establish how the charge will be discharged or dealt with during the transaction.
10. Identity of the Property
Make sure the property described in the documents is actually the property you are buying.
Check details such as:
- Title or parcel information
- Apartment/unit number
- Physical location
- Boundaries where applicable
- Property description
- Development details
Never rely solely on the description used in an online property advertisement.
What About the Deposit?
A deposit is usually governed by the terms of the sale agreement. The amount, payment method, conditions and consequences of withdrawal should therefore be clearly documented. Do not assume that a particular percentage is automatically required in every transaction.
Your advocate should explain exactly what happens to the deposit if the transaction fails to complete and under what circumstances it may be refundable or forfeited.
“Before paying a deposit, know exactly what you are paying, who receives it, where it is held and what happens if the transaction does not complete.”
Did You Know?
The State Department for Lands currently lists an official land search as a mechanism for identifying registered ownership and encumbrances.
This makes the official search an important part of due diligence rather than simply a formality.
Expert Tip
Do not allow urgency to replace due diligence.
If a seller or agent tells you that you must pay immediately to “secure” the property, ask for the relevant documents first and involve your advocate.
A genuine transaction should have a clear documentary trail.
Frequently Asked Questions
Should I pay a deposit before seeing the title?
It is safer to request and verify the relevant ownership documentation before committing money.
Can an agent provide the documents?
An agent may provide documents supplied by the seller, but buyers should still have the documents independently verified.
Does a title copy prove ownership?
A copy of a title is not the same as an independent official search. The search is intended to verify current registry information and identify registered encumbrances.
Should my lawyer review the documents?
Yes. A property advocate can help interpret the legal documents and identify issues that may not be obvious to a buyer.
Conclusion
Paying a property deposit is a significant step in the home-buying process.
Before doing so, buyers should establish who owns the property, whether there are encumbrances, whether the seller has authority to sell, whether the sale agreement protects their interests and whether the property documentation is consistent.
Due diligence may take time, but recovering money after a problematic transaction can take considerably longer.
At Quantum Elegant Homes, we encourage buyers to approach property purchases carefully, transparently and with the appropriate professional support.
