Understand that agreement before you sign it: Part 1

Guest post by Samuel G. Njenga

I signed that agreement and I never really understood most of the clauses therein. This is a common issue with most land purchasers. Did you know in the unlikely event of failure to complete a land purchase transaction and in the event of failure to resolve amicably any issues that may arise, the recourse the purchaser or the seller have will be based on the content of the agreement. Let us try and understand the contents of a standard sales agreement.

The agreement must have a vendor (seller) and a purchaser and either could be an individual or a company. The agreement will not only quote the name (s) of the vendor / purchaser but also mention successors in title, assigns and personal representatives. These are parties to the agreement. Who are these? Successors in title basically mean the successive owners of the titled land. Assigns are third parties to whom the vendor / purchaser would transfer all of the rights and obligations he/she has. A personal representative is ordinarily an executor for the estate of a deceased person who left a will or the administrator of an intestate estate. Take note that all these parties are bound by the agreement you are signing.

The agreement will further mention the Land Registration (LR) number, commonly referred to as the title number of the parcel in question, its area (approximate) & tenancy (freehold or lease). In the case of a lease the agreement will quote the lease period.

The agreement will further quote the Purchase price and terms of payment. Ordinarily, a payment of 10% on execution of the agreement will be paid by the purchaser. However, this may vary depending on what the two parties have agreed. The agreement will mention the completion period and in most cases give room for extension of the period as long as the parties agree and do so in writing.

It will further list the completion documents as below (if it is an individual buying and an individual selling):

1.     Original Title in the name of the Vendor

2.     Consent necessary for transfer

3.     Duly executed transfer forms in triplicate

4.     3 Passport Photos of the Vendor

5.     Copy of Pin Number of the Vendor

6.     Copy of National ID of the Vendor

7.     Rates Clearance Certificate (In Case the tenancy of the land is leasehold)

8.     Rent Clearance Certificate (In Case the tenancy of the land is leasehold)

9.     Valuation form duly filled

In the case the vendor/purchaser is a Company, then some additional documents will be required as below:

1.     3 photos each of the 2 directors of the company executing the transfer

2.     Copies of PINS and ID copies for 2 directors executing the transfer.

3.     Copy of the registration Certificate if it’s a company.

4.     PIN Certificate of Company

There is this clause that goes like “The Property is sold with vacant possession which shall be given to the Purchasers by the Vendor against release of the full Purchase Price and apportionments (if any) to the Vendor.”

What does it mean?

Vacant possession: On completion of a sale, the seller is obliged to deliver the property with vacant possession which means clear of occupants and of any objects which are not included in the sale.

Apportionments: it refers to the allocation of property expenses such as insurance and taxes between the buyer and seller. Apportionment can also describe the division of property between tenants in common

Another clause will go like “The property is sold subject to all subsisting easements, quasi-easements and right of way if any, the acts reservation, special conditions and other matters if any attaching on the said property but otherwise free from any encumbrances.”

Let’s understand what these things mean:

Easements: The right of one party to use the property of another party. Easements are often applicable when public utility companies want the right to erect telephone poles, electricity poles or run water / sewer pipes either above or beneath private property.

Quasi easement: Similar to above but only applicable when a single owner has 2 or more adjoining plots. In this case, one or more parcels will be used to benefit the other (s). Notice how a quasi-easement becomes an easement upon the transfer of one or all of the parcels.

Right of way: It is basically the right to pass over property owned by another party. A good example would be KPLC power lines.

Special conditions: These apply especially in cases of leases. A lease is usually accompanied by special conditions which govern the lease.

Encumbrances: As earlier mentioned in another lesson, these will include restrictions, cautions, charges etc.

Take note that whenever you acquire that plot, you get it as is and consequently you inherit all of the above.

Next lesson we look at other agreement clauses including default clause, rescinding an agreement, certification of parties signing, validity of an agreement and disputes arbitration.

What is in this official search document?

Guest post by Samuel G. Njenga

Paul and I met this broker who was introduced to us by a friend in Rongai. This was on a cold Thursday morning sometimes in August 2010. The guy went ahead and showed us a very nice 2 acre piece of land around Rimpa, some place between Rongai and Kiserian. It had an old building and was on sale. We felt the price quoted by the owner was quite low. However, the story went that the owner was liquidating a lot of his assets due to financial constraints hence the low figure quoted. We expressed interest in the property and the broker called the owner who apparently was in Kiserian. We therefore decided to drive on to Kiserian and meet the guy.

