Ten hidden costs when buying land in Kenya
When purchasing land in Kenya, it is easy to focus on the purchase price and forget about other additional charges that may arise in the course of the transaction. They can be minor or major but they add to the cost of buying a home or land. Herein is a list of need-to-know imperatives, according to Build-Kenya, an organisation that advises on construction matters in the country.
Stamp duty is the tax governments place on legal documents, usually in the transfer of assets or property.
The payment is done at designated banks. It is usually charged at 4 per cent for properties within municipalities and at 2 per cent for properties situated outside municipalities.
This payment is done to Kenya Revenue Authority (KRA) by the land selling company when transferring property.
Always get to know whether this cost is included in the cost of the land.
This is the fee paid for legal services during a land transaction. In Kenya the Advocates Remuneration Act states that the minimum amount payable to the lawyer is Sh35,000.
It is advisable to budget for between 1 and 2 per cent of the purchase price for the property as the legal fees.
However, you can always ask the land seller whether the land price has included lawyer and legal fees for the sale agreement, transfer form etc.
Registration fees is paid to the Lands Registry for purposes of making the entry into the registry and title printing costs.
The registration fees are usually around Sh500 and attestation Sh1, 000. This is another cost you need to know whether its included.
Rates and Rent
This mostly applies in leasehold properties where the registered owner of the property at any given time is required to pay rates to the county government where the land is situated.
Rent is paid in relation to property that is held under a leasehold tenure from the government and is paid to the national government.
For a purchaser, it is important to ensure that the seller gives you the records of rates and rates payment that are up to date, to enable you deal appropriately with any future queries.
Consents of transfer
This is an irrevocable written permission of the relevant Authority, Proprietor, Manager or any other interested person that is required under the laws affecting registration of land, before any dealing with respect to a specific piece of land can be lawfully registered.
Depending on the tenure of the land certain consents may be required such as Land Control Board Consent or Consent to Transfer from the Lessor.
Clearances may also be required such as Rates clearance certificates. A fee of Sh1,000 is charged for Consent to Transfer from commissioner of Lands.
This is another cost you need to ensure is factored in the price of the land you wish to buy.
Land valuation is the process of analysing a property to determine its market value for the purposes of calculating taxes or to enable leasing, sale or acquisition of property.
The costs of valuation are usually Sh1,000 for municipal plots, Sh500 for plots in other urban centres but some real estate companies pay this on behalf of clients. However, valuation for stamp duty is usually free.
In most cases land selling companies require a 10 per cent, 20 per cent, etc. of the buying price as the booking deposit and some no deposit at all.
You need to know of these arrangements and whether it is part of the total cost or not so that it doesn’t turn out to a hidden cost in future.
Title deed search
Title deed search is the process of retrieving documents showing events in the history of a piece of property to determine details and regulations concerning it.
You can either do it online if your land is in Nairobi registry or manually if in other areas, a land search costs Sh500.
If you desire to do due diligence separately, you need to be aware of this cost.
Value ads on the land
Some land selling companies grade roads, drill boreholes, fence, put a fence and a gate.
However, you can inquire on whether this costs have been factored on the selling prices to avoid incurring extra costs.
Land/plot viewing fees
This is the fee charged when you express interest to go and view a plot of land before purchasing.
In most cases some companies charge Sh500 or Sh1,000 which is non-refundable.
This is a cost that you need to be aware of as you scout for property. In most cases, it is easy when purchasing land to focus on the purchase price and forget about other additional charges that may arise in the course of the transaction.