Home ownership is the dream of every person, while some prefer purchasing affordable pieces of land in satellite towns to build their dream homes gradually, some would rather buy an already built house. However, others opt to acquire off-plan houses. Whichever option you elect to use,you must not burn your fingers. Below are 10 things to look out for before investing in off plan houses:
Check the company’s background thoroughly
Take time and establish details about the company before signing any deal. There are several companies purporting to sell off plan houses and have not been delivering on their promises.
The first thing to do is check whether the company is legally registered, how long they have been in operation, the number of projects completed.
Also check whether they have a pending court case regarding with past customers.
Most of the information is available on social media pages, websites and blogs and it will help you identify a genuine real estate company in Kenya that you can invest with.
You can then go ahead and request to meet the project’s team.
Seek professional advice
The real estate industry is comprised of professionals including lawyers, independent contractors, surveyors, valuers and financiers.
Take time and engage them individually, some could be your friends and relatives and may be experienced in their individual fields for a very long time.
They will help you understand the decision you are about to make and advise you accordingly.
One must not shy away from seeking information from experts. This would also help minimise the risk of bad investment as they would help you in making the best decisions.
Ask questions to determine what is covered as part of the purchase price, for example, what fittings, floor coverings, painting and decorating is part of the package and what is additional.
Ask developer about intended funding structure
This is key to help one know whether the developer depends solely on the off plan sales to finance the project.
Do not shy away from asking questions such as; what happens if people stop purchasing, is there a bank loan to finance the project and what happens in case of defaults and that affects the investment?
A good developer should disclose such information to buyers and if they are not willing to provide such information one should rethink your decision.
Further, it would be important to dig deeper through research looking into project funding pools or processes.
Deal with the proper party – land owner not developer
Seek the proper party with whom the contract of sale should be executed. In a conventional sale, the status of each party is quite clear and a prospective buyer would typically conclude the transaction with the legal owner of the property.
However, complications may arise as to the proper party with whom a contract should be executed, in off plan settings.
It is worthy to note that only the legal owner of a property can pass a good title to a prospective buyer.
In other words, entering into a contract of sale with a developer who has no title to the property may have grave consequences for the buyer.
Thus, it behoves on the prospective buyer to confirm the role of the party one is dealing with.
Check whether it is the developer or the owner of the property you are dealing with.
Conduct thorough due diligence on the specific project targeted
This cuts across the board. Whether you are buying land or a house for sale in Kenya, buyers must not take chances, find time to visit the site to ascertain that indeed it truly exists.
This is also an opportunity to visit previous projects done and review the quality of work done.
Due to the cost intensive nature of the development of off plan properties, it is not unusual for such properties to have been mortgaged in favour of financiers.
Furthermore, the fact that the developer promoting the sale of the property is “renowned” is not a substitute for the prospective buyer’s obligation to conduct a detailed due diligence on the property.
At best, it should only persuade the buyer of the standard of the property to be constructed on the off plan site.
Confirm the developer has genuine title deeds
Whether purchasing vacant land or an off plan house, confirm that indeed they have the genuine title deed.
You can go ahead and do a title deed search at the lands registry with the assistance of a lawyer. Search for a title deed is the process of retrieving documents to determine details and regulations concerning it.
The documents required for a title deed search include; a copy of the title deed you are conducting search on, a copy of a Kenya Revenue Authority (KRA)pin certificate, contact details such as phone numbers, postal address and email address and a copy of an identity card.
Certificate of Occupancy
Perhaps the most debatable issue for buyers to consider is their interest after 99 years or less depending on the date of issuance of the global certificate of occupancy.
Indeed, there are several unresolved questions in this regard surrounding the interest of an original owner of a certificate of occupancy vis-a-vis an assignee under a deed of assignment with an original owner.
Whilst this discussion is not within the purview of this article, the point to note is that the interest of the prospective buyer should be adequately protected by envisaging possible outcomes upon the expiry of the tenure granted under a certificate of occupancy and wording the deed of assignment or sublease appropriately to protect the interest of the prospective buyer accordingly.
Terms of the contract of sale
Another point worthy of consideration is the adequacy or comprehensiveness of the terms of the contract of sale.
Experience shows that most contracts do not sufficiently address key issues on insurance, completion, delivery, insolvency of the developer and termination.
Indeed, what is the fate of a prospective buyer in the event that the construction of the property is delayed.
Upon failure to deliver the property within the stipulated period, or where the developer becomes insolvent and does not have the financial wherewithal to complete the property, what happens?
What happens when the buyer fails to make payments on due dates or simply decides to walk away from the purchase?
There is need for sound legal advice in the course of negotiating terms of a contract.
Root of title involuntary joining at the hip
As is common with off plan properties, several units of properties are covered under one title which is either certificate of occupancy or registered deed of assignment.
How then can the interest of a prospective buyer who wants one unit within the property be protected?
The practice is that a deed of assignment or deed of sublease is executed by the respective parties upon completion.
Copies of the title documents are then delivered to the buyer, and an assurance recorded in the agreement that the original documents will be provided when required for registration of the buyer’s interest.
However, most buyers will still seek to partition their interest from those of other buyers — which is advisable.
Sign the legal documents
With the assistance of a credible property or commercial lawyer who will help review the underlying terms and conditions, one must be safeguarded from any loss as a result of the transaction about to make.
Carefully review the contract with a legal professional and take note of the completion date and penalties if the developer does not deliver on time.
This is very critical especially in this part of the world where there are no policies protecting investors.
Laws like this protect the investors and ensure that both parties — developer and investor — benefit mutually from the project, but most importantly enables the buyer to be cushioned from the elements.