On reaching Kiserian we navigated our way to some dingy looking pub where the owner was having a drink with some other guys. We got shocked because in front of us was a former KANU bigwig who seemed a shadow of his former self. The guy looked unkempt and in comparison to the man I knew in his hey days, it seemed like life had not be rough on him. He had a unique look and it was not possible to mistake him for someone else. I just realized how fast the tide can turn against you especially when in the political cold.

After the intros, we told the old man that we were interested in his property. He told us that we are not the first to express interest and if we really wanted the property, then we needed to make a commitment as fast as possible. Red flag?! Indeed yes, coupled with the fact that he was a former politician (another red flag), I knew we had to trend carefully. We informed the guy that however much we want the land we needed to confirm it is OK by way of carrying out an official search. He informed us that he is to travel to Kericho the day after so if we wanted his land then we had to move fast. We promised to revert back to him as soon as we had the search. No-one should ever force you into a quick deal before you perform the necessary due diligence.

As we departed for Nairobi, I called my contact in Kajiado and gave him the LR number so that he does the search. At around 4pm, my contact in Kajiado called me. He is usually a funny fellow but from his first words, he sounded shocked. He told me that he had the search with him and it was like none he had ever seen before. I was quite curious to know what was therein. He called me by my name and told me, “I thought I told you to be very careful with some of the land you keep attempting to buy”. I told him am usually careful and I do the best I can. “Forget about that land”, he retorted. He went ahead to inform me that the search had so many encumbrances to an extent that they could not fit in the space availed for listing them on the search document.

When I received the search the day after, it made some interesting reading. It had as many as 4 entries other than the normal entries of the name of the proprietor and when the title deed was issued. The 4 entries were as below:

1.     A restriction that no dealing will be registered on the land unless the registered owner appears in person.

2.     Caution by some guy claiming lender’s interest.

3.     Charge in favour of a financier.

4.     Further charge in favour of the same financier.

In total the land was charged to the tune of 9M and it was only worth 3M at the time we viewed it. I am sure by the time of the charge which was around 2004, it must have been worth 300k. How the charging was done for such a value, don’t ask me.

An official search is a confirmation by the respective land registry on behalf of the government on the ownership and status of a particular title. It shows the following details:

1.     Title number, search number and the date the search was done.

2.     Nature of title: Absolute or lease.

3.     Approximate Area in hectares

4.     Name and address of proprietor and whether a title deed has been issued to the proprietor.

5.     A section on inhibitions, cautions and restrictions.

6.     Encumbrances section (leases, charges etc.)

7.     Pending applications

The search document details are filled based on the content of the green card upon and must be signed and sealed by the Registrar. For a title to be clean, then No.s 5 to 7 must be nil. If not, and especially section 6, a charge entry must have a corresponding discharge entry to free the charge. A title with the any unresolved issues in No.s 5 to 7 is not transferable.

A quick look at the title document itself:

Other than confirming the title number, the approximate area of the plot/land and the proprietor details, one needs to confirm the entries in the proprietor section (part B) which should tally with the entries on the search. Take note of the date the title was issued and confirm it is the same with what appears on the search. There is also the need to have a look at any entries in section C (encumbrances section) because therein they list them. Any entry in this section must be accompanied by a signature by the registrar. Remember the following important points:

•       A charge entry must be accompanied by a discharge entry for the same amount and by the same chargee to release the charge.

•          A caution can only be removed by the entity that placed the caution, same with restriction.

•       If you come across a discrepancy in the proprietor details as in names, nature of title and approximate area, then be very careful. Take for example a discrepancy in the name of the proprietor (e.g. use of initial in the title as compared to full names in the ID), the legal process get quite interesting where the proprietor must go through a correction of names in the title. The process starts with swearing an affidavit, the same is presented to the registrar who writes some letter to the area chief, who must identify the proprietor and give them a letter. The proprietor must then present themselves to the relevant Land Control Board to get consent to change the name and he/she takes all the docs to the registrar for the change to be effected. Quite a procedure.

