Off-Plan Property Purchases in Kenya: Buyer Protections and Developer Default Risk

Buying a unit “off-plan,” before the building exists or before its title is even registered, is now a routine way to buy property in Kenya, particularly in Nairobi’s apartment and mixed-use market. It is also the transaction type most exposed to developer default: stalled projects, changed specifications, and buyers left chasing refunds years after paying a deposit are common enough that any off-plan buyer should understand exactly what the law does, and does not, protect. This article looks at the legal basis for an off-plan sale, what the Sectional Properties Act requires of a developer before a unit can be sold, and what recourse a buyer actually has when a project fails to complete.

The Legal Basis of an Off-Plan Sale Agreement

An off-plan purchase is, at its core, a contract for the future disposition of an interest in land, and it is bound by the same formality rules as any other land contract in Kenya. Section 3(3) of the Law of Contract Act provides that no suit can be brought on a contract for the disposition of an interest in land unless the contract is in writing, is signed by all the parties, and each party’s signature is attested by a witness present when it was signed. An off-plan sale agreement that fails this test, for example, one concluded informally by email or based only on a reservation form, is difficult to enforce in court even if money has already changed hands. Buyers should treat the formal sale agreement, not the marketing brochure or the payment schedule, as the document that actually governs the transaction.

Because the unit does not yet exist as a registrable interest, the off-plan agreement typically describes the buyer’s rights by reference to a specific unit number on an approved or proposed sectional plan, with completion, registration of a separate title, and transfer to follow once the building and the plan are finished. Everything the buyer is actually entitled to, the unit’s size, finishes, common areas, service charge structure and, critically, the completion date and consequences of delay, needs to be captured precisely in that document, because there is limited statutory protection to fall back on if it is not.

What the Sectional Properties Act Requires Before a Sale

The Sectional Properties Act, No. 21 of 2020, is the statute governing subdivision of buildings into individually owned units with shared common areas, and it does impose some pre-conditions on off-plan sales, though narrower ones than many buyers assume. Section 43(1) requires a developer to deliver to a purchaser, before selling or agreeing to sell a unit or proposed unit, a copy of the purchase agreement, the by-laws or proposed by-laws, and the sectional plan or proposed sectional plan, among other documents. This is a disclosure obligation: it does not prevent a developer from selling a unit that does not yet exist, but it does require the developer to show the buyer, in writing, what is actually being bought and on what terms.

A separate and narrower restriction applies where an existing, already-tenanted building is being converted into sectional units. Section 13(1) provides that where a building contains premises rented to a tenant who is not a party to a purchase agreement, the owner “shall not sell those premises as a residential or commercial unit until the sectional plan that includes those premises is registered.” This provision addresses conversions of standing buildings with sitting tenants; it does not by its terms prohibit a developer from selling proposed units in a new development still under construction, which is the standard off-plan model and remains lawful provided the section 43 disclosures are made.

What the Act does not do is mandate any particular protection for the money the buyer pays before completion. There is no requirement in the Sectional Properties Act that deposits or instalments be held in escrow, released only on milestones, or refunded automatically if the sectional plan is never registered. Whatever protection a buyer gets on that front has to come from the sale agreement itself, not the statute.

Developer Default: What Recourse Does a Buyer Actually Have

When a developer stalls, abandons, or materially changes a project, the buyer’s remedies sit in general contract law rather than in a dedicated off-plan statute. Depending on the terms of the agreement and the extent of the breach, a buyer may be able to claim specific performance (compelling the developer to complete and transfer the unit), rescind the agreement and claim a refund of sums paid, or claim damages for the loss caused by the delay or defect. Which remedy is realistic depends heavily on the developer’s solvency: specific performance is of limited value against a developer that has run out of money to finish the building, and a refund claim against an insolvent developer competes with its other creditors.

Buyers are not without practical tools while a dispute is unresolved. A caution or restriction can be lodged against the parent title under the Land Registration Act to stop the developer selling, charging, or otherwise dealing with the land while the claim is pending, which can be decisive leverage in negotiating a resolution. Verifying title, existing charges, and the developer’s planning and environmental approvals before signing remains the most effective way to reduce this risk.

The Missing Piece: No Dedicated Escrow Law for Off-Plan Deposits

Kenya does not have a statute dedicated to off-plan buyer protection comparable to escrow or trust-account regimes found in some other jurisdictions. Neither the Sectional Properties Act nor any other real estate statute currently mandates escrow of off-plan payments, a gap industry commentary has repeatedly flagged. In the absence of a legal mandate, whether a buyer’s deposit is protected depends entirely on what the sale agreement provides and whether the developer agrees to it. A buyer negotiating an off-plan purchase should push for the purchase price, or at least deposits and early instalments, to be held by an independent third party and released against verified construction milestones, rather than paid directly to the developer on signing.