Agreements for the sale of land in Kenya are very important. These are written legal contracts between parties buying and selling real estate, such as vacant land, houses, apartments, commercial buildings or some other real property. They contain the terms and conditions in a transaction, which protect the respective interests of both the buyer and the seller.
According to Section 3[3] of the Kenyan Law of Contract Act, a person cannot institute a case in court on the reliance of a sale of land agreement which had not been put down in writing. In addition to writing, the sale of land agreement should be executed [signed or marked with a finger print] by both the buyer and the seller and the signature of each party should also be attested by a witness who is present when the contract is executed by the parties.
Although there is no prescribed format for writing agreements for the sale of land in Kenya, there are some salient content that should be included in all agreements for the sale of land. The following is a non-exhaustive list of such content:
This refers to the names and identification details of the parties contracting who are usually the buyer and the person selling the land in his capacity as the land owner. However, there are some instances when the parties could be other persons with power of attorney to contract on behalf of the registered land owners. In this section, it is usually indicated that a reference to the parties may include a reference to the administrators to the parties’ estates if the context may so provide. This is important because such administrators would be bound to fulfill the obligations of a party who may die before the completion of an agreement.
In this part, the full names of the parties, their Identity Card Numbers, phone numbers and addresses are included. However, if both or one of the parties is a company or an organization [called legal persons], the name of such a company and its unique registration number are included instead of the names of its directors or shareholders.
This entails a sufficient description of the property subject to an agreement which includes information about the land’s title registration number, its size and location.
This refers to the explanation of the meaning of words and phrases as used in the agreement. This is important because it prevents ambiguities which may result into disagreements about the meaning of some words or phrases in case of a dispute.
Under this part, it is indicated whether the agreement would incorporate the LSK Conditions for Sale .It is worth noting that the said conditions are not mandatory and parties may agree to exclude all or some of the conditions.
It is important to unequivocally indicate that the seller has agreed to sell his land to the buyer and that the buyer has agreed to buy that land. In the law of contract, this is referred to as a consensus ad idem or “the meeting of the buyer’s and the seller’s minds”. Again, the particular land being sold should be specifically described for clarity. The interest being sold could be either a freehold or a leasehold title.
This refers to any conditions which would be specifically unique to a given sale of land agreement.
This section includes the agreed purchase price of the land and the initial deposit to be paid by the buyer before or at the time of signing the agreement. If the parties agree that the payments would be in installments, the date of each payment and the amount to be paid should be clear and not palpable to conflicting interpretations. The method of payment should also be indicated, e.g. whether it would be by cheque, direct cash transfer, cash etc. However, cash payments should be avoided but if this method is opted, the buyer should always get the seller’s written acknowledgment that he has received the money.
Regulation 2 of the Law Society of Kenya Conditions of Sale defines completion as the act of completing the sale of the property for consideration pursuant to the Agreement by parties and this include:
[a] Process of transferring [by registration or otherwise] the interest or estate in the Property to the Purchaser.
[b] The granting of legal possession of the Property to the Purchaser.
[c]Settlement of utilities bills and transfer of utilities accounts; and
[d] Apportionment of outgoings between the vendor and the purchaser.
This is the final chain of conveyance. The seller completes by giving the purchaser all the registrable documents plus possession and the Purchaser completes by giving the seller the balance of the purchase price.
The following consists of the completion documents that the seller may be required to deliver to the buyer:
-The original title deed.
-A transfer deed duly signed by the seller.
-Land Rent Clearance Certificate [for leasehold titles only].
-Land Rates Clearance Certificate [for municipalities/urban properties under both freehold and leasehold nature on whose rates are levied by the government].
-Consent of the Commissioner of Lands to leasehold interests.
-Consent of the Land Control Board for lands in controlled [agricultural] areas.
-Consent of any charge or mortgagee having an interest on the land.
-Notice of withdrawal of caveat or caution if there are any third parties who had interest in the property.
-Original Land Rent payment receipt.
– Original Land Rates payment receipt.
-Copy of the seller’s PIN certificate.
-Copy of the seller’s identity card/company directors.
-3 coloured passports of the seller/company directors.
-Selling company’s copy of CR 12 certificate [which shows a company’s directors].
This refers to the date before when the buyer is supposed to have cleared paying the full purchase price. Ordinarily, this is set to happen on or before the expiry of ninety days from the date of signing the agreement though the parties have the freedom to agree otherwise. However, when it is an open contract [one that only states parties, price and property] or the completion date is not stated in the Agreement, the completion ought to take place within a reasonable time. Though the completion date is binding, the parties are at liberty to mutually agree to extend it should there be any delay.
Where the parties provide that the “time is of the essence” then the completion date must be strictly adhered to and failure to complete in such a case will be deemed a fundamental breach of contract both at law and equity. The party at fault will not enforce the contract specifically but the other party is free to pursue his remedies for breach of contract including specific performance. In this case, the aggrieved party is free to rescind the contract the very next date if he so chooses. Ordinarily, time is only regarded as of essence if the parties make it an express term in the Agreement.
