KENYA Law and Practice Contributed by: Anne Kinyanjui and Loice Erambo, DLA Piper Africa, Kenya (IKM)
• a legal charge over the real estate in favour of the lender; • assignment of receivables: during the devel - opment the receivables will include insurance proceeds; rights in project bank accounts; and/or rights and interest to contracts and agreements relevant to the project. After the development, the receivables will typically be rental income; • (if required by certain lenders) direct agree - ments with respect to key construction contracts. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no restrictions on granting security over real estate to foreign lenders, nor on making repayments to a foreign lender under a security document or loan agreement. However, like citi - zens and Kenyan corporations, a foreign lender or foreign security trustee would be required to have an Ardhi Sasa account in order for security over immovable property, which is registrable on Ardhi Sasa, to be created in their favour. For security over movable assets, the foreign lender would need to appoint a Kenyan agent (typically, Kenyan counsel) to register relevant notices at the Collateral Registry on their behalf. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security When granting security, the borrower will be responsible for the following costs: • stamp duty at the rate of 0.1% of the bor - rowed amount for registrable securities such as legal charges; • the legal fees of the borrower’s and lender’s advocates, as prescribed by the Advocates Remuneration Order based on the amount secured; and
• nominal registration fees charged by the rel - evant registries. In addition, the borrower is usually responsible for the lender’s enforcement costs, including legal fees. 3.5 Legal Requirements Before an Entity Can Give Valid Security The following requirements must be met. • The borrower must have the capacity to give the security under its constitutive documents. • A corporate guarantor must derive commer - cial benefit from giving security over its real estate assets, even where the borrower is a related company. Where there is no commer - cial benefit, the borrower and guarantor must enter into a commercial benefit agreement for the payment of agreed fees to the guarantor as consideration for guaranteeing the facility to the borrower. • Financial assistance for the acquisition of real estate assets is not prohibited. 3.6 Formalities When a Borrower Is in Default Enforcement of a Legal Charge Section 90 of the LA prescribes the formali - ties for the enforcement of a legal charge in the event of default by the borrower. If the borrower is in default for one month, the lender issues a notice of the default to the borrower, requiring the borrower to remedy the default within the notice period (at least three months if the default relates to non-payment). If the borrower fails to do so and the lender opts to exercise statutory power of sale, the lender issues another 40-day notice. Upon lapse of the notice period, the property is valued and sold. The time taken to sell the property would vary according to market
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