Special circumstances when you can proceed with a deal when a title is encumbered:

For developers who are financed, the titles for the land they are developing are usually charged by the financier. What normally happens, in the case when a customer who pays up for a house, a partial discharge for the specific title to the unit is done hence freeing it from the charge and allowing for the transfer to proceed. So whenever you carry out a search for the title of the house you want to purchase, you should not be worried to find it charged by a financier because essentially it’ll undergo a discharge and the transfer will be executed. However, a vacant plot / land must be free from encumbrances.

Next lesson will dwell on understanding a sales agreement, I know most people have signed it but they were not sure what some clauses meant.

Due Diligence when investing in real estate

Guest post by Samuel G. Njenga

On this particular Saturday morning sometimes in 2008, my partner Paul and I met one of our brokers who showed us a very nice piece of land in Ruiru off the Eastern bypass. It was approximately 2  km from the junction of Thika Road and Eastern bypass towards Ruai, third row from the tarmac. The site was wonderful but we have since learnt not to be so excited by the aesthetics of a shamba (farm). The shamba was up for sale and the good thing is that the broker knew the owner at a personal level.

We expressed interest to acquire it and decided to carry out due diligence. The 1.25 acre shambas in Ruiru were originally owned by shareholders of Githunguri ranching company. The first thing we do is to check on the survey maps to confirm that the ground we are being shown and the title number as seen on the map adds up. We then check the original owner from the records of Githunguri coz the company still exists. It is easier to trace the original owner and any subsequent transfers of title in Thika. For this particular shamba the story went that the original owner (an old lady) had given the son the land as a gift but the son had never transferred the title in his name. It was thus easy to confirm coz the title was still in the name of the original owner. After that confirmation, we carried out an official search at Thika and confirmed the records. When we finally met the son, we negotiated the price further and agreed. However, we insisted that the son takes us to the mother, who in actual sense was the proprietor. We drove all the way to Githunguri and met the old lady at her home. She actually confirmed the story and agreed to appear before a lawyer and sign the agreement and any other document.

We normally demand that the Vendor must have all the completion documents including the consent to transfer. On the day of signing the deal, we met the Vendor and insisted that we go to the site first so that we are shown the beacons before we enter into an agreement and pay 10% deposit. When we landed at the site, we got the shock of our lives. We found fresh subdivision beacons on the land. In my estimation, the land must have been beaconed the day before. You can imagine the reaction of the Vendor. He was tongue tied, speechless ama aliona na mdomo… Of course the deal never proceeded but I advised the old lady to carry out investigations and establish what could have happened.

A week later, I met our broker and he told me what exactly had happened. The land in question had been on sale for like 6 months or so. The original broker in charge of the sale had circulated copies of its title to so many other brokers. The guy had also narrated the story to other brokers of how the son had acquired the land from the mother as a gift and the fact that the son had never executed the transfer. Crooked fellows just did another title (similar to the copy they had accessed) and the ID in the name of the old lady. When a prospective purchaser got wind of that the land was on sale and the guy was given the story behind the ownership he decided to purchase. When the prospective purchaser did a search in Thika, the title was clean and in the name of the old lady. Little did he know that the purported vendor was an old lady whom the crooks just hired and one of the crooks posed as the son and the vendor was convinced that the story added up. So he paid for the deal in cash and received the fake title, consent to transfer, passports and copies of the fake ID and fake PIN. So the guy decided to physically subdivide the land as he awaited the transfer to go through. It was shock on him…. He was suckered and lost a whopping Kshs. 2.5M.

Basically, I’d also think we survived by a whisker though we were dealing with the real owner but the prospects of a court case chasing our hard earned cash was not anything we’d have wanted. But again you may wonder what error of omission or commission did the conned guy commit.

How best can you carry out due diligence?

1.     Always trust your 6th sense; basically your instinct. When you feel like there is something not adding up, most likely there is a problem. When you meet a vendor who does not sound confident and wants the deal done as fast as possible, it is a red flag.

2.     Get to know the history of the land you are buying from the locals. You’d be surprised at the kind of info you can gather from locals. Biggest challenge is land / plots in town; imagine CBD, whom do you approach? Like I remember in 2003 when I first bought a plot in Syokimau, the sales lady from the Company I bought from mentioned that there is some contentious land whose ownership is claimed by KAA but some fellows are selling. It is so sad that turned out to demolitions witnessed the other day…so so painful. My point is, the info is always there if you are keen to ask around.

