The sectional titles regime is based on the principle that a unit in a building is deemed separate and independent from the other units in the same building. It is possible to acquire the unit and obtain an independent title deed with respect to that specific unit, unlike for a lease where the interest of the owner is registered against the main title over the land on which the unit is built.
The former Sectional Properties Act of 1987 (“the repealed SPA”) was replaced by the Sectional Properties Act, 2020 (“the current SPA”) because it was unresponsive to the current needs and emerging challenges in the real estate industry. It was difficult to implement which delayed and/or impeded the completion of transactions. Some of the challenges faced under the repealed SPA included:
- It only applied to properties registered under the repealed Registered Land Act (RLA) – Therefore, any property registered under a different regime had to be converted to the RLA regime first before the registration under the repealed SPA could be processed. This made transactions lengthy and complex.
- Payment of land rent and rates by unit owners was made corporately through the holder of the main title thus leading to delays in dealings in the specific units.
- The corporate status of the Corporation was not clearly defined – The Corporation is the entity responsible for managing and maintaining the common property where the building lies. The repealed Act referred to the Corporation but did not provide for its establishment or management.
Therefore, the current SPA was passed to address the challenges brought by the repealed SPA and to align the law on sectional properties to the current land laws and the Constitution of Kenya. It is intended to ease the registration and the management of the sectional properties and consequently encourage investment in sectional properties in Kenya.
B. SALIENT FEATURES OF THE CURRENT SPA
The salient features of the current SPA include:
- Application of the Current SPA
The provisions of the Act apply in respect of land held on freehold title or land held on a leasehold title where the unexpired residue of the term is not less that twenty-one years, and there is an intention to confer ownership.
- Registration of Sectional Plans
All sectional units must have a Registered Sectional Plan which has been prepared by a surveyor and authenticated by the Authority responsible for survey. Before preparation of the sectional plan, a surveyor must be presented with proof of ownership of the parcel or unit to which the Sectional Plan shall apply. The Sectional Plan itself must describe two or more units in it and be presented for registration in quadruplicate at the Lands Registry. Registration of the sectional unit follows thereafter.
- Termination of the Sectional Property Status of a Building
The Sectional Status of a building may be terminated by:
- Unanimous resolution of the owners of the units;
- Substantial or total damage to the building; or
- Compulsory acquisition by the Government.
On termination of Sectional status of a building, the Registrar shall make a notification on the Sectional Plan to that effect, after which the owners of the units in the Plan shall be entitled to the parcel as tenants in common in shares proportional to the unit factors of their respective units.
- Liability of Rates, Land Rent and Taxes
The owner of a unit shall be liable for any rates, ground rent, charge or tax levied by a rating authority on the unit. The Corporation is not liable in relation to the parcel of any rates, ground rent, charge or tax levied by a rating authority.
- Treatment of Existing Long-Term Leases
All long-term leases/sub-leases that confer ownership over apartments, flats, maisonettes, townhouses or offices, registered before 28th December 2020, are required to be reviewed to ensure that they conform to Section 54(5) of the Land Registration Act.
This section of the Land Registration Act requires the following to be met before long-term leases are registered:
- Proper geo-referencing of the property; and
- Approval of the geo-referencing by the Survey of Kenya.
All the long-term leases that were registered without meeting the two requirements above will need to be reviewed by 28th December 2022. The persons responsible for initiating the review of such long-term leases are the developer, a management company or an owner of the unit.
If the review is not undertaken, the Lands Registrar can register a restriction against the main title of the parcel to prevent any further dealings in the land for lack of compliance. Further, pursuant to a notice dated 7th May 2021, the Ministry of Lands notified the public that long-term leases prepared on the basis of architectural plans will no longer be registered with effect from 10th May 2021. It is therefore crucial that owners of residential or commercial properties whose leases are not compliant undertake the review as required under the current SPA.
- Establishment of the Corporation
The current SPA provides for the establishment of the Corporation on the registration of a sectional plan. The Corporation shall be registered by the Lands Registrar who will issue a certificate of registration. A Corporation registered under the current SPA will be able to, inter alia, enter into contracts in its own name, sue and be sued in its own name and open bank accounts. These provisions on the establishment of the Corporation have addressed the gap that was in the repealed SPA by clarifying the corporate status of the Corporation, the regime of its registration and the procedures for its establishment.
- Duties of the Corporation
The Corporation shall be responsible for the following, among others:
- Maintaining the common property;
- Insuring the building against fire, unless otherwise agreed by the owners of the units;
- Paying premiums of any insurance it is responsible for;
- Engaging the services of a property manager or other necessary professionals to ensure proper management of the common areas;
- Ensuring the enforcement of any lease or licence under which the land (where the building lies) is held;
- Carrying out any duties imposed on it by its by-laws.
8. Investment of Corporation Funds
The Corporation may invest any funds it holds that are not immediately required by it. However, it can only invest in the investments which a trustee may invest in under the Trustee Act, Cap. 167, such as any shares of a building society, any security issued by Kenya Railways, any security issued by or on any loan to the Industrial Development Bank Limited, among others. A Corporation may also invest in funds which are endorsed by a special resolution of the owners of the units.
- Dispute Resolution
The Corporation has powers to constitute an Internal Dispute Resolution Committee to hear and determine disputes arising between unit owners in relation to the sectional property.
The current SPA has definitely given the regulatory framework governing sectional properties a much-needed face-lift. It has dealt with the challenges that were being experienced under the repealed SPA and it is now aligned with the provisions of the other Land Laws and the Constitution of Kenya. It has also enhanced compliance in the registration of long-term leases by requiring that the properties comprised in the leases are properly georeferenced and uniquely identified.
However, it is yet to be observed whether the new provisions will remedy the delays in the registration of units under the sectional properties’ regime. Further, the requirement that all long-term leases should be reviewed and eventually converted to sectional properties is expected to inconvenience many owners of property and developers of ongoing projects where reversionary interest is yet to be transferred to estate management companies.
To operationalize the provisions of the current SPA, the Sectional Properties Regulations, 2021 were developed and gazetted by the Ministry of Lands and Physical Planning. The Regulations deal with two key elements, that is, the registration of sectional plans for developments where no long-term leases are registered and the conversion of registered long-term leases to sectional properties. They provide for the requirements and procedures of effecting the provisions of the current SPA.
Article by June Njoroge-Ngwele & Ann Yvonne Muriithi
Published on 2nd March 2022