Types Of Fees Involved In Buying Property In Kenya
Types Of Fees Involved In Buying Property In Kenya
Beyond the sale price of the property he covets, the buyer will have to face many other costs: notary fees, agency fees, mortgage, taxes specific to housing, condominium fees etc.
The main cost is the government’s Stamp Duty, which is 4% of the purchase price. You will also have to pay your lawyer about 1.25% of the purchase price for his role in the process. Buyers should be aware of this because most sellers tend to write the contract so that the buyer also pays the seller’s lawyer’s fees.
Therefore, buyers must be passionate about these details. If the buyers take out financing, they must take into account the evaluation costs representing 0.2% of the assessment and the 1% commitment fee to the bank.
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What Fees Are Involved When Buying a Property in Kenya?
1. Notary fees
The terminology “notary fees” is not quite right because the majority of this expense is constituted by tax rights that the notary collects and returns to the Treasury.
Notary fees are borne by the person to whom the transaction benefits: the buyer.
Notary fees are subject to a mandatory fee which is the same, regardless of the place of establishment of the notary who receives the sale.
They vary according to the amount of the purchase:
the lower the amount of the purchase, the higher the costs;
conversely, the greater the amount of the purchase, the more these costs are proportionately low.
Tip to reduce the costs of notary: pay the movable property component housing (kitchen or bathroom equipped, blinds, appliances, etc.) separately from the purchase of real estate. Thus, the basis for calculating fees is lower so the notary fees decrease.
Finally, the fees of the notary are governed by decree so it is impossible to negotiate unless the notary decides to do its work for free (which can be conceived for a customer carrying out many transactions with the notary).
2. Estate agency fees
The agency has the choice when signing the mandate to sell its commission to the seller (in this case, it is included in the selling price) or the buyer.
The most common situation is when the agency fees are borne by the buyer.
Unlike notary fees, agency fees are not regulated by law and are freely negotiated between the seller and the agency.
They generally rise between 3 and 6% of the selling price.
The amount of agency fees is decreasing, that means the sale price of a luxury villa will be applied a lower percentage .
When the buyer makes an offer to buy less than the selling price and this offer is accepted by the seller, the agency will have to reduce its commission.
Note: The payment of agency fees takes place at the time of signing the deed of sale at the notary.
What if this signature never takes place? The real estate agent will not receive a commission,
however, there are ways to take legal action to collect damages.
3. The Mortgage
The majority of buyers finance their property on credit.
The buyer must repay the borrowed capital with an interest rate and ancillary costs (insurance, fees, prepayment penalties, etc).
The buyer must know that the more important his personal contribution is, the lower the interest rate.
The buyer is advised to contact a mortgage broker who will negotiate on his behalf with financial institutions.
4. Different taxes related to housing in Kenya
1. Property tax
This is an annual tax levied by the local government based on the location and value of the property. It usually represents about 1% of the property value.
2. Land tax
The land tax is a local tax whose rates vary according to the location of the land. The highest rate is 8% and applies to Nairobi.
Stamp Duty Act: The purpose of this bill is to amend the Stamp Duty Act by exempting new homeowners under the affordable housing program. The Stamp duty rates in Kenya varies between
2% and 4% on the value of the property depending on the location. The incentive will be a positive development for the new owners.
5. Condo fees
The condominium fees are due with respect to the trustee by the person who is co-owner at their due date.
An agreement between the seller and the buyer decides otherwise in the deed of sale.
If the sale occurs during a quarter, there will be prorata temporal distribution of co-ownership charges between the seller and the buyer.
Attention: this act affects only between the seller and the buyer since for the trustee it is the co-owner at the time of the call for funds which is fully liable for charges.
However, if a supplementary call or a refund takes place at the end of the financial year (once the sale has been concluded), it is the one who is the co-owner at that time who will be the sole beneficiary or the only one liable.
6. Works voted by the co-ownership
The rule is the same as for the charges of co-ownership: the work is due by the one who is co-owner at the time when the calls of funds are to be regulated.
Nothing prevents the seller and the buyer from agreeing to a different distribution.
Here is what is most commonly expected in the deed of sale:the works voted before the compromise are the responsibility of the seller;for works voted between the compromise and the authentic deed, they are the responsibility of the seller unless he gives the purchaser power to attend the general meeting and to vote in his place.
7. Does the acquirer still have to pay these fees?
The buyer is obliged to pay the notary fees:
The notary may also refuse to close the sale until the purchaser has paid the amount of the provision on notary fees.
This sum must be paid by the purchaser at the stage of the preliminary contract and is deducted from the notary fees.
As for real estate agency fees, the buyer, if he does not pay them, can be worried only in one hypothesis: when he has concluded a mandate with the real estate agency. (This is the case when the buyer has given a mandate to the real estate property development company in kenya to research, negotiate and facilitate the acquisition of a property.)
Also Read – Top Real Estate Companies In Kenya