3.     Check the land / plot on the survey map. This will also ensure that whatever you are being shown is in line with what the area map shows. A survey map clearly shows the LR numbers, the access roads etc. Make sure it is an authentic map. At the survey of Kenya they go for around Kshs. 300.

4.     Carry out an official search for the land /plot and ensure that the title is clean. A clean title has no encumbrances (cautions, restrictions, charges, etc. we’ll talk about these later). Take note that a search cannot tell you anything about a fake title. It is just shows the records as per the green card at the land registry. However, when a fake title is presented to the land registry for a transfer to be executed, then they’ll notice at that point; but by then you’ll have probably lost your money.

5.     Use an Advocate who understand conveyance and one who is not only licensed to practice but has renewed their license. Some advocates have no clue about conveyance. They normally must renew their licenses annually. By the way, a transaction done by a lawyer who is not licensed is voidable. This site gives this info: http://online.lsk.or.ke/online/searchengine.php

6.     There is that Ndung’u report. It is wise just to confirm that what you are buying is not mentioned in that report.

7.     Last but not least, ensure you confirm that the ID of the vendor is not fake. You can use security experts / firms to confirm that.

8.     If you can, get to have an idea where the vendor works or lives. Wherever possible, just pay a 10% deposit and le the balance be held by an advocate to be released upon successful transfer.

Play safe because losses in land deals are usually big and painful. You might cry in the toilet after s**t hits the fan.

Next lesson we’ll talk about how to interpret the official search document and special circumstances where you can go ahead and deal in a plot which has encumbrances especially when charged by financiers.

What is a FAKE TITLE DEED?

Guest post by Samuel G. Njenga

A deed is a signed agreement especially about the ownership of property or legal rights. A Title deed is a legal document providing somebody’s right to property and subsequently ownership.

Then what is a deed plan? This is a signed plan by the Director of Surveys showing the precise particulars of a surveyed piece of land. It shows the details as in the shape of the plot, the distances and bearings all-round the plot, scale of plotting, Deed plan number, land reference no., size of the plot in hectares, signature of the Director of Surveys, the date of authentication by the Director of Surveys and above all it shows if the plot is a New Grant or an extension of lease. This is practice is under the provisions of Registration of Titles Act (RTA). This deed plan once it is duly prepared, it is attached to a certificate defining the current owner and any endorsements by the relevant Registrar in the event the property has changed hands or there are encumbrances therein whatsoever relating to the plot.

What about a mutation? Under the Registered Land Act (commonly referred to as Cap 300) the mutation form shows how a bigger land (mother) mutated into smaller pieces and the details of the proprietor (Names, ID, box number and signature). It further shows the date the surveying was done. It also details the subdivision details (existing roads, LR numbers of the resultant plots, the exact measurements of the plots and their areas in hectares). Other signatures therein include the one of a licensed / district surveyor and the land registrar who prepared the resultant titles. This document is ordinarily forwarded to survey of Kenya for purposes of amending the RIM (Registry Index map) which basically keeps track of all subdivisions in a specific area.

Then what is the meaning of the word “fake”? To make something false appear genuine.

From the foregoing therefore, a fake title deed is a false replica of a genuine Title deed where it could have all the attachments but does not relate to any physical piece of land. Equally it purports to confer a right that doesn't exist.

In early 1990's there was the infamous 13th floor of Ardhi House where false documentation was done to support surveys and issuance of Title deeds by the unsuspecting authorities. This floor was in reference of a room in River Road Nairobi. After all Ardhi house goes up to 12th floor. The fraudsters could therefore generate documents including allotment letters, Part Development Plans (PDP) and all that appertains to excision of land from the Government land (GL). They could even go ahead and file these documents in the files of the Ministry of lands using inner house staff of the Ministry at a small fee. That is the point where corruption sets in the process. It even becomes difficult for the Ministry to trace the entry point of the fake documents in the Ministry’s genuine files. Where allocation of a genuine plot is substituted with the “fake” one it becomes even more complex to unearth the conversion stage from a genuine Title deed to a fake one.

