DUE DILIGENCE IN HOME AND PROPERTY OWNERSHIP

DUE DILIGENCE IN HOME AND PROPERTY OWNERSHIP

Many of us get excited when we have finally managed to save up money and have identified a piece of property we would like to purchase. We however fail to do a background check on what we are buying, hence exposing us to the risk of being conned.

This background check is referred to as due diligence. It is advisable than one confirms that the title to the property they would like to purchase is clear and marketable. The law is clear that one cannot sell what they do not have. This means, if I do not own the property, I cannot sell it, and the purchaser cannot subsequently claim ownership upon purchase either. Whoever claims ownership after such a transaction will only be entitled to damages after successfully suing the purported seller.

If one demonstrates that they undertook sufficient due diligence before purchasing a property, they can be deemed to be an “innocent purchaser for value,” should such a transaction go south. It is mandatory for one to exhaust all available avenues when undertaking due diligence. It is usually advisable for the proposed purchaser to appoint a lawyer to handle this on their behalf. 

The question then is, what does due diligence entail when it comes to property ownership? Below are some of the things to be considered before any purchase:

  1. Search

The verification of ownership of a property is done by querying the property ownership documents, commonly referred to as title deeds. This is done by physically examining the title documents, undertaking a search at the lands registry and perusing the property file where possible.

A search will also ascertain whether the property is clear of any claims by third parties, such as charges registered by banks, or cautions lodged by parties disputing the title or seeking to block transactions on it.

  • Physical Verification

In addition to the search, it is advisable to physically visit the property to confirm that all the details described to you are accurate. Are the dimensions according to the description given? The role of a surveyor in this process cannot be overemphasized, as the surveyor will determine whether all the details concerning the dimensions are accurate according to the maps. If it is a house, has it been built or is construction ongoing? The environment around is also noteworthy: Is there background noise? Is the property next to a dumpsite?

It is also advisable to talk to the neighbors and local administration to find out the information they have regarding the property. They may be aware of undocumented family disputes or court cases. This does not mean that you cannot proceed with the purchase of such property. It does, however, mean, that it would be in your best interests to ensure that the dispute has high chances of being resolved and the title cleared. For instance, in a matter where a father has died and left behind property to be divided among his children, it would only be a matter of time before a succession cause is undertaken, which would then enable the new owner to transfer the property to you.

  • Authority to Transact

One may have all the required documents to enable them to transfer the land, but may lack authority to undertake the transaction. For instance, a son or daughter cannot sell their parents’ property. Even where the parents are deceased, they have to get letters of administration from the courts to allow them to handle the property.

One may also have partial authority. For instance, where the bank has a lien on the property, the bank would have to consent to the transaction. Another example is in the case of a lease, where one can only sublease the property with the consent of the owner. One may also be legally authorized to sell the property by way of a Power of Attorney.

It is therefore important to confirm that the person purporting to sell the property to you has full authority to transact, and where partial authority resides in a third party, that the third party has consented to it.

  • Approvals and Clearances

Where one is purchasing a house or a piece of land that has been subdivided, it is important to verify that the relevant authorities have approved the development of the house or the subdivision of the parcel of land. The authorities include the County Council, the Survey Office, and the Ministry of Lands.

Further, property owners have an obligation to pay land rates, land rent and service charges, among other payments. It is important to ensure that the property is free of any such arrears.  

Conclusion

Due diligence is conducted at the beginning of the transaction, and not during or after the transaction. Remember, there is no need to rush. Take your time and undertake proper due diligence.

By: Praxedes Kageha

If you would like to undertake due diligence on a piece of property and would like more guidance on the process, be sure to contact us at praxcy@mmsadvocates.co.ke or info@mmsadvocates.co.ke

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