Selling Off-Plan in Kenya: What a Developer Must Have in Place Before Taking a Deposit

In short, Kenya has no off-plan statute and no escrow law, which means the developer who sells units before they exist is regulated by a patchwork, the Sectional Properties Act, 2020 on what must be handed to a buyer, the county, NEMA and the National Construction Authority on what must be approved before a spade goes in, the Law of Contract Act on the agreement, and the general law on misrepresentation and penalties. The patchwork is enough to prosecute a developer who gets it wrong and not enough to reassure a buyer who has watched Banda Homes go into liquidation. The developers who sell out in 2027 are the ones who put in place, voluntarily, what the Real Estate Regulation Bill would impose, a clean title, complete approvals, a disclosed lender, a fair agreement and a stakeholder or escrow account which releases money as the building rises. This article, written for developers and for the members of the Kenya Property Developers Association, sets out the list.

Why the developer should read the buyer’s article first

Our guide to buying an apartment in Nairobi tells a buyer to search the mother title, to ask for the approvals one document at a time, to check whether a bank is ahead of him, to amend the developer’s standard agreement and to pay into an advocate’s client account against certified stages of construction. Buyers read it. Their advocates read it. Their banks already do all of it. So a developer who takes deposits without those things in place is no longer selling to an uninformed market, and every buyer who walks away over a missing document is a unit which sits unsold while the loan interest runs. The developer’s list is the buyer’s list turned around, and it is cheaper to complete it before the launch than to argue about it at every sale.

What the law requires

Start with what is compulsory, because breaching it is not a commercial choice. Section 43 of the Sectional Properties Act, 2020 says a developer shall not sell or agree to sell a unit or a proposed unit unless he has delivered to the buyer a copy of the purchase agreement, the by-laws or proposed by-laws, the management agreement if there is one, the recreational agreement if there is one, the title to the parcel or the certificate of title or lease for the unit, the sectional plan or proposed sectional plan, and any charge which affects or will affect the title, with a written notice of the principal secured, the instalments, the term, the interest and the prepayment terms. Section 57 makes non-compliance an offence punishable by a fine of up to twenty million shillings or a year in prison, and section 58 lets the buyer enforce the agreement whether or not the developer complied. Section 38 requires a developer who sells before the sectional plan is registered to insure the units and the common property. Section 27 requires him, once the plan is registered, to convene the first meeting of the owners’ corporation within ninety days of half the units being sold or one hundred and eighty days of the first sale, whichever comes first.

Around the Act sit the general rules. A contract for the sale of land is unenforceable unless it is in writing, signed by the parties and attested, under section 3(3) of the Law of Contract Act, so a reservation form and a bank slip are not a sale. The county must have granted development permission and approved the building plans under the Physical and Land Use Planning Act, 2019, the National Environment Management Authority must have issued the environmental impact assessment licence, and the project must be registered with the National Construction Authority, which is now free, with a registered contractor and a registered professional team. Marketing runs into the Competition Act and the Consumer Protection Act, which prohibit false or misleading representations about what is being sold, and a brochure which shows a swimming pool the plans do not contain is a representation. Sales agents must be registered under the Estate Agents Act. And since the 2023 amendments to the anti-money laundering law, advocates and estate agents are reporting institutions, so every buyer is identified, the source of large deposits is asked about, and cash is treated with suspicion, which a developer should welcome rather than resist.

What the law does not require, and the market now does

Nothing in Kenyan law obliges a developer to hold a buyer’s deposit separately from his own money, to release it against construction progress, to cap the deposit, to complete by a date or to refund with interest when he fails. The Real Estate Regulation Bill, 2023, Senate Bills No. 35 of 2023, tabled in August 2023, would change all of it. It proposes a Real Estate Board with which every project is registered before it is advertised, a separate account into which seventy percent of buyer receipts are paid and from which withdrawals are certified by the engineer, the architect and an accountant against the percentage of completion, a cap on deposits at ten percent of the price, a five-year defects liability, a refund with interest to any buyer misled by the marketing, and fines running to five percent of project cost. As at January 2027 the Bill has not been enacted. A version of it will be, because the political pressure behind it has not gone away. Banda Homes went into liquidation by order of the High Court in March 2025 with a liquidator appointed in June, and its buyers, who paid on reservation forms into the company’s account, are unsecured creditors of a company with no money.