Would a naked eye be able to identify a fake title? From the aforementioned info, it gets very tricky because most fake titles are replicas of the original, meaning the details therein are the same. How then can you tell it is fake? It is pretty hard, but the easier approach is to tell a fake owner because obviously the ‘owner’ should have other document especially the ID card. We also have document experts who can verify the title. Most security companies / experts can verify IDs. Banks when financing land deals use experts to detect forgeries of titles and IDs. If you carry out proper due diligence you should get to know if the owner is the real one and if the documentation is proper.

By the way, other than fake titles, whenever then you transact with plots, take time to carry out proper due diligence to establish the history and more importantly the conception process of the plot. Only then you will tell the plot was grabbed or was acquired the right way. Else you could invest on a road reserve where caterpillars of the Ministry of Roads will be your obvious guests. In this case no compensation by the state will come your way as the rights of the society surpasses individual interest.

A green card is a document that holds original records of all transactions relating to a piece of land/plot. This means at the issuance of a new title, it must be preceded by opening a card for it. Any subsequent transactions relating to the plot/land are recorded there. Normally when a subdivision is done, a green card will be opened for each sub-plot  Maybe the seller had reached the stage where the card had already been opened but the title not yet issued. However, that is the last and the easiest process when subdividing land. The green card is applicable to the registered Land Act and is resident at the district land registry level.

We also got the white card applicable to Registration of Titles Act, mostly leases and is resident at Ardhi house as well as at the district level; they are usually put together in binders.

Finally, do you know that an official search at the land registry office is not sufficient due diligence?? I’ll expound more in the next topic as we look at how to carry out a comprehensive due diligence you can carry out to protect yourself from getting conned when purchasing land.

Our next lesson will be on paying due diligence before investing in real estate.

Making Real Estate Part of Your Retirement Nest Egg

Guest post by Young

At one time or the other, everyone will retire or be retired (by organisation or by nature). You cannot continue to work with the same passion and strength forever. One day, you will be tired of work or the work will be tired of you. Faced with this inevitable end of work, you need to have a solid, reliable and stable retirement plan.

Many employees are discovering nowadays that most companies and organisations are more interested in employees taking care of their pension rather than relying on them.

Even more disheartening is the unfortunate realisation by those who were part of previous pension programmes that their money had been invested mostly in the stock market and other financial schemes and had been lost. This shocking discovery came to many when they had passed their peak working years.

One of the reasons for this unfortunate development is the fact that apart from real estate, only very few investments are under the control of the owners of the funds.

In real estate you are literally in charge. However, in several other financial investments, you are either at the mercy of the fund managers or those running the company you have bought into. That is why astute real estate investors keep a significant portion of their funds invested in real estate. So, if you are interested in retiring young, and rich, or you are already approaching your retirement age, then use real estate as a retirement vehicle.

One of the basic issues you need to decide is the amount of money you need annually to sustain or maintain your standard of living after your active working years. You will have to estimate the likely rate of inflation and other expenses that will come with it, such as increased school fees, feeding, transportation, health care and other utility bills.

The essence of this is to help you estimate the minimum income you need annually and set a real estate investment goal that will generate the income you need and more.

In addition to the above, you need to determine the real estate investment that seems best suited for your purpose. For instance, a person who has set an investment goal of having a steady cash-flow of 6 million every year could focus on residential properties located within certain environments that will generate the desired amount yearly, or is projected to generate such an amount yearly.

This individual could also focus on commercial properties such as shopping complexes, or event centres with a similar projected cash-flow. Whatever your goal, there is a suitable real estate investment vehicle for you.

There are several models that have been used and have worked for others. I believe you can adopt any of them and make them work for you. Some years ago, a property developer built a mini-estate of about ten (10) semi-detached duplexes in a GRA as a retirement investment. His aim was to rent them for residential purposes and use the income coming in to maintain himself and his family.

Another individual concentrated on buying prime properties during his working years. By the time he retired, he had three properties in prime locations including the one he and his wife were living in. By then all their children had completed their university education and were all settled.

He then sold two of the properties at very good prices and used the gain as a fixed deposit at his bank. The interest accruing on the money was always in excess of their monthly expenses.

These individuals were not dependent on any government pension plan for their upkeep and survival. This is the essence of planning for your retirement yourself.

Real estate fulfils several roles. It provides cash-flows as well as capital appreciation. Over time, real estate is usually the asset that will eventually outpace inflation in its capital appreciation.

