Additional Costs when Buying or Selling Property in Kenya
When buying or selling land or property in Kenya, there are several additional costs beyond just the purchase price that you need to factor into your budget. Being aware of these extra fees and expenses is crucial for proper financial planning. Let’s go through the main costs involved.
Agents’ Costs (Commissions)
If you enlist a real estate agent to help you find a property or a buyer, you’ll be responsible for their commission. Agent fees are generally negotiable but typically range from 2-5% of the sale price. This “commission” fees is separate from the property transfer and legal costs.
Search (Due Diligence) Costs
During due diligence, your lawyer may need to obtain several documents, including:
– An official search from the relevant land registry
– A certified copy of the greencard from the relevant land registry
– A certified copy of the Registry Index Map from the Survey of Kenya
– A Survey Report from a licensed Surveyor
These costs vary from registry to registry and are typically borne by the buyer.
Utility Costs
Ensure that all utility bills, such as water and electricity, are settled by the seller before the transfer of ownership. Unpaid bills can be transferred to the new owner.
Consents
- Land Control Board (LCB) Consent: Required for selling land in “agricultural” areas, with costs ranging from Kshs. 1,000 to Kshs. 20,000 depending on the type of consent.
- NLC Consent for Leaseholds: For leasehold property, you might need consent from the National Land Commission (NLC).
- Management Company Consent (Apartments/Flats): Apartment or flat dwellers may require approval from the management company, with fees determined by the management company.
Land Rates and Rent
– Land Rates: Collected by the County Government where the land is situated.
– Land Rent: Collected by the Ministry of Lands and Physical Planning.
– Payment of Accrued Rates and Rent: Ensure that the seller settles all outstanding rates and rent before transfer, as liability shifts to the new owner.
Stamp Duty
– Definition: A mandatory tax charged on property transfers in Kenya.
– Determination: The market value of the property is determined by a government or private valuer.
– Exemptions: Transfers between spouses, deceased person’s property to beneficiaries, and certain other transactions.
– Payment: Borne by the purchaser and collected by the Kenya Revenue Authority.
– Rate: 2% of the property value for rural areas and 4% for urban areas.
Lawyers can assist with calculating and paying stamp duty.
Valuation Costs
– Purpose: To ascertain the current market value of the property for stamp duty assessment.
– Costs: Borne by the buyer and may involve government or private valuers.
Legal Fees
– Engaging a specialized/competent Lawyer: Highly recommended for conveyancing and land transactions. The lawyers handle contract negotiations, due diligence, document verification, and registration.
– Fees: Legal fees are subject to minimums prescribed by the Advocates Remuneration Order, typically starting at 2% or Ksh 35,000, and increase with property value. Additionally, a 16% VAT applies to legal fees.
Registration Expenses:
Registration fees for transfer instruments vary by registry and are borne by the buyer.
Other Possible Costs
Depending on the transaction, there could be additional costs like stamp duty on the initial sale agreement. Discuss any unique charges with your lawyer upfront.
Post-Registration Costs
Capital Gains Tax: Payable by the seller. It is a tax on the profit earned from property transfer. Currently, the rate is 15% of the net gain (sale proceeds minus acquisition and incidental costs). Exceptions include transfers between spouses, inherited property, or sale of a private residence owned and occupied for three years before sale, land transfers below Ksh 3 million, and agricultural land under 50 acres outside urban areas.
Conclusion
In conclusion, buying or selling land in Kenya involves numerous costs beyond the purchase price. It is essential to budget for these fees to ensure a smooth and successful transaction. Consult with a licensed advocate to guide you through the process and avoid any potential pitfalls.
Remember: The above is not specific legal advice for you. Always consult a lawyer to determine the best option for your specific situation
© MMTK Law
info@mmtklaw.com | +254 700 720011