Kenyan off-plan buyers learn a stalled project is not automatic grounds for a refund
Written on
Property lawyers say off-plan buyers in Kenya cannot assume a full refund when a development stalls, after a Nairobi investor lost about Sh450,000 on apartments whose construction never took off, with the courts awarding restitution only where a developer's breach is fundamental.
Kenyans who pay deposits for off-plan apartments are discovering that a stalled project does not automatically entitle them to their money back, with property lawyers saying the remedies available depend on the terms of the sale agreement and how serious the developer's breach turns out to be.
In February 2026, a Nairobi developer unveiled a pitch to a circle of high-net-worth Kenyans, marketing luxury off-plan apartments in Westlands and Riverside as dollar-denominated rental investments with furnished units, serviced living and guaranteed corporate and diplomatic demand. One chief executive reserved two units in the Westlands property, paying a deposit of $20,000 (Sh2.6 million) while other buyers committed $3,000 (Sh389,000). Six months after the groundbreaking, construction of the apartments had stalled and the developer had repeatedly changed the staff assigned to the project, leaving investors uncertain about who was in charge and whom they should engage. Emails and meeting minutes reviewed by BDLife show the investor documented repeated silence and inconsistent updates, and argued that delayed completion of one-bedroom apartments priced at $205,000 (Sh26 million) and two-bedroom units at $300,000 (Sh38 million) would leave his capital idle with no prospect of return. After months of back-and-forth he was refunded $16,587.36 (Sh2.15 million), a loss of about Sh450,000.
His lawyer flagged red flags in the off-plan contract, noting that it was still registered under the previous developer, leaving the new owner without legal capacity to transfer units or funds. Property lawyer Prudence Mugambi said buyers should not assume that the word escrow guarantees recovery, and that a purchaser is not automatically entitled to a full refund merely because there has been a delay. "The first question is whether the developer has breached a material obligation under the contract and whether that breach is sufficiently serious to justify rescission and restitution," she said.
Ms Mugambi said the position changes where a failure goes beyond an ordinary construction delay and amounts to a fundamental breach, for example where a project has been abandoned and there is no realistic or communicated timeline for completion. She cited Abdalla & another v Sheheena Enterprises Limited [2025] KEHC 9881, in which purchasers paid Sh41 million towards an off-plan apartment that the developer abandoned; the court found fundamental breach and ordered restitution of the entire Sh41 million together with costs and interest. In Saad M Saad v Tudor Heights Limited & another [2023] KEELC 21586, where a purchaser had paid Sh1.5 million for an apartment in a project that stalled, the court rescinded the agreement and ordered a refund plus contractual damages.
Where forcing completion is impractical, courts have awarded damages instead. In Henry Ng'ang'a Waweru & another v Dinara Developers Limited [2017] KEELC 1064, purchasers had paid Sh2.5 million for two off-plan apartments but construction had not begun by the time of the hearing, and the court found specific performance was neither appropriate nor efficacious. On repayment, Ms Mugambi said a developer cannot simply impose an instalment schedule because it cannot refund immediately, although an instalment arrangement can be negotiated; if there is no agreement, the purchaser can pursue contractual or legal remedies, with the repayment terms ultimately determined through arbitration or by the court depending on the dispute-resolution mechanism in the agreement.