With proper planning and sacrifice, an individual can focus on the number and type of real estate properties he or she would like to have as at the age of retirement. Those who successfully achieve this feat would have a peaceful and more relaxed old age.

Finally, you need to understand that practically any goal is achievable if you give it enough time and sacrifice. For most people, their earning years span between 20 and 30 years, during which a person could save and invest in having at least two or three rental properties.

The key is to start early, start now and stay focused. Using the law of compound interest, appreciation and leverage, and several other tools, an individual can secure his or her future with real estate as one of his retirement nest egg to compliment other asset classes.

But before investing in real estate, understanding /interpreting an agreement, understanding a search (cautions, restrictions, and encumbrances), caveat emptor and paying due diligence is necessary. This will be covered in the upcoming lessons. 

Pooling resources: Part 2

Continued from part 1.

Having already bought a plot and having collected some cash from new members; we were smiling from ear to ear. By the way, the new members’ share was calculated based on market value of the plot and available cash plus a premium. The essence of the premium was to cater for the work already done and structures already put in place. The capital injection they brought was used to acquire another plot in Kitengela. We seemed to be getting somewhere.

It was now time to do a 5 year business plan; after all targets must be set and well documented. Planning is extremely essential for any business. The business plan ordinarily will:

1.     Outline the vision and mission of the company. Vision creates that momentum of growing anticipation about the future, where change is embraced as a step closer to that very compelling picture of what’s coming next. The Mission defines the company's purpose and primary objectives. Its prime function is internal – to define the key measure or measures of the company's success – and its prime audience is the leadership team and stockholders.

2.     Set out values that the company must adhere to.

3.     Outline the products and services to be offered and the target market

4.  Carry out a serious SWOT and PEST analysis. It is crucial that an internal analysis of the strength and weaknesses of the membership as well as opportunities and threats be analysed. It is also important to analyse the external environment.

5.     Stipulate the strategies that take you to the vision and how to implement them

6.     Outline the management structures are also very key

7.     Give clear financial projections

This is just a paper and it can remain a paper if not well implemented and monitored. The same document is very crucial when you decide to approach financiers.

Our line of business mutated with time from speculation with plots to buying large tracks of land, subdividing and selling plots. With leveraging on credit, it was much easier and faster to expand and the turn-overs were testament of the expansion.

Management structures changed from owner managed to having a team of professionals manage the firm. The shareholders remained as the board members and exclusively deal with strategic decisions that are scaled down to the management team for implementation.

The company eventually pursued other lines of business including development of housing estates. What is nice about such business ventures is the fact that the company largely invests other people’s money. The OPM concept is the sweetest model of investment. Of course another brilliant idea developers utilize if well managed are joint-ventures with land owners. If well managed, you can imagine having a joint venture with the land owner whose land becomes the equity towards a project, then the company approaches a financier who provides the cash for development. Armed with a marketing strategy that works, it essentially means using other people’s cash to make money.

When I look at this chama cum company, the sky is the limit.

More Valuable lessons:

1.     Without a proper business plan, it is almost impossible to make it in business; you’ll end up running like a headless chicken.

2.     Having a business plan is an important thing, implementing it and monitoring the targets is far more important.

3.     Clear strategies on how to grow are important. This goes hand in hand with adapting to the ever changing environment.

4.     Management of a business is very crucial. Sometimes owners of business mix ownership and management to the detriment of the company. It is always wise to let a company be managed by professionals.

5.     There is need to have goal congruence in an investment group. This is very crucial because if this is not the case, you’ll always be embroiled in internal wrangles as opposed to spending time strategizing on how to grow.

6.     Variety of members in the group should be viewed as a strength because it brings in different views and professional outlooks.

7.     The number of group members should not be too low neither should it be too high. Too low means challenges of getting sufficient capital could arise. Too high means serious group dynamics could set in and managing a larger group is much tougher.

Our next lesson will be on making real estate part of your retirement nest egg.

Pooling resources: Part 1

Guest post by Samuel G. Njenga

Soon after I got my first job and in the heat of exciting times of joining the working class, we formed a Christian social grouping together with former campus mates (5 of them). We used to read the bible together as well as organize outings inviting our girlfriends (most of them became wives, others fell by the wayside). Soon we started feeling like we needed to nurture some investment ideas together; after all we needed to live well in this world and beyond. We were newly employed young men bubbling with lots of energy but lacking in finances. Simply put, we were at the same level of financial ability and no-one seemed bigger than the other. We also had a unity of purpose and we shared a lot in common. We could move in the same direction and obviously we respected each other’s view from the onset.

