By: Kendi & Company Advocates

LAND ACQUISITION

Section 7 of the Land Act provides for the methods of acquisition of Title to land to include allocation, land adjudication, compulsory acquisition, prescription, settlement programs, transmissions, transfers and long-term leases.  Before acquiring interest in land, a property developer must conduct due diligence. This involves conducting pre-contract inquiries and investigation of title through searches and requisitions. The developer has to inspect the physical condition of and location of the subject property. The developer then conducts a search on the property to ascertain the owner of the property. There are four types of searches that may be conducted: a historical search, a postal search, an official search and a personal search at the Land Registry. The developer may also conduct a search at the company registry and the survey department where applicable.

APPLICATION FOR DEVELOPMENT PERMISSION

An application for development permission shall be made in form PLUPA/DC/1A and shall be transmitted to the electronic address of the planning authority or submitted in paper form and shall be accompanied by a certified copy of the title deed or certificate of title or certificate of lease, a location plan indicating clearly the subject are in relation to major landmarks, roads and features and the Building Plans. The building plans to be submitted include the development plan and drawings, architectural drawings and specifications, civil and structural engineer’s drawings, electrical engineer’s specifications and mechanical and plumbing drawings and specifications.

An applicant for development permission shall indicate the proposed uses to which the land shall be put, the population density to which the land shall be subjected and the portion of land the applicant shall provide for easements as a consequence of their proposed development. An application shall not be considered duly completed until payments due to the planning authorities are made. Where an applicant does not receive written response for development permission such permission shall be assumed to have been given. Once an applicant has been granted development permission, they shall procure a commencement notice for development in form PLUPA/DC/I4 stating their intention to carry out development as per the development permission and specifying the date for commencement. Where an applicant has been granted development permission but has not commenced the proposed project within three years of receiving the development permission the same shall lapse.

OBTAINING THE NECESSARY APPROVALS

The key approvals required before beginning construction of any project include but are not limited to, the architectural plan and structural plan approval, NEMA approval, National Construction Authority approval and where applicable change of user permit. Developers are required to submit their building plans to the county’s planning department which then assesses the plans to ensure they ae in compliance with the country’s building code, the Physical and Land Use Planning Act and relevant regulations as well as the area’s local zoning regulations and building by-laws. The building plans are also reviewed by the county’s public health department, fire department, energy department, roads and public works department.

The other approval is from the National Environment Management Authority who require undertaking of an environmental impact assessment to evaluate the likely environmental impacts of a proposed project or development, taking into account inter related socio economic, cultural and human health impacts, both beneficial and adverse. Planning authorities shall require applications for major development to be subjected to EIA. A proposed development also requires a Strategic Environmental Assessment if it is likely to significantly affect the environment due to its nature, size or location, it is situated in an environmentally sensitive area, it may have potentially hazardous effect or its importance transcends beyond a local geographical area.

The other key approval required before commencing development is the approval from the National Construction Authority. Before the commencement of construction works, every construction project must be registered with the NCA. While county planning departments check for compliance with the building code and planning laws, the NCA ensures that every construction site adheres to the quality standards in the construction industry.

A developer may require approvals from other regulatory bodies depending on the location of the construction site including approvals from the Civil Aviation Authority, Kenya National Highways Authority, Kenya Forest Service among others.

• The registered owner of a property may send written notification to the Director General or the county director requesting for inspection during the commencement of the project and at subsequent stages. The relevant authorities shall then visit the project site and conduct inspection in accordance with prescribed procedures and prepare the inspection report within seven days. If satisfied with the standard on the visited site the authority shall issue permit authorizing progress of development from the date of inspection, if not satisfied, demand compliance to the set standards or conditions of approval before embarking on the development. The registered owner of a property carrying out development shall not proceed with the development unless issued with a copy of the inspection report and permit authorizing progress.

IDENTIFICATION OF PARTNERS

Before erecting a new building, the developer shall erect an onsite construction board clearly indicating the role of each professional involved. Additionally, the role of each party will be provided in the relevant project documents. The professionals include; engineers, architects, contractors, quantity surveyors, project managers, supervisors, skilled workers and private investors/ financial partners. Due diligence should be conducted on every professional engaged to ensure they have the technical, legal and importantly the financial capacity to undertake the project.

PROJECT DELIVERY PROCESS

This entails examining, reviewing and approving the progression of the development at pre-defined critical stages in their lifecycle to provide assurance that the project is initiated, governed and completed in alignment with the development plan. The initiation phase encompasses all the steps one must take before a project is approved. The pre-construction phase is where the project team prepares the construction site and prepares a strategic plan and implementation matrix. Developers should have clear performance standards and specifications and set the timelines for completion. The procurement phase is where the project team purchases all the materials, tools and services necessary to complete the project. The construction phase is the project execution phase where the contractors transition the project into actual construction. In this phase it is important to incorporate effective project controls to increase the certainty of outcome and identify areas of underperformance. The key areas of project controls cover planning and scheduling, cost estimation, cost control, progress and performance measurement. The post construction phase is the final step in the long process of completing a construction project. The relevant authorities will be called to inspect the premises to ensure they are fit for habitation and that the project was constructed in accordance with the development permissions.

COMPLETION

Projects will be assessed as complete once all contractual responsibilities have been demonstrated and approved by the developer. Upon completion of the development project, the licensed professional or duly authorized agent shall on behalf of registered owner of property notify the Director General or the County Director requesting for joint final inspection of all relevant authorities and agencies and the director shall coordinate the final joint inspection exercise and coordinate all inspection reports and forward them to the relevant planning authority who shall within seven days cause the issuance of certificate of compliance and notice for issuance of certificate of occupation.

