1. What entails rent to own?

This is a type of contract in which the tenant has an option to purchase the property they are renting at some point in the future.

2. What are the areas of rent to own?

Developers dealing with housing in the outskirts of Nairobi would mostly consider this option than those in upmarket. This is mostly because they are majorly locals as opposed to the Asians and foreigners in upmarket.

3. The difference between it and the purchase tenant scheme?

Lease option/ rent to own: Here the tenant has an option of buying the house once the lease agreement expires. They can however change their mind, without any obligations to the landlord.

Lease purchase: It is a legally binding contract where you are obligated to buy the house at the end of the lease whether you can afford it or not. It is usually hard to get out of this type of contract.

4. Break down for us the agreements by both the tenant and landlord on the scheme?

• The amount of rent that is due each month
• Amount of down payment
• The length of time period for rent payments before becoming eligible to purchase the property
• The interest rate on the purchase price and when it is payable
• Who pays homeowner’s insurance, property taxes and other related costs
• Any special clauses or conditions that need to be met in order for you to become the owner

5. What is the percent paid as form of deposit for the scheme and the difference between this percentage and that of mortgage purchase?

For the rent to own purchase scheme, the down payment is usually a subject of negotiation between the tenant and developer. Mostly, it ranges between 10-20% of the purchase price. This is independent on the other charges constituting a purchase.

As for the Mortgage purchase, the deposit is usually fixed unless the client has some special packages from their financiers. This ranges between 10-20% since many financiers would finance between 90-80% of the purchase price. Some clients as aforementioned, get fully financed and other all the charges of purchase are catered for by their respective financiers.

6. What are the binding purchase obligations?

• In both terms, the client will end upon loosing part or all the deposit paid once they terminate or breech the contract.
• The amount of rent that is due each month, the timelines or payment and penalties of late or non-payment.
• Amount of down payment
• The interest rate on the purchase price and when it is payable
• Who pays homeowner’s insurance, legal fees, property taxes and other related costs
• Damages and amendments costs

7. Expound on the rent payment of the tenant who wants to own the house and the normal tenant in the same apartment?

For the normal tenant, the rent is as it is. That is there is no additional costs since the end goal is not owning the property as opposed to the rent to own tenant. There are some extra costs to cover fees like legal, stamp duty etc. The bigger portion of rent goes to the purchase.

8. Is the property transferred immediately or up to the tail end of the agreement?

The transfer of ownership always begins at the tail of purchase to cushion the owner/developer incase a breech occurs.

9. What percentage of the value of the house is considered when determining the rent to own payment?

Different owners have different modalities of payment. Let’s pick a life scenario of Some Kitengela unit, the deposit payments range from 10-50%.

This makes it easier for clients to pay a lesser rent per month for those with higher deposits. The interest rates are also lower.

The time frame for payment also ranges from 10-25 years depending on the terms of engagement.

10. Is it popular in Kenya or it is yet to pick up and the reasons of either?

This mode of property purchase is not common in Kenya despite the very high demand from clients. Most developers however, would just want to sell off their houses and move on to other projects since this whole process of Rent to own requires a tedious process of debt collection and management.

11. What happens when purchaser realizes they are dealing with insincere agent?

Before the purchasers engages in any sort of arrangement for purchase, they need to carry out thorough due diligence and check on the blue prints since most such deals have hidden scrupulous rules and costs.

There is nothing much they can do if they missed this crucial step in purchase as they will start calculating losses or end up in un ending lawsuits.

12. What are the pros and cons of the rent to won purchase mode?

Pros.

• You have more control over when (or if) you want to buy out your lease agreement before its expiration date.
• If there’s any major change in circumstances like job loss or divorce with kids involved then having this type of contract allows for an easier transition back into renting status without having purchased anything yet!
• Also, since rent payments contribute toward ownership they might not count as taxable income which could save some money on taxes when it’s time to sell down the road!

Cons

• If interest rates fluctuates before you purchase, then your rent will increase accordingly while still paying off debt incurred during the rent-to-own period which may affect the cash flow per month that had been anticipated when first entering into this kind of agreement.
• You don’t have no control about what work is done to the property you live in till the property is transferred to you.