So the market has moved ahead of the law. Buyers’ advocates now ask for a stakeholder or escrow arrangement as a matter of course, lenders financing a project ask for it because it protects their own security, and a developer who offers it at the launch sells against competitors who do not. Which is why the sensible course for a developer, and for the Association, is to adopt the substance of the Bill now, as a condition of membership or as a house rule, and to say so in the brochure.

The list, in the order it is done

1. The land, in the right hands. The mother title is in the name of the project company, or the landowner has signed a joint venture agreement which is registered or protected by a caveat and which gives the developer an express right to sell units and says how the landowner is paid. A developer selling on a landowner’s title under a handshake is the pattern in most of the collapses. The title is searched, the rates and rent are clear, the user is residential, and any restriction or caution is removed before the first advertisement. Our article on the landowner’s joint venture covers the agreement from the landowner’s side, and a developer should expect every term in it.
2. A project company. Each project sits in its own limited company, so a failure on one site does not take the deposits on another with it, so the lender’s security is confined to the project, and so the company’s CR12 shows the buyer who stands behind the development. The company is registered with the Registrar, the KRA, the county and, where it employs directly, the NSSF and NHIF successors, and it keeps books from the first day, because the Bill’s six-monthly audit is coming and a lender asks for the same thing.
3. The approvals, complete and in a folder. Development permission and approved architectural and structural drawings from the county, the NEMA licence, the NCA project registration, the fire and public health clearances where the county requires them, and the water and sewer connection approvals. Each is scanned into a data room the buyer’s advocate is given a link to. An approval which is pending at the launch is stated as pending, with the date expected, because a buyer who finds out later treats it as concealment.
4. The lender, disclosed and bound. Most projects are financed, and the charge over the mother title sits ahead of every buyer. Section 43 requires the charge to be disclosed. Good practice goes further. The facility agreement carries a unit release mechanism under which the bank undertakes to discharge each unit from the charge on payment of an agreed release price, and the undertaking is given to the buyer’s advocate before the buyer pays. A buyer who pays without it has lent the developer money to reduce the bank’s exposure, and buyers’ advocates now refuse.
5. The professional team and the contractor, under contract. A registered architect, structural engineer and quantity surveyor, a registered contractor under a written building contract with a fixed completion date, liquidated damages for delay, retention and a performance bond, and the contractor’s all-risks insurance in place. The architect’s certificates are what the stakeholder account releases money against, so the architect must be independent of the developer.
6. The sectional documents. A proposed sectional plan prepared by a licensed surveyor from the approved drawings, the proposed by-laws for the corporation, the management agreement if the developer intends to appoint a manager, and the schedule of unit factors which fixes each owner’s share of the common property and of the service charge. These are the section 43 documents and the buyer receives them with the agreement, not after completion.
7. The sale agreement, drawn for both sides. The agreement describes the unit by reference to the proposed sectional plan and the specifications, states the price and the payment schedule, fixes the completion date with a stated extension for events outside the developer’s control, provides liquidated damages for delay which are a genuine pre-estimate rather than a penalty, because a penalty is unenforceable and a court will say so, limits the developer’s right to vary the plans and adjusts the price for a variation in size, provides a defects liability period of at least six months, gives the buyer a refund with interest where the developer fails to complete and gives the developer a forfeiture of a stated part of the deposit where the buyer defaults, on notice. It also says where the money goes, which is the next item. A developer who insists on his own form, drawn for the developer alone, spends the sales period negotiating it with every buyer’s advocate.
8. The money, held by someone else. The deposit and the instalments are paid to a stakeholder, an advocate’s client account or a bank escrow under a tripartite agreement, and released to the developer against the architect’s certificate for each stage, foundation, slab, roof, finishes and completion, with the last tranche held until the unit title issues. Where the project is financed the receipts are paid into the project account under the facility and applied to the release price of the unit, and the lender’s consent to the arrangement is obtained in advance. The developer keeps the interest, the buyer keeps the security, and the cost, a modest stakeholder fee, is recovered many times over in the speed of sales.
9. The marketing, checked against the plans. Every brochure, render, price list and social media post is checked by the architect and by us against the approved drawings and the agreement before it is published, and every promise in it is either in the agreement or removed. The agents are registered and their commission agreement is signed. A launch discount is a price, not a guarantee of value.
10. The handover and the title. The occupation certificate from the county, the practical completion certificate from the architect, the sectional plan registered, the unit titles issued, the charge released unit by unit, the insurance in place, the first meeting of the corporation convened within the section 27 period and the by-laws registered. The buyer’s money in the stakeholder account is released on the title, not on the keys.

