By Faith Karanja
Savvy investors avoid taking unnecessary risks. In that regard, before making any investment decisions, they engage professionals to assess the inherent risks or liabilities, besides benefiting from sound and well informed advice. The goal is tosafeguard the return on their investment.
Currently, we are witnessing an increase in the development of high-rise commercial and residential units in various prime locations within Nairobi and other regions. As investors consider to invest in real estate ( whether it is an investment in a vacant land, an off-plan unit or already developed commercial and residential units), it is advisable to engage a legal professional to aid in the conduct of legal due diligence over the property.
Importance of legal due diligence
Legal due diligence over a land entails investigation and verification of the ownership of the land, any land disputes, existing encumbrances as well as verification of the land boundaries. This is achieved by first, conducting of an official historical search at the land’s registry. This reveals the ownership history of the property, any registered encumbrances, easements (including formal rights of way or utility wayleaves) as well as nature of the title, that is whether it is a leasehold or freehold title. Encumbrances entail any legal charges or mortgages, cautions, inhibitions or restrictions registered against the property. Encumbrances affect property dealings and often require prior consent or authorization of the third party that has registered them.
One should also confirm any reported court cases against the land. Kenya has an online database for court cases through which one can verify whether a land is subject to a legal dispute. A legal professional guides in advising how any discovered legal disputes may affect property dealings.
It is also important to peruse the Ndung’u Report. The report was prepared by the Commission of Inquiry into the illegal or irregular allocation of public land, dated June 2004. The commission was chaired by Paul Ndiritu Ndung’u thus the name. Its objective was to inquire into theillegal (irregular) allocation of land reserved for public purpose to private individuals andcorporate entities. Additionally, it was required to provide recommendations to the Government of Kenya for the restoration of the said land to its original purpose.Perusal of the Ndung’u Report is essential in confirming whether a land has been adversely mentioned in the report.
Another important step is requisition of the title. This involves requestsmade to the owner of the property to inquire and clarify its details including any undisclosed disputes or encumbrances.
Verification of the regulatory approvals, permits, licences and certificates – especially when purchasing off-plan units or already developed units – is also necessary. This ensures that the developments are legally permitted and compliant.
Physical inspection of the property is also necessary. This provides an opportunity to verify that the property actually exists. In essence, it prevents the purchase of ghost properties. It is also an opportunity to assess the location of the property – whether it is on a swampy or riparian area. The process entails engaging with the occupants of the neighbouring properties . The information received helps one to verify the details of the property.
Finally, a survey of the property through an engagement of a licensed surveyor in order to confirm the property boundaries should be undertaken.
At the end of the day, investors should aim to maximize their investment returns and being risk-aware is the first step towards a sound investment.
The writer is the managing partner at Karanja Law and Co. Advocates. Kindly share your feedback via : info@karanjalaw.co.ke.
