DUE DILIGENCE CHECKLIST FOR OFFPLAN PROPERTY PURCHASE
Buying property off-plan refers to purchasing property before construction is commenced or completed. In this type of transaction, developers usually use pre-construction layouts, site developmental plan and building plans and approvals to market and sell their properties (Apartments, Villas, Bungalows, Townhouses) to prospective home buyers and real estate investors.
As an Investor or home buyer, below are some of the due diligence checklist you need to verify before committing your finances to an off-plan property:
NO. | ITEM | DUE DILIGENCE VERIFICATION |
1. | Developer | Identify who is the Developer. Do they own the land where the construction is to be done? Is it an individual or a corporation? If a corporation, request for Certificate of incorporation, tax certificate. Conduct a search to identify the directors and shareholders. Check whether there is any entry in the encumbrance section of the search. Request for identity documents (ID/Passport bio data, Tax certificate, passport photograph) of the directors/shareholders as they appear of the search (CR 12). Identify if they have any other project they have completed. The Developer has the financial muscle to complete the project. |
2. | Title Deed/Certificate of lease | Request for a copy of title and conduct an official search at the land registry. Confirm the developer is the owner/proprietor. If not, request for proof that the Developer has authority from the owner/proprietor of the land to undertake the project. Check whether there is any entry in the encumbrance section of the title search. If there is an entry in the encumbrance section, involve the entity for consent and approval. Also ask for an escrow account for payment of purchase price. (Do not pay any agent) |
3. | Approvals: NEMA, Local County Government and NCA | Request for National Environment Management Authority (NEMA) approval. Request for Local County Government plan approval. Request for the Developer’s or their architect’s license from National Construction Authority. |
4. | Site Visit | Engage the services of a trusted Surveyor to conduct a survey report on the property to establish that the property does exist, measurement correspond to those in the title and whether construction has begun. You can accompany the Surveyor so as to also verify in person. The Surveyor will also assist in verifying the approvals by NEMA, Local County Government and NCA. |
4. | Agreement for Sale | Once the verification above is satisfactory, have your lawyer review the Agreement for Sale to ascertain the following: The terms are favorable to both parties and not one sided. The property is fully captured as is in the title document. The purchase price payment terms are convenient. There is a project competition and handover date. The default in project completion clause is well drafted to protect the purchaser. If property is charged, payment is made to an escrow account held by both developer and chargee. There is an express discharge clause upon payment of full purchase price. The dispute resolution clause is well crafted. Type of title you will obtain upon registration. NOTE: Your lawyer should be able to give you an approximate breakdown of costs associated with the transaction (purchase price, due diligence costs, valuation costs, stamp duty costs, registration costs, service charge costs, legal fees for both parties and any other cost associated with the transaction. |
5. | Registration of Transfer | Your lawyer will oversee the execution and attestation of the transfer documents and together with the Developer’s lawyer procure registration and issuance of title in the purchaser’s name as well as overseeing the handover process. |
NOTE:
- Never pay the purchase price to an agent unless formerly instructed by the Vendor.
- If the property or the company is charged, involve the Chargee.
- If the title does not belong to the Developer involve the real proprietor/owner.
- Always have a lawyer
At A.O.WANGA ADVOCATES we are happy to assist you with due diligence when purchasing property in Kenya and represent your interest as the purchaser.
For more information contact us via info@aowangaadvocates.com or +254794600191
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