KENYA Trends and Developments Contributed by: Abdullahi Garane, Grace Mando, Elaine Murgor and Derrick Asalah, Garane & Somane Advocates
contract is concluded, but it is possible to exist in the future”. Algerian Law No 11-04 of 2011 aptly describes such contracts as agreements for the sale of a building “on designs or in the process of completion”, where the developer transfers land and building rights progres - sively as construction advances, while the buyer pays in instalments tied to progress. This structure creates distinct obligations: the devel - oper must build, while the buyer pays in phases. Pos - session is typically granted upon substantial payment or full settlement, with final completion documents including the certificate of lease issued only when the unit matches the approved plans and all regulatory requirements are met. The completion date is there - fore the most critical clause in any off-plan agreement. An off-plan contract is simultaneously a contract of service obligating the developer to build the unit for the purchaser and a contract of transfer of property. Given this hybrid nature and the buyer’s vulnerability, the legal framework must impose heightened obliga - tions on the developer and provide robust protections for purchasers. Modern off-plan sale agreements frequently include arbitration clauses. These provisions confer significant protection for investors by offering faster, more cost- effective dispute resolution than court proceedings. Arbitrators with specialist knowledge in real estate and construction can deliver informed decisions, while awards are final, binding and readily enforce - able both locally and internationally. This mechanism provides buyers with greater certainty and efficiency when pursuing remedies for delays, defects or non- performance. Legal Risks Investors Must Understand Unregulated developers Unlike many developed markets, Kenya places few restrictions on who may launch off-plan real estate projects, allowing a wide range of players to under - take off-plan developments. Anyone can initiate a project once they secure land either through an out - right purchase or a joint venture with a landowner, and obtain various regulatory approvals such as change of
user, architectural and structural plans, and National Environmental Management Authority (NEMA) envi - ronmental clearance. There are no mandatory mini - mum capital requirements, proven track records or independent financial vetting by a regulatory body. This low threshold has allowed undercapitalised or inexperienced developers to enter the market, increas - ing the likelihood of project failure, delays or abandon - ment. Joint ventures can further obscure accountabil - ity, as the developer may be a special-purpose vehicle with limited assets. For investors, this means thorough due diligence on the developer’s financial standing and previous project delivery record is essential before committing any funds. Delays, abandonment, fund diversion and structural failures This remains the single biggest deterrent for prospec - tive off-plan buyers. When developers receive sub - stantial deposits but fail to secure a sufficient number of off-takers or encounter unexpected cash-flow prob - lems, funds are sometimes diverted to other projects, operational expenses or even unrelated ventures. The result is prolonged delays often stretching well beyond the contracted completion period or complete aban - donment. Contracts typically include penalty clauses or interest on late handover, but enforcing these against financial - ly distressed or insolvent developers is often impracti - cal. In extreme cases, desperate cost-cutting or failure to adhere to regulatory and construction standards has led to structural failures and building collapses, resulting in total loss for buyers who have already paid significant sums. The fear of whether a project may be completed and investment security concerns continue to discourage many potential investors from entering the off-plan market, despite the attractive pricing. The payment structure trap – locked-in buyers Most off-plan sale agreements tie payment instal - ments to rigid calendar dates or arbitrary timelines rather than actual, verifiable construction progress. Buyers are contractually obliged to continue making instalments even when the project is visibly stalled or progressing far slower than anticipated, with limited
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