Real Estate Finance

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Question:
Explain the Kenyan legal perspective of real estates in respect to real property rights, mortgage contracts, contract for sale and lease contracts. Answer:
1) Real property rights
Real property refers to land and anything permanently attached to it such as buildings, fences and sidewalks. Personal property refers to items not permanently attached to real property but can be removed when the property is sold such as cars, clothes and furniture. Real property rights

Owning real estate carries with it a bundle of legal rights transferred with the property from seller to buyer. Ownership of land is holding title to it. The evidence of that title is the deed. The seller executes a deed to transfer title to real property and the bundle of rights that go with it. These are some recognized rights of the holder of title to the property which include: * The right of possession - the property is owned by whoever holds title. Every Kenyan citizen has the right to possess real estate property as guaranteed by the constitution. * The right of control - within the laws, the owner controls the use of the property Ownership gives the rights to determine real property use and management subject to government regulations. * The right of exclusion - others can be excluded from using or entering the property. A person who enters into another’s property without authority of the owner can be charged in a court of law for trespass. * The right of enjoyment - the owner can enjoy the use of the property in any legal manner. The owner can use the land for farming, building or any other legal purpose. * The right of disposition - the title holder can sell, rent or transfer ownership or use of the property at will. The owner can give rights to another party to use the land for a purpose e.g. telephone company to lay cables or to people to walk across the land. This is referred to as easement. The owner can mortgage the property i.e. secure a debt using the property as the security. If the mortgage is not repaid, the creditor can foreclose and sell the property. Limitations to real property rights

i). The government can imposed constraints on property use. The owner has right to build or demolish a building which can be limited by law or building codes or zoning laws of cities. This restricts how property in an area can be used to control land use. ii). The government can impose taxes on real property which are based on value, location and size. iii). The government can take away privately held real property in case the government discovers mineral deposits and the owner paid fair market value of the property taken. iv). The government can enact laws affecting real property and enforce them for public health, safety and general welfare. This restricts how the owner may use the property. v). Mechanics lien-When a supplier of labour and materials is unpaid, he/she can claim against that property. This is because the labour and materials supplied enhanced the value of the property. Hence the property should be security for the money owed.

2) Mortgage contracts
This is a legal agreement that conveys the conditional right of ownership of an asset or property by its owner (the mortgagor) to a lender (the mortgagee) as security for a loan. The lender’s security interest is recorded in the register of title documents to make it public information and is voided when the loan is fully repaid. Although real property i.e. land and buildings is the most commonly mortgaged, other properties can also be mortgaged. When personal property such as appliances, cars or jewelry is mortgaged, it is called chattel mortgage. Elements of a legal mortgage

This is effected by creating a lease where the mortgagor binds himself to repay the mortgage money on a certain date. He then transfers the mortgaged property to the mortgagees on condition that the mortgagee will transfer it to him on repayment of the loan. The...
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