KENYA Trends and Developments Contributed by: Abdullahi Garane, Grace Mando, Elaine Murgor and Derrick Asalah, Garane & Somane Advocates
or no contractual right to suspend payments or exit early without forfeiting substantial deposits. A completion clause offers little practical protection. This mismatch between payment obligations and real project progress leaves buyers locked in, continuing to fund developments that may never reach comple - tion. It is one of the most unfair and frustrating aspects of current market practice and directly contributes to the loss of investor confidence. Reforming payment structures to align with independent milestone certifi - cations would fundamentally rebalance risk between developers and buyers. Practical Reforms for Enhanced Buyer Protection Drawing on international best practice, particularly the successful models in Dubai (Real Estate Regulatory Agency – RERA) and Algeria, and the specific chal - lenges observed daily by practitioners in Kenya, the firm proposes a focused set of reforms that would significantly strengthen buyer protection while main - taining an entrepreneurial development sector. These reforms directly address the risks outlined above. Pre-marketing licensing and developer vetting In July 2020, a committee appointed by the principal secretary of the State Department for Housing and Urban Development recommended the establish - ment of the Real Estate Developers Regulatory Board (REDRB). The key mandates of this board include • registering, licensing and regulating real estate developers; • de-registering rogue developers; and • publishing and maintaining a website of records, etc. The establishment of the board is a step in the right direction, especially in the wake of a booming prop - erty market, amid increasing cases of fraudulent mar - ket players. Additionally, developers should be prohibited from marketing or selling off-plan units as proposed in the Real Estate Regulation Bill, 2023, until they obtain a formal marketing licence. Licensing should require proof of secure land title or a valid joint-venture con - sent with landowner approval, approved architectur -
al and structural plans, minimum financial capacity or bank guarantees and a credible project timeline with a clear milestone schedule. Marketing materials should be filed with the REDRB and become enforce - able documents. This would finally impose meaning - ful barriers to entry, eliminate phantom projects and misleading brochures, and give investors’ confidence that only credible, capable developers can solicit their funds. Mandatory escrow accounts with milestone-based payments All purchaser funds should be held in a ring-fenced, project-specific escrow account managed by an independent trustee or escrow agent approved by the REDRB. Funds should only be released upon independent professional certification by a registered quantity surveyor or architect that defined construc - tion milestones have been met (eg, completion of substructure, reinforced concrete frame, roofing and internal finishes). Buyers should have the explicit contractual right to suspend further payments and, after a reasonable cure period, to terminate the agreement and recover their deposits with interest if milestones are not met within agreed timeframes. This single reform would directly address both fund diversion and the payment- structure trap, giving buyers real leverage and protec - tion throughout the construction process. Defects safety net, retention and mandatory insurance A 5% retention from the total purchase price should be held in escrow for 6–12 months after practical com - pletion as a performance bond; if structural defects or poor workmanship appear, there is an immediate pool of funds available to effect repairs if the developer fails to act. In addition, developers, contractors and archi - tects should be required to maintain mandatory ten- year structural defect liability insurance, with buyers named as beneficiaries. These measures would pro - vide both immediate recourse for workmanship issues and long-term protection against major defects or col - lapses, significantly reducing the risk of total loss.
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