What the developer gains

Everything on the list costs money and time before the first sale, and a developer under pressure from a landowner and a lender is tempted to launch first and complete the list later. The developers who have sold out in Kilimani, Kileleshwa, Syokimau and Nyali since 2024 did the opposite, and the arithmetic is on their side. A project with a clean data room, a lender’s undertaking and a stakeholder account closes sales in weeks rather than months, because the buyer’s advocate has nothing to fight about. Buyers pay a premium for certainty, and diaspora buyers, who are the largest single source of off-plan money in Nairobi and the most nervous, pay the largest premium. And the developer who has adopted the substance of the Bill has nothing to change when it becomes law.

A note for the Association

The Kenya Property Developers Association speaks for the developers who deliver, and it has an interest in separating them from the ones who do not. A voluntary code, under which a member does not take a deposit until the land, the approvals, the lender’s undertaking and a stakeholder account are in place, and under which the member publishes its compliance, would do more for the market than the Bill will do in its first five years, because it would exist now. It would also give the Association the standing to shape the Bill rather than to receive it. We are glad to help draft it.

Questions developers ask us

Is a developer required by law to use an escrow account in Kenya?

No. There is no escrow law for property in Kenya. The Real Estate Regulation Bill, 2023 would require seventy percent of buyer receipts to be paid into a separate account and released against certified progress, but it has not been enacted. The market now expects a stakeholder or escrow arrangement whatever the law says.

What must a developer give a buyer before selling an off-plan unit?

Under section 43 of the Sectional Properties Act, 2020, the purchase agreement, the by-laws, the management agreement if any, the title, the proposed sectional plan and full details of any charge on the land. Failing to do so is an offence under section 57 carrying a fine of up to twenty million shillings.

Is a reservation form a sale?

No. A contract for the sale of land must be in writing, signed and attested under section 3(3) of the Law of Contract Act. Money taken on a reservation form is a debt owed to the buyer, and a developer who spends it has borrowed it unsecured.

How much of the deposit is a developer allowed to keep if the buyer defaults?

Only what the agreement says, on notice, and only if the amount is a genuine pre-estimate of the developer’s loss. A forfeiture of the whole price paid is a penalty and a court will refuse to enforce it. Ten percent of the price is the usual and defensible figure.

Is it possible to sell units before the county approvals issue?

The Sectional Properties Act does not forbid it, but a sale on the strength of unapproved plans is a sale of something which does not yet lawfully exist, and the marketing rules on misleading representations apply. State the approvals as pending, hold the money in a stakeholder account until they issue, and give the buyer a refund if they do not.

When must the first meeting of the owners’ corporation be held?

Under section 27, once the sectional plan is registered, within ninety days of fifty percent of the units being sold or one hundred and eighty days of the first sale, whichever is sooner.

What does a developer’s off-plan pack cost?

We quote a fixed fee per project for the project company, the joint venture or land acquisition, the lender’s release undertaking, the sale agreement and sectional documents, the stakeholder arrangement and the review of the marketing, and a fixed fee per unit for the sales. The buyer pays for his own advocate, not for ours.

Next step

Send us the title, the approvals you hold and your draft sale agreement, by e-mail to peter@pmlaw.co.ke or WhatsApp through +254 714 644 080. We reply within one working day with what is missing from the list, what a buyer’s advocate will ask for, and a fixed fee for the project. Nothing is charged until you instruct us.

Peter Maina is a Partner of Peter Maina & Company Advocates, Hazina Towers, Nairobi. He is an Advocate of the High Court of Kenya practising in conveyancing and real estate, corporate and commercial, and capital markets law, and acts for developers, landowners, lenders and buyers on residential and mixed-use developments in Nairobi and the coast.