N/B:  The fees applicable in the process of property development are outlined in the Physical and Land Use Planning (Planning Fees) Regulations 2021

SECTIONAL PROPERTIES ACT NO 21 OF 2020

There are two main ways in which flats, townhouses and offices in office blocks can be owned, by registration of long-term leases under the Land Registration Act No. 3 of 2012 or by registration under the Sectional Properties Act, 2020. For long term leases, the developer acquires ownership of land, puts up housing units and issues long term leases for each individual unit. The developer creates a management company with shares equivalent to the number of units in the development. Every purchaser is issued with a share in the management company. Once all the units in the development are transferred to buyers, the land/reversionary interest is transferred to the management company in which the owners of the houses are shareholders. Common areas such as pathways, gardens and corridors are owned in common by the owners of the units in the development.

In a departure from the more popular practice of registration of flats and office block units through long term leases, the Sectional Properties Act provides comprehensive details regarding how a developer is to sell a unit or a proposed unit to a purchaser. Land is bought under operation of the Act through registration of a sectional plan. The sectional plan delineates the external surface boundaries of the parcel and the location of the building in relation to them, includes a drawing illustrating the units, bears a statement containing the particulars as may be necessary to identify the title to the parcel and defines the boundaries of each unit. The sectional plan is lodged together with a certificate of a surveyor stating that the structure shown on the plan is within the external surface boundaries of the parcel which is the subject of the plan. On registration of a sectional plan, the registrar issues a certificate of sectional property and there is constituted a Corporation which shall consist of all persons who are the owners of units in the parcel to which the sectional plan relates and the corporation shall be regulated in accordance with the Sectional Properties Act. The owner of the land at the time a sectional plan is registered shall provide to the corporation all warranties and guaranteed on the movable and immovable property of the corporation, the structural, electrical, mechanical and architectural drawings and specification, the plans that exist showing the location of underground utility services and sewer pipes and all certificates, approvals and permits issued by the county government which relate to any property for which the corporation is responsible.

Where a sectional plan has not been registered prior to the sale of any units, the developer shall insure the units and the common property against loss resulting from destruction and damages awarded against the developer, owner of a unitor the corporation in an action for occupier’s liability. A developer shall not sell or agree to sell a unit or a proposed unit unless the developer has delivered to a purchaser a copy of the purchase agreement, the by laws or proposed by laws, the management agreement, the recreational agreement, the lease or title of the parcel on which the unit is located and the sectional plan or proposed sectional plan. The sectional status of a building may be terminated by a unanimous resolution of the corporation, substantial or total damage to the building or by compulsory acquisition.

JOINT VENTURES

A joint venture is a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. In construction, it is a grouping of two or more contractors or financial institutions with contractors who jointly undertake to perform construction works. In a corporate joint venture the parties come together to form a corporate entity to pursue their common interest. Parties prefer a corporate JV as compared to a contractual JV since it allows the land to be held in a special purpose vehicle where the JV Partners are also shareholders. The National Construction Authority may register joint venture on application made in writing by the persons intending to enter into joint venture agreements. The application shall be made in the prescribed form and shall indicate the sum of the annual turnover of all members to the joint venture, sum of the available capital of all members to the joint venture, the category in which the joint venture wishes to be registered and the plan, equipment and machine holding the joint venture. The formation and operation of the JV shall include the land owner who contributes land and the developers/investors/financiers who are involved in project finance contribution. The Joint Venture company shall be responsible for construction from design and engineering to operations and maintenance.

The entire life cycle of construction joint ventures consists of four major phases: the beginning phase, the formation phase, the operation phase and the termination phase. The beginning phase involves a site visit where the land owner takes the investor to the proposed site for inspection in order to establish the viability of undertaking a project on it. The factors considered are the infrastructure, the size and shape of the land, ground level, area zoning and proximity to basic amenities. This enables the investor to determine the most appropriate type of development for that particular parcel of land. The proper due diligence is conducted in this stage. In the formation phase, the investor makes proposal to the land owner regarding the costs and profits sharing. Factors to be taken into account in the cost benefit analysis include the cost of the land, cost of construction, the cost of obtaining approvals for the project, legal, marketing and administrative expenses. If the land owner accepts the proposal, they can start drafting the joint venture agreement and form a special purpose company which may be registered as a private limited company under the Companies Act No.17 of 2015. In line with the JV contract, the land owner avails to the investor all deeds and relevant documents to facilitate the registration of the transfer of the land in the name of the Joint Venture Company. The investor will then have the plan prepared by the project architect, taking into account the land owner’s requirements and when ready and approved by the land owner, the same will be submitted to the relevant authorities for approval. On completion of the project, the houses allocated to the land owner are allocated to him and the land owner is free to sell any of the houses at any stage of the construction. The formula for profit sharing will have been negotiated and agreed upon prior to the signing of the agreement. A good joint venture should address the following factors: selection of the requisite consultants including the architects, contractors, quantity surveyors, structural engineer, project surveyor, project physical planner, project valuers, project accountants and project lawyer; transfer of land to the development company- if the title to the land is in the name of an individual, it is advisable to transfer the same to the special purpose vehicle; project milestones and timetables – the parties should agree on the various timelines including the ground breaking date, construction phase and expected project completion date. The roles and obligations of the parties should be clearly set out in the joint venture agreement and consequences of default or breach defined.

This information provided in the blog and articles is intended as a general overview of the different subjects dealt with. This information is not intended to be, and should not be used as, a substitute for taking legal advice in any specific situation. Kendi & Company Advocates is not responsible for any actions taken or not taken on the basis of this information. Please refer to the full terms and conditions on our website.

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