Land acquisition processes in Kenya assume different payment models. The payment models are predominantly dictated by the financial positions of potential purchasers as well as the ability of lending institutions to offer reasonable credit facilities in forms of mortgages.

A mortgage is a legal arrangement where an institution lends a certain amount of money in exchange of registration of a relinquished benefit/interest in the Debtor’s property. The registration of the interest in favour of the Lender serves as security for satisfying payment of the borrowed amount. The rights remain in force until the debt is paid in full. Mortgages are the most common securities taken in exchange for real estate financing transactions.

Distinction and Interrelations between Loans and Mortgages.

The use of the terms “loans” and “mortgages” have been interchangeable where they are both construed as money lent to a Debtor/ borrower. Whereas both terms are involved in the lending of money, they are distinct concepts which we shall demystify in this article.

Whereas a mortgage is the security taken by a lending institution to guarantee payment of the amount given to the borrower, a loan is the sum of money borrowed from a financial institution to meet various goals and needs. A loan may be secured by a collateral which includes a mortgage or can be collateral free.

In Kenya, mortgages and their registration are guided and provided for by the Land Act No.6 of 2012 and the Land Registration Act No. 3 of 2012. Under these Acts, Mortgages are identified as Charges and are defined as “interest in land securing the payment of money or money’s worth or the fulfillment of any condition, and includes a sub charge and the instrument creating a charge…”

Under our laws, a charge may be formal or informal.

An Informal Charge is a security taken by a lender for the payment of money through the creation of rights over the property. The rights in the property are however not registered at the land’s registry. On the other end of the spectrum is the Formal Charge that is submitted and registered at the relevant Land Registry.

In the unfortunate event of default of payment by the borrower the lender will have the right to recover their amount through suing the borrower to pay, selling, auctioning, leasing, or even occupying the charged land. It is therefore very important for lenders to understand their roles when it comes to borrowing and financing purchases.

Although the lender has rights over the charged land securing payment, the Kenyan laws also provide protections to the borrowers to guarantee protection from unscrupulous lenders. Such rights include the right to receive notices and memorandums on the increment or reduction of interest rates, right to be alerted on the increment of amounts to be paid towards the settlement of the loan.

Parting Shot

Mortgages have been instrumental in ensuring Kenyans have access to real estate products notwithstanding their prevalent financial situation. With the existence of favorable lending rates in Kenya, property ownership has sprouted over the years and has been key in the realization of many home ownership dreams.

With the protections guaranteed by our laws through various statutes, borrowers can have the peace of mind knowing that lenders will not act arbitrarily against them. With these guarantees also come the responsibilities of borrowers to ensure that they make payments towards settlement of the loan are paid within the agreed period. This among other responsibilities of Lenders and Borrowers are fundamental in protecting the relationship between the parties.

As Optiven, we have partnered with reputable lending institutions to ensure that our clients of all cadres of life access our state-of-the-art properties at affordable and competitively low interest rates. This has been part of our quest of ensuring that Kenyans are settled and get decent opportunities to invest in land.


The content of this document is intended to be of general use only. For specific legal advice on Optiven Limited Real Estate Investments please do not hesitate to contact us through the contact details contained below.

Telephone: 0790 300300