It is excusable to assume that we are experiencing a booming real estate buyers market. What with the many housing expos held every so often, and in between buyers can visit the many innovative real estate studios and property marts offering all kinds of homes.
In addition, there seems to be an unprecedented willingness to provide mortgage financing. Indeed, mortgage vendors are merely a phone call away, and are sometimes strategically seated at shopping malls, offering a wide choice of mortgage products. On the face of it, buyers are spoilt for choice.
But the reality is rather different. Away from the sales pitch, buyers are faced by the twin problems of having to negotiate contractual terms in an environment devoid of credible consumer protection laws, as well as contending with the prevailing high transaction costs.
Typically, the purchase of a house involves an offer letter, an agreement for sale, as well as title documents.
Where a buyer is being financed, there is, in addition, a facility letter as well as the mortgage documents and the occasional guarantee.
These sale and mortgage documents are usually prepared by the advocates of the seller and the financier respectively, and are essentially tailored to suit their clients’ purposes.
In most developed countries, a buyer can rely on some decent level of statutory protection against unfair contract terms.
Courts invariably refuse to enforce a contract that contains unfair or unconscionable terms. But Kenya does not have similar statutes and the courts are inclined to enforce the contract as made by the parties.
Accordingly, parties have to ensure that the terms of the contract clearly reflect their wishes. In addition, a buyer who is being financed has to ensure that the sale agreement provides for payment of the financed amount after registration.
This is because most financiers disburse funds after registration of both the transfer and the security in favour of the buyer and of the financier respectively.
The sale and finance documents are often imbued with technical terms that may prove daunting to a layperson.
Equally challenging is the necessary due diligence exercise, which has to be carried out on the property being acquired to verify such matters as the ownership, the root of the title, survey plans, building approvals, and licences.
A lawyer is best placed to carry out or coordinate the necessary due diligence and to negotiate the terms of the agreement for sale as well as the finance documents.
As a rule of prudence, therefore, a buyer needs to engage a lawyer or a law firm to act in both the acquisition and financing of a house.
Article by Peter Mwangi who is a Partner at Walker Kontos Advocates. Source: Daily Nation.
also ensure it is not on a road reserve.