We held a series of meetings that culminated into a decision to be contributing some small cash (4k per month) towards investing. 4k for a guy earning 20k was 20% of my income, but the more I saved and invested, the happier I’d get. We then realized we did not have an account to put the money, neither did we know what exactly to do with the money. We also realized that we were not sure which form to take; company, welfare group or remain as an amorphous group. In a nutshell we needed proper structures in place to get going.

What is supposed to have guided the form we take? Akin to climbing a tree from the bottom, what we wanted to venture into was to guide our decision on this matter. My love for real estate started way back and it was easy to sell to the group the idea of venturing into some form of real estate investment(s). At least we agreed in that regard; though we felt this was more futuristic than anything else. Back then, the idea of owning plots seemed very distant of course with the kind of incomes we had. But wait, Rome was never built in a day; at least we dreamt big.

A decision was made that we register a limited liability company; after all plots and houses could only be registered in the name of the company whose shareholding we thought was prudent to be equal for all shareholders. The people to lead this young company to glory were the next big question. A chairman, treasurer and a secretary perhaps? A starting point it was. Would we then say that the initial structure was in place? By the way, I look at the minutes of our first meeting and we clearly came from very far.

Six young men armed with a registered company and contributions worth 60k and raring to go. Next big question was how to venture into real estate business with 60k? This is where it gets tricky, but as they say where there is a will, a way can be found. Ultimately, a decision was made that we do stocks for at least one year as we strategize on real estate investments. Stocks for novices and buying interesting counters with no real facts guiding the decisions. Stuff made of nightmares, running around like headless chicken was the order of the day. The learning curve was massive and wrong decisions made but nevertheless we were doing something. We went ahead and pumped in cash for 1 year buying several counters but making no headway in terms of making money. Swimming in the deep perhaps and expecting things to work.

The stock market went south and we soon we realized that we had contributed a lot more money than the market value of our stocks. Time to pack and try something else? Probably adopt a different strategy. At least we were sure something had to change. A strategy meeting was called and lots of brainstorming done. Hard decisions had to be made. These were the decisions.

1.     Ship out of the stock market by way of selling all the counters; after all it was not working.

2.     Look for a few more members to join the group to accelerate the growth and get more capital.

3.     Move to real estate which was our initial idea; thus use the cash from stocks to pay for a plot somewhere and speculate.

After sale of the stocks, the very first plot was bought in Kitengela. Quite a milestone; after all we had started living the big dream; albeit in a small way.

Recruiting an additional 4 members was the next task. We decided that we could only recruit members who would buy into our vision. Members proposed their friends but a stern condition was set that they prepare a business proposal to be evaluated by the existing members. The potential members were subject to vetting just to make sure they have a clear vision for the group and will add value. With benefit of hindsight, it was a marvellous move because it separated wheat from chaff. We let down several guys by out-rightly rejecting their wish to join us. After all this is business and we never really wanted joy riders.

Something was telling me that this group is headed for greatness. Take note of very important points so far:

1.     Strong urge to invest together by way of pooling resources was the starting point. Unity of purpose was also evident.

2.     The members had a lot in common; were of the same age-set and financial ability, they could thus identify with each other’s challenges especially financial.

3.     The members were focused; agreed in principle on what they wanted to pursue. The big deal was how to get going.

4.     Structures (albeit simple ones) were put in place.

5.     When things did not work, a change of direction (not dissolution) was proposed and pursued.

6.     Recruitment of new members was not only based on financial ability but they were meant to add value to existing membership. One of the most important considerations was the characters of the individuals and how well they plan their finances at a personal level.

Sounds like ingredients for a successful chama. The work had begun in earnest and a lot of hope was in the air.

Most chamas fail due to a myriad of reasons but that happens way before the chama even gets going. There is nothing as frustrating as having members who are not progressive; those who argue for no reason and of course those who are not committed. Monetary contributions in most cases are considered the most important thing from members; but we get it all wrong. After all money cannot make itself; a lot of things must be right.

Next lesson will be on how this great chama mutated into a well-managed real estate firm that is doing wonders and will soon be a multi-billion investment.