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LEGAL ALERT NO.1 OF 2022

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STEP BY STEP PROCEDURE FOR REGISTRATION OF SECTIONAL UNITS AND CONVERSION OF LONG-TERM LEASES TO SECTIONAL TITLES PURSUANT TO THE SECTIONAL PROPERTIES ACT, 2020 AND THE SECTIONAL PROPERTIES REGULATIONS,2021.

The step by step procedure for registration of Sectional Units and conversion of Long-Term Leases to Sectional Titles under the newly enacted Sectional Properties Act 2020 (“the Act”)and the Sectional Property Regulations 2021 (“the Regulations”) is simplified hereunder as follows:-

  1. Registration of Sectional Units for   New Developments

Preliminary considerations

  1. The Applicant should have the original Title of the parcel to which the Sectional Plan shall apply.
  2. The Applicant should engage a Licensed Surveyor to prepare a Building Plan and have it approved by the relevant County Government, wherein the property is situate.
  3. The Surveyor shall then prepare a Sectional Plan from the approved Building Plan. The contents of the Sectional Plan are discussed in our previous Legal Alert accessible here.

Once the Sectional Plan is prepared, it shall be counter signed by the following persons: –

  1. A Licensed Surveyor who must indicate their Licence Number;
  2. The County Executive Committee Member in charge of approval of buildings Plans (which should be issued within 30 days)
  3. The Owner of the Property; and
  4. The Land Administration Officer confirming that Land Rent has been apportioned to each unit on the Sectional Plan, where applicable.

Registration of Sectional Units

After the Section Plan is counter signed, an application for its registration shall be presented to the Lands Office which application is accompanied by the following documents: –

  1. The Original Certificate of Title or Certificate of Lease of the parcel in respect of which the Sectional Plan is made;
  2. An application for the registration of the Corporation; More information about the  Corporation is contained in our previous Legal Alert accessible here.
  3. A list of the Owners of the Units in the parcel as updated from time to time;
  4. A Certificate of Approval of the proposed division of the structure as illustrated on the Plan from the County Government;
  5. A confirmation by a Surveyor stating that the Units shown on the Plan correlate with the existing structure;
  6. The Rent Apportionment Form; and
  7. The Sectional Plan in quadruplicate.

What will happen on registration of the Sectional Plans?

Upon the registration of the Sectional Plans, the Registrar shall carry out the following:-

  1. Close the register of the parcel described in the Sectional Plan.
  2. On payment of the prescribed fee register the Sectional Plan in respect of the parcel in the Sectional Plan Register for either freehold or leasehold property respectively.
  3. Open Unit Registers in respect of the Units.
  4. Issue the Unit Owner(s) the Certificates of Lease where the tenure is leasehold and Certificates of Title where the tenure is freehold.
  5. Any interests noted on the closed Register shall be noted on the new Registers opened and on the Certificates issued for the Sectional Property.
  6. A Certificate of registration for the Corporation is issued.

What happens after the registration of the Sectional Plan?

  1. Within twenty-one days from registration of the Sectional Plan, the Registrar shall submit a copy of the registered Sectional Plan to the County Government of the area in which the parcel is located.
  2. The County Government shall upon receipt of a copy of the registered Sectional Plan, apportion Land Rates to each Unit on the Sectional Plan to enable the individual Unit Owners to pay their Land Rates separately.

2. Conversion of Long-Term Leases to Sectional Titles

Who is entitled to apply for conversion?

  1. The Management Company where all Units have been transferred to the respective owners;
  2. The Developer where only part of the Units have been transferred to the respective owners; and
  3. The Unit Owner(s) where the Management Company and Developer have failed to apply for the conversion.

Process of conversion

Upon preparation of the sectional plan, an application for conversion shall be lodged at the Lands Office and the said application should be accompanied by: –

  1. A sectional Plan;
  2. The Original Title document;
  3. Long-Term Lease previously registered over the Unit;
  4. Application for registration of the Corporation through the prescribed Form as set out under the Regulations.

Upon lodging the application for conversion, the Land Registrar shall carry out the following: –

  1. Register the Sectional plan;
  2. Close the parcel Register for each Unit and open Unit Registers;
  3. Issue the Unit Owner(s) the Certificates of Lease where the tenure is leasehold and Certificates of Title where the tenure is freehold;
  4. Issue a Certificate of Registration of the Corporation.

What happens after Conversion?

  1. All dealings of the Units shall be noted on the Unit Registers;
  2. The Management Company shall transfer all its assets and liabilities to the Corporation within a period of one year and shall thereafter be wound up.

What happens if the Original Title is unavailable and is not encumbered at the time conversion?

  1. A deed of Indemnity shall be lodged in the respective Land Registry;
  2. Upon receipt, the Registrar shall register the Indemnity and issue a notice in the Gazette calling for the title for purpose of conversion;
  3. The notice period shall be thirty days. If the period lapses and the Title is not availed, the Registrar shall register the Sectional Plan, issue the Unit Owners with Certificates of Title or Lease for the Sectional units and close the Parcel Register.

Conversion of Long-Term Leases held as security

Where the Lease over a specific Unit is held as security by the Bank, the process of conversion will be as follows: –

  1. The Applicant shall prepare the requisite documents for conversion;
  2. The Applicant shall then deliver the documents to the Financier or the Financier’s appointed representative;
  3. The Financier or appointed representative shall submit the application for conversion to the Registrar;
  4. The Registrar upon verification shall register the Sectional Plan and open new registers and issue new certificate of lease or certificate of title with the Charge entry endorsed thereon.

Units exempted from conversion

  1. Units wherein the Agreement to Lease expressly states that the reversionary interest (return of ownership rights upon the expiry of the Lease term) vests in the Developer or Lessor or Management Company as legal owner and not as trustee;
  2. Units in large mixed-use developments and phased developments wherein the Agreement to Lease provides that reversion shall be retained by the Developer or to be held by a Management Company; or
  3. Projects of strategic national importance, substantial transactions, and special economic zones, which by their nature, renders it impractical to relinquish reversionary interest.

Observation & conclusion.

The Sectional Properties Act mandates the registration of sectional units in respect of all new developments, except those specifically exempted by the Act. Proof of ownership of the Property must be presented to the Surveyor in order to initiate the process of preparing a building plan which is required for the preparation of a Sectional Plan in respect of the sectional units.

In respect of conversion of existing buildings into sectional units, the Act authorizes all relevant persons to make the application including the management company, the Developer or property owner.

The Act criminalizes any sale of a Property that has either not been registered into sectional units, in respect of new or proposed developments, or existing buildings not converted into sectional units, except as exempted by the Act. Any person found guilty of selling such Property or proposed Property is liable to be penalized by a fine not exceeding Kenya Shillings Twenty Million or imprisonment of up to one year.

The major challenge in compliance with the Act and the Regulations that are now in force is that the Lands Registry is yet to operationalize the registration of sectional titles and conversion of Long-Term Leases despite:

  1. The period granted for converting the Long-Term Leases lapsing on 28th December 2022;
  2. Failure to adhere to the provisions of the Sectional Properties Act constituting an offence under the Act.

We continue to engage the Lands Registry Officials on the way forward and shall update on future developments.

NB: –

*This write up is meant for general information only and should not be relied upon without seeking specific legal advice