How to Check If a Kenya Developer Is Using an Escrow Account (And Why Most Don't)
When you pay a deposit on an off-plan property in Kenya, where does that money go?
In most cases, it goes directly into the developer's operating account. The developer uses it to pay salaries, marketing costs, land expenses, and whatever else the business needs at that moment. Your deposit is no longer yours in any practical sense. You have an unsecured contractual claim for delivery of a unit. That is not the same as money you can get back.
Escrow arrangements exist to solve this problem. But in Kenya's off-plan market, they are the exception, not the rule.
What Escrow Actually Means
Escrow is an arrangement in which a third party holds funds on behalf of two contracting parties and releases those funds only when agreed conditions are met.
In a properly structured off-plan escrow arrangement:
- Your deposit is paid to an independent escrow agent, not to the developer.
- The escrow agent holds the funds in a designated account.
- Funds are only released to the developer when the developer meets specific milestones: foundations complete, building frame complete, practical completion, and so on.
- If the developer fails to meet the milestones within the agreed period, the escrow agent returns the funds to you.
The essential feature is that the developer does not control the money until they have earned it by delivering something. This aligns the developer's financial interests with completing the development rather than simply raising deposits.
The Difference Between Escrow and a Client Account
These two terms are often confused, sometimes deliberately by developers who want to sound like they are offering protection they are not.
A client account is a bank account held by an advocate, into which client funds are deposited. Under LSK (Law Society of Kenya) accounts rules, advocates are required to maintain client accounts separately from their own funds and account to clients for money held.
If a developer says "funds are held by our advocate in a client account," this is not the same as escrow. The developer's advocate holds the money on the developer's instructions. The advocate's obligation is to their client, the developer. If the developer instructs the advocate to release funds to the developer's operating account, the advocate does so.
A client account is better than money going straight to the developer's general bank account, but it does not provide the independent milestone-triggered protection that escrow provides.
True escrow requires an independent agent with contractual obligations to both the buyer and the developer, and a release mechanism that the developer cannot trigger unilaterally.
Kenya Law and Off-Plan Deposit Protection
There is currently no Kenyan statute that requires off-plan developers to hold buyer deposits in escrow.
The Housing (Amendment) Act discussions, proposals from the Kenya National Bureau of Statistics regarding the housing market, and various Lands ministry consultation papers have noted this gap. The Landlord and Tenant Bill, as it has moved through various iterations, does not address off-plan deposit protection directly.
The Sale of Residential Off-Plan Properties sector has been flagged by the KNHCRS (Kenya National Housing Corporation) as needing better regulation, but as of 2026, no specific escrow mandate has been enacted for private developers.
This means the buyer's protection depends entirely on what the sale agreement says. There is no regulatory backstop.
How to Tell From the Sale Agreement Whether Your Money Is Protected
Ask three questions when you read or have your advocate review the sale agreement.
First: where are the payments made? The agreement should specify the account name, bank, and account number. If payments go to "the Developer" without further specification, ask the developer to confirm in writing where the money is held.
Second: what are the conditions for release? If the agreement says the developer may use deposits "for the purposes of the development," that is not escrow. It means the developer controls the money. An escrow arrangement will name the escrow agent and set out specific milestone conditions for each drawdown.
Third: what happens to your deposit if the developer fails to complete? An escrow agreement will have a specific refund mechanism. A standard developer agreement will send you to the dispute resolution clause, which means litigation against an entity that may by then be insolvent.
Which Kenya Developers Use Escrow
Genuine escrow arrangements in Kenya's off-plan market are rare.
Some international and regional developers operating in Kenya, particularly those with listed parent companies or institutional investors, have implemented escrow arrangements as part of their governance standards. Developers with NSE-listed entities or those participating in the Kenya Mortgage Refinance Company (KMRC) framework sometimes have more structured deposit arrangements, because their investors or lenders require it.
Smaller and mid-market developers, which make up the majority of Kenya's off-plan market, typically do not use escrow. The reasons they give include the administrative cost of escrow, the difficulty of construction financing when deposits are locked up, and the absence of any legal requirement.
The fact that there is no legal requirement does not mean buyers have to accept the risk. It means buyers have to negotiate.
What to Negotiate If You Want Deposit Protection
If the developer does not offer escrow, you have several negotiating positions.
Request a staged payment structure rather than an upfront deposit. Pay 10% on signing after the parcel verification is complete, and tie subsequent payments to milestones that have been independently certified. This is not full escrow but it limits your exposure at any given point.
Request that the initial deposit be held by a neutral advocate, not the developer's advocate, on agreed terms that specify when it is released. Get the terms in writing, signed by the neutral advocate.
Ask whether the developer has construction finance in place from a licensed lender. A developer with genuine bank construction finance has typically had their project assessed by the lender. This does not protect your deposit but it is a signal about the development's viability.
If the developer will not accept any of these and insists on full advance payment into their general account with no milestone structure, you are being asked to take on all the delivery risk. That is a commercial decision you can make. You should at least make it with clarity about what risk you are accepting.
The Litmus Check Before Any Deposit
Escrow protects your money once it is paid. Before you pay, the independent protection available to you is a Litmus verification of the development land.
If the land is encumbered by undisclosed bank charges, even a perfect escrow arrangement would not save you, because the bank's security interest in the land predates your agreement. The developer's financier takes the asset; you take the queue in insolvency.
Verify the parcel first. Then ask about deposit protection.
KSh 21,500 for standard title verification. KSh 25,500 with field verification.
This article is for general information only. It does not constitute legal advice. Consult a qualified Kenya conveyancing advocate before any off-plan property transaction.
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