Lands CS Highlights Key Flaws of Real Estate Regulation Bill 2023, Asks Senate to Reject It

The Cabinet Secretary affirmed that the proposed bill failed in several significant areas and the Senate should not allow it to proceed.

Lands CS Highlights Key Flaws of Real Estate Regulation Bill 2023, Asks Senate to Reject It

Kenya’s Lands Cabinet Secretary Alice Wahome, while appearing before the Senate's Land, Environment, and Natural Resources Committee, asked them to reject the proposed Real Estate Regulation Bill 2023.

According to the CS, the proposed bill presented by the Estate Agents Registration Board Chair, Ms. Eunice Macharia, bears some flaws relating to the registration and regulation of estate agents. She further affirmed that her ministry is at an advanced stage of reviewing the concerns in the Estate Agents Act, which was sponsored by Trans Nzoia Senator Allan Chesang.

Highlighting her reasons for requesting the Nyandarua Senator John Methu-led committee to reject the bill, CS Wahome noted that the bill “lacks the specificity of the Estate Agents Act and doesn’t mention activities like negotiating terms or managing properties.”

Additionally, she mentioned that the proposed bill seems to confuse an estate agent with a developer when it defines an estate agent as “a person who sells, offers for sale, or offers for rent a piece of land, building, or any other part of a building.” Wahome stated: “Without qualifying that this is done on behalf of others or principals and could be interpreted that developers are estate agents, as previously indicated, the practitioner in real estate agent and the investor (developer) should be totally divorced in terms of legislation.”

[File image of Lands Cabinet Secretary Alice Wahome. Photo/Courtesy]

The Real Estate Regulation Bill 2023 further proposed that “the board be composed of a chairperson appointed by the Cabinet Secretary, various government officials or their representatives, nominees from the Council of County Governors, associations representing land purchasers, developers, and real estate agents, and the Registrar as an ex officio member.” A proposition with which the Lands Ministry disagrees, asserting that “proposing a board that lacks professionals to oversee the regulation of professionals undermines the growth and development of the profession and generally undermines professionalism in the real estate sector.”

Wahome also commented that the bill seeking to regulate real estate agents and developers creates fundamental loopholes as the registration of professionals and real estate projects are different, adding that the real estate agency is a distinct profession with training up to university, and its regulation is already included in the estate agents cap 533 of the Kenyan law.

“I propose that the registration and regulation of real estate agents remain as contained in the Estate Agents Act; this is consistent with other professional regulatory boards like the Surveyor Board, Physical Planners Board, and Engineers Board of Kenya.”

According to the CS, the bill seeks to introduce “an association of purchasers,” which is inconsistent with Part 111 of the Sectional Properties Act, which provides for the establishment of a corporation. The bill also tends to introduce documents that are related to the registration of titles that are ideally under the Land Registration Act.

Wahome noted that the bill allows investors to use up to 75 percent of the purchasers’ deposits towards development; ideally, developers and persons or entities dealing in the construction of property for sale, subdivision, and sale of land should invest their own money to finalize the processes of construction, subdivision, and titling.

The current practice of purchasers contributing towards the acquisition and development of private properties in the hope the said developers will finalize the construction and subdivision, as stated by the CS, has no legal basis.

“In the event of off-plan sales, regulations should be provided to protect the purchasers’ funds; allowing developers to use up to 75 percent of the purchasers’ funds exposes the purchasers to loss of funds in the event of default. This is tantamount to borrowing funds from investors without sufficient safeguards,” said Wahome.

Despite the above-mentioned concerns, CS Wahome noted: “The Real Estate Regulation Bill 2023 is a good initiative in as far as it seeks to regulate real estate investors who intend to sell their properties off-plan using parts of the funds contributed by purchasers. It should, however, exempt those who do not wish to offer properties off-plan.”

She reiterated that most of the challenges faced are from developers who start developments and use purchasers’ deposits towards the construction or to meet subdividing and infrastructure costs while subdivision and titling are incomplete.

In conclusion, the Cabinet Secretary affirmed that the proposed bill failed in several significant areas and that the Senate should not allow it to proceed. She advised EARB to collaborate with the relevant ministry to address the current challenge of off-plan sales, either through new legislation or a review of the existing relevant legislation.

“The Estate Agents Act, Cap. 533, is more comprehensive and effective legislation for regulating estate agents compared to the proposed Real Estate Regulations Bill 2023. The proposed bill appears to favor a small group of “investors” involved in off-plan sales and shouldn't disrupt the existing professionals registered under the Estate Agents Act.”

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