When Your Kenya Off-Plan Developer Goes Insolvent: A Buyer's Practical Guide

Banda Homes entered liquidation in March 2025 with an estimated KSh 4-5 billion in investor losses. Willstone Homes, Mizizi Africa Homes, and others have preceded it.

When a Kenya off-plan developer goes insolvent, buyers enter one of the most complex legal situations in property law. Understanding the process — and where you stand — helps you make rational decisions.

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What Happens When a Developer Goes Insolvent

The Insolvency Act 2015 governs corporate insolvency in Kenya. When a company cannot pay its debts, it can be:

Placed in receivership: A receiver is appointed to manage and sell specific assets (typically charged to a lender).

Placed in liquidation (winding up): A liquidator is appointed to collect all assets, pay creditors in the statutory order, and wind up the company.

For most off-plan fraud scenarios, liquidation is the relevant process.

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Where Buyers Stand in Liquidation

When a company is liquidated, its assets are distributed to creditors in the following order:

Priority creditors first:

Liquidator's fees and legal costs. Secured creditors (banks with registered charges on the company's assets). Preferential creditors: employees' wages, certain government taxes.

Unsecured creditors last:

Buyers who paid deposits or purchase instalments but received no registered security are unsecured creditors.

This is the painful reality for most off-plan buyers: their claim ranks after secured lenders and government taxes.

What unsecured creditors typically receive:

In well-managed liquidations of companies with some recoverable assets: often 10-30 cents per shilling, paid years after the insolvency.

In liquidations of developer-fraud cases where assets have been dissipated: often nothing.

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If You Have a Charge on the Development Land

A buyer who registered a legal charge against the development land before the insolvency is a secured creditor. This is rare in practice — few off-plan sale agreements provide for buyer-side security — but where it exists, it gives the buyer significantly better position.

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What to Do When You Hear a Developer Is Insolvent

Step 1: Stop making payments. If you are still making instalments, stop immediately. Any new payments go into the insolvency pot and may not be retrievable.

Step 2: Confirm the insolvency status. Check the BRS (Business Registration Service) for a notice of receivership or winding up. Confirm whether a liquidator has been appointed.

Step 3: Contact the liquidator. The liquidator is the official point of contact for all creditor claims. They will publish notices inviting creditors to submit proof of debt.

Step 4: File your proof of debt. Submit your proof of debt to the liquidator within the prescribed period. Include:

Your sale agreement. All payment evidence (receipts, bank statements, M-Pesa records). Any documents received from the developer.

Step 5: Join any buyer association or collective.

Multiple buyers in the same development often form collective groups to monitor the insolvency, share information, and engage legal representation. A group of 200 buyers has more leverage than a single buyer.

Step 6: Consider criminal complaint.

If you believe the insolvency involved deliberate fraud (collecting deposits with no intention of completing the development), file a complaint with the DCI.

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Prevention: What Would Have Helped

The most effective protections against developer insolvency risk are before you pay:

Verify the developer holds clean title on the development land. A developer who does not own the land cannot deliver your unit regardless of financial capability.

Understand where your money goes. Deposits that go into an escrow (not the operating account) survive insolvency better than deposits that were used for operating expenses.

Commission a field verification before paying. Confirms the site exists, construction is at the stage described, and the developer's title is clean.

Read the insolvency provisions in the sale agreement. What rights do you have if the developer becomes insolvent?

Litmus full field verification for off-plan: KSh 25,500.

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This article is for general information only. It does not constitute legal advice. If your developer has entered insolvency proceedings, consult a qualified Kenya advocate immediately.