However, in the case of Sagoo v Dourado, The Court of Appeal provided other instances when time would be construed to have been of essence. These includes when:
[i] The parties expressly stipulate that conditions as to time must be strictly complied with.
[ii]The nature of the subject matter show that time should be of the essence.
[iii]A party subjected to unreasonable delay gives notice to the other making time of the essence.
If time had not been made of the essence in an agreement, a party is obligated to give the other party a 21 day notice to fulfill his obligations in case of a delay in doing so. In this case, a party may not rescind an agreement before the elapse of the stipulated notice period.
This is the interim period between the execution of the contract and completion. It allows for the performance of the contractual obligations stipulated in the sale of land agreement to ensure proper transfer of property.
This refers to the time of signing [execution] of the sale of land agreement after negotiations of terms of the contract.
Under this, information is given on specific matters affecting the land being sold. For instance, it is indicated whether there are some permanent structures on the land or whether the land is burdened with some form of easement. Easement refers to a right to use and/or enter onto the land of another without possessing it.
Condition 4 of The Law Society of Kenya Conditions of Sale provides that a Completion Notice must be proper and explicit. The party who is ready to complete gives the other a completion notice. Once a party gives a completion notice, time becomes of the essence and must be completed within 21 days as provided for under Condition 4[7][c].
For the notice to be valid and effective,
[a] One must limit the time of performance but the limitation must be reasonable e.g. 21 days
[b]The notice must demand performance of the contract.
[c]The notice must be explicit i.e. that the Agreement will be rescinded if performance demanded is not effected.
[d]The notice must be served on either party or their Advocate.
[e]The notice must not be premature. They should only be issued after one of the parties has defaulted.
[f]The issuer of the notice must be able, ready and willing to perform his obligations under the contract and must be able to demonstrate this willingness. e.g ability to grant vacant possession.
Here, it is indicated when the seller would grant to the buyer vacant possession of the land.
This is a very important part and either party should ensure that he understands its implications before signing the agreement. The section captures what would happen in case a party fails to honor his side of the contract and to be precise; it indicates the penalties that would accrue against such a party.
For instance, if the buyer breaches the contract, most agreements provide that the seller gives a 21 day written notice to the buyer indicating that the seller has absolute discretion to do either of the following:
[a]extend the time for completion of the agreement.
[b]rescind the agreement
[c]retain 10 % of the purchase price.
Under this section, the parties agree on who will incur various costs of the transaction. Ordinarily, each party incurs his own legal charges while it is the buyer who incurs the stamp duty charges while the seller incurs the application fees for consent by the Land Control Board.
This is a clause which provides that each and every clause in the agreement should be read distinctly and separately such that in the event that one is declared to be null and void, it should be severed so as not to affect the other clauses.
This clause cautions the buyer to conduct his due diligence on the condition of the land. This is done by stipulating that the seller shall not be called upon to point out irregularities on the land which could easily be identified through a proper due diligence.
Even after conducting due diligence, there are matters affecting the land that the buyer may not be able to establish easily. The seller should therefore be expected to give a warranty. For instance, a warranty that there are no pending court cases over the property, there are no boundary disputes , that the seller does not hold the title in trust for other family members or that there are no persons occupying the land who may have had established some interest over it by way of adverse possession.
When negotiating agreements, it is advisable to carefully predict and plan for any unexpected circumstances that may delay or make the completion of an agreement impossible. Force majeure events are usually defined as certain acts, events or circumstances beyond the control of the parties, for example, natural disasters or outbreak of hostilities. The outbreak of Covid 19, which disoriented the whole world in 2020 and 2021, is a good example of such an occurrence.
A force majeure clause typically excuses one or both parties from performance of the contract in some way following the occurrence of such events. Its underlying principle is that on the occurrence of certain events which are outside a party’s control, that party is excused from, or entitled to suspend performance of all or part of its obligations, in accordance with the clause.
When drafting the force majeure clause, it is essential to include all the probable circumstances that would jeopardize a timely completion.
This clause outlines the general obligations of each party and when they should be fulfilled. For instance, it states how and when payment is to be made and when the seller would grant vacant possession of the land to the buyer. Again, it is under this clause that it is stated whether the agreement could be varied and how.
Under this clause, it is stated that a delay in exercising a right or power by a party does not mean a waiver of that right by the party. In other words, if a seller delays in writing to a buyer who breaches the agreement, such a delay would not stop the seller from enforcing his rights at a later date.
This refers to the affixation of one’s mark on the agreement by way of a signature or a thumb print. These marks should also be attested by witnesses who should be present during the execution. It is advisable that parties append their signatures on every page of the agreement. It is also very important to indicate the date on which the agreement is executed.
