Advisory: Change of Purchaser in an Agreement for Sale of Property

When a purchaser initially bought property as an individual but now intends to change ownership to a company, the process depends on whether the company already exists and at what stage the transaction is (e.g., before or after registration of the transfer). Here's how it works in Kenya:

 

Scenario A: Before Transfer Is Registered (Ideal Case)

If the transfer has not yet been registered in the purchaser’s name (i.e. the title is still in the seller’s name), the steps are relatively straightforward:

Steps:

1. Incorporate the Company
• Register the intended company via eCitizen if not already incorporated.
2. Amend the Sale Agreement (if already signed)
• Draft and execute a Deed of Assignment or Addendum to reflect that the company will now be the purchaser.
• All parties (seller, individual purchaser, and the company) must sign.
3. Update the Transfer Documents
• Prepare new transfer forms in the company's name as transferee (e.g., Form L.R. 1, transfer instrument).
4. Generate a New Stamp Duty Valuation in Company Name
• Request the stamp duty assessment through Ardhisasa under the company’s Ardhisasa ID.
5. Pay Stamp Duty
• Based on the current valuation, stamp duty (typically 4% for urban property) must be paid by the company.
6. Complete Registration of Transfer
• Submit the stamped documents and pay registration fees to the Land Registry.

 

Scenario B: After the Title Has Been Transferred to the Individual

If the individual already owns the property and now wishes to transfer it to a company, this is treated as a fresh conveyance, attracting stamp duty and transfer formalities.

Steps:

1. Incorporate the Company (if not done already)
2. Execute a Transfer of Property to the Company
• Draft a formal transfer instrument from the individual to the company.
3. Stamp Duty Payable
• Stamp duty will again be assessed based on current market value, even if no money changes hands.
4. Apply for Land Control Board Consent (if agricultural land)
5. Register the Transfer in Favour of the Company
• Submit documents for registration at the Land Registry or through Ardhisasa.

Note: KRA and the Land Registry will treat this as a sale/transfer and will require justification for the change (e.g., company ownership, internal restructuring).

 

Important Legal Considerations

• The company must be properly incorporated and have a valid Ardhisasa ID.
• If the individual and company are related, the transfer may raise capital gains tax (CGT) or tax planning implications.
• Consider consulting on Section 38 of the Stamp Duty Act (possible exemptions in restructuring, if applicable).
• The seller may need to consent to the change if it happens before registration.

 

Optional Documents Needed:

• Deed of Assignment / Addendum to Sale Agreement
• Board Resolution (if company is purchaser)
• Company Certificate of Incorporation
• KRA PIN for company
• CR12 or register of directors
• Transfer instrument in favor of company
• Application for stamp duty valuation (via Ardhisasa)