The Ministry of Lands and Physical Planning in a public notice dated 7th May 2021 announced that the Sectional Properties Act (Act. No 21 of 2020) was enacted into law on 11th December 2020.[i] This is a 95% re-enactment of the repealed Sectional Properties Act of 1987. The Act is an improvement from the old regime to conform with the requirements of the current land laws in Kenya.[ii] The purpose of implementation of this Act was to deal with a number of issues including enhancing the ongoing digitization process of Lands Registry records and providing a mechanism of defining each owner’s interest in the property or unit.
The Act will only apply in respect to properties that have shared amenities including flats, maisonettes, townhouses or offices as long as the intention is to confer ownership on different persons sharing the common areas.[iii] Its application shall only be in respect to land that is held on a leasehold or a freehold title where the unexpired residue of term is not less than twenty-one years.[iv]
This new Act has impacted on property ownership in Kenya in various ways: Firstly, a new title for each unit will be created after the division of an existing structure into units by way of registration of a sectional plan, prepared by a surveyor.[v] This will be a change from the old regime where there was one common title that is shared by many people who have long-term leases that entitle them to ownership over their individual units or have a share in the land owning company.[vi]
Upon registration of the sectional properties, a certificate of title shall be issued for freehold property and a certificate of lease for leasehold property.[vii] The new title will include the percentage of share owned in a common area.[viii] All the interests such as charges and easements that are registered against the main title will be endorsed on all the certificates of title that will be issued in respect to the sectional units.
The Act will lead to the establishment of an Owner’s Corporation after the registration of a sectional plan.[ix] The Corportion is not a company and thus will not be regulated by the Companies Act, 2015.[x] It is mandated with the management and the administration of the estate and the common areas.[xi] A big departure from the previous regime is that the Owner’s Corporation will not own any common areas.[xii] This will do away with the requirement for the appointment of an institutional manager to manage the units, common property, and the movable and immovable property of a corporation. Upon transfer of contracts, assets and liabilities to the Corporation, the Management Company will be wound up.[xiii]
The New Act requires that all the plans presented for registration as a sectional plan shall be geo-referenced.[xiv] This means that the plan must be referenced using a specific location either on, or above or below the earth’s surface.[xv]
The effect on securities held on original unconverted titles is that when a sale of sectional unit is completed, the buyer of the unit gets partial discharge of the charge in relation to their sectional title.[xvi] Before renting out of a sectional unit to third party tenants, the Act requires that the unit owners must give a written notice to the Corporation of the intention to rent out the unit accompanied with details of the tenant.[xvii] Within twenty eight days of ceasing to rent the unit, Aa written notice should be given to the Corporation.[xviii]
Long term leases conferring ownership of apartments, flats, maisonettes, townhouses or offices are to be converted by 28 December 2022.[xix] The conversion may be initiated by a developer, the management company or an owner of a unit.[xx] The Act may impact various stakeholders and the question of what is the way forward for developers and banks is that, where the development has been done and the units have been sold, it would be easier to transfer the reversionary interest to the management company so that the conversion is effected by it.[xxi] Where there are still unsold units, there can be a transfer of the unsold units to the developers and thereafter transfer of reversionary interest to the management company.
For banks, they can ensure that a sectional plan has been prepared by a licenced surveyor before the financing of a development and in the case where a unit has been financed, the borrower may be pushed to commence the conversion process.[xxii]
The major challenge posed by the implementation of this Act is that it is still unclear how the registration shall be undertaken practically. Whereas the Act is in force and the conversation is required almost immediately, the Sectional Properties Regulations and Guidelines are still undergoing a stakeholder participation phase.
In conclusion, it is important for all property owners to comply with the Act as the failure to comply with the Act will attract a fine not exceeding Kenya Shillings two hundred and fifty thousand.
We are available to assist and advice with conversion of your property into sectional properties or any other question relating to land transactions. Kindly reach out to us on info@mmsadvocates.co.ke or wkuyoh@mmsadvocates.co.ke
References
[i] Public Notice, ‘Registration of Sectional Units under the Sectional Properties Act (No.21 of 2021)’ Ministry of Lands and Physical Planning, 7 May 2021-https://lands.go.ke/wp-content/uploads/2021/05/Public-Notice-Sectional-Properties-7th-May-2021.pdf on 26 June 2021.
[ii] Rachier A and Mwangi P, ‘Sectional Properties/Long Term Leases; Which way forward?’ Webinar organized by the Law Society of Kenya Nairobi Branch, 9 June 2021.
[iii] Public Notice, ‘Registration of Sectional Units under the Sectional Properties Act (No.21 of 2021)’ Ministry of Lands and Physical Planning, 7 May 2021-https://lands.go.ke/wp-content/uploads/2021/05/Public-Notice-Sectional-Properties-7th-May-2021.pdf on 26 June 2021.
[iv] Section 2, Sectional Properties Act (Act No.20 of 2021).
[v] Section 4 (1), Sectional Properties Act (Act No.20 of 2021).
[vi] Kigera C, Njage A and Maina N, ‘The Sectional Properties Act- practical insights on how it will affect you’ Webinar organized by Bowmans, Nairobi, 11 May 2021.
[vii] Section 5 (1) (c), Sectional Properties Act (Act No.20 of 2021).
[viii] Section 6, Sectional Properties Act (Act No.20 of 2021).
[ix] Section 17, Sectional Properties Act (Act No.20 of 2021).
[x] Section 17 (6), Sectional Properties Act (Act No.20 of 2021).
[xi] Section 20 (1) (g), Sectional Properties Act (Act No.20 of 2021).
[xii] Kigera C, Njage A and Maina N, ‘The Sectional Properties Act- practical insights on how it will affect you’ Webinar organized by Bowmans, Nairobi, 11 May 2021.
[xiii] Kigera C, Njage A and Maina N, ‘The Sectional Properties Act- practical insights on how it will affect you’ Webinar organized by Bowmans, Nairobi, 11 May 2021.
[xiv] Section 9 (b), Sectional Properties Act (Act No.20 of 2021).
[xv] Section 2, Land Registration Act (Act. No 3 of 2012).
[xvi] Section 23 (2), Sectional Properties Act (Act No.20 of 2021).
[xvii] Section 45 (1), Sectional Properties Act (Act No.20 of 2021).
[xviii] Section 45 (4), Sectional Properties Act (Act No.20 of 2021).
[xix] Public Notice, ‘Registration of Sectional Units under the Sectional Properties Act (No.21 of 2021)’ Ministry of Lands and Physical Planning, 7 May 2021-https://lands.go.ke/wp-content/uploads/2021/05/Public-Notice-Sectional-Properties-7th-May-2021.pdf on 26 June 2021.
[xx] Section 13 (4), Sectional Properties Act (Act No.20 of 2021).
[xxi] Kigera C, Njage A and Maina N, ‘The Sectional Properties Act- practical insights on how it will affect you’ Webinar organized by Bowmans, Nairobi, 11 May 2021.
[xxii] Kigera C, Njage A and Maina N, ‘The Sectional Properties Act- practical insights on how it will affect you’ Webinar organized by Bowmans, Nairobi, 11 May 2021.
Article by: Wendy Kuyoh