John, a young investor in his late thirties, has long aspired to venture into real estate by developing an apartment complex in a rapidly growing coastal area, intended for both short-term and long-term tenancy. Through diligence, discipline, and prudent financial management, he successfully acquired a parcel of land on which to realize this ambition. He engaged an architect who designed an impressive house plan and subsequently contracted builders, with the construction already underway and the structural framework now visible to the public.
However, John has recently become aware of rumours suggesting that the area has been zoned exclusively for residential developments, with an additional restriction limiting buildings to a maximum of three floors. This new information has caused him considerable uncertainty, as it potentially jeopardizes the fulfilment of his real estate investment dream.
He has further come to the realization that he ought to have obtained the requisite consents from the relevant authorities prior to commencing construction, which he failed to do. Unfortunately, John now faces the prospect of serious repercussions for having undertaken construction without the necessary approvals.
The Law VS Real Estate Investment and Construction
As is the case in many other sectors, the real estate and construction industry is subject to legal and regulatory oversight. Accordingly, vision and capital alone are not sufficient to commence construction.
A Developer is required to obtain the necessary consents and approvals from the relevant authorities prior to commencement, so as to ensure that the proposed development is fully compliant with the law.
Examples of these Approvals are:
- Change of user and zoning approvals- Section 57(1) of Physical and Land Use Planning Act 2019 prohibits a person from carrying out a development permission granted by the relevant County Government.
- Environmental Impact Assessment licence– The Environment Management & Coordination Act (EMCA) prohibits the person from carrying out a development without an Environmental Impact Assessment Licence (EIA Licence).
- National Construction Authority registration and Approval– The National Construction Authority Act, prohibits commencing any construction work before registering the project and the Constructor with the National Construction Authority (NCA).
The Courts have also pronounced themselves on the issue of undertaking construction and development prior to obtaining the requisite approvals, as illustrated in Sosplashed Limited & another v Pwani Maoni Limited & 3 others (Environment & Land Case No. 12 of 2021) [2023] KEELC 22487 (KLR) (Judgment delivered on 21 December 2023). In that matter, the Developer, being the 1st Defendant, had undertaken construction in contravention of the zoning regulations applicable to the area.
Further, the 1st Defendant adduced in evidence fraudulent development approvals together with a falsified Environmental Impact Assessment licence. The Court consequently ordered the 1st Defendant to reduce the number of floors of the cottages already constructed, as well as the completed apartment block, to two floors within one hundred and twenty (120) days. In addition, the Court directed that the incomplete apartment block be demolished within the same period, so as to ensure compliance with the zoning restrictions of the area.
What Does This Mean to Developers?
- Obtain Zoning and Land Use Approvals- Confirm that the intended development is in line with the zoning regulations and land use policies of the area.
- Secure Valid Development Approvals- Apply for and obtain development permits from the relevant County Government or planning authority. Ensure that the approvals are authentic, properly issued, and cover the specific project.
- Undertake Environmental Impact Assessment (EIA)- Where required under the Environmental Management and Coordination Act (EMCA), conduct an EIA study. Obtain an authentic EIA Licence from the National Environment Management Authority (NEMA) before starting construction.
- Ensure Authenticity of Documentation- Submit only genuine approvals and licences. Fraudulent or falsified approvals attract severe legal consequences, including demolition orders and penalties.
- Maintain Transparency and Accountability- Developers are expected to act in good faith by disclosing accurate information to authorities and the public.
It is evident that in real estate investment and construction, the availability of capital and a vision alone are insufficient. Compliance with legal and regulatory requirements is a fundamental prerequisite for any successful development. Developers must therefore obtain all requisite approvals, ensure the authenticity of documentation, and uphold transparency and accountability throughout the process. Observing these obligations not only safeguards projects from legal and financial risks but also ensures sustainable, lawful, and credible investments in the real estate sector.