Insights on Sectional Properties in Kenya
In the recent past, Long term leases conferring ownership over apartments, flats, maisonettes, townhouses, or offices (sectional units) were registered on the strength of architectural plans/drawings.
The Sectional Properties Act (the Act) was enacted in the year 2020 to govern the registration of such sectional units and thereafter the Sectional Properties Regulations were gazetted in the year 2021 outlining the procedure for registration of sectional plans and the conversion of already existing long-term leases conferring ownership over sectional units to sectional titles.
Further, the Land Registration Act No. 3 of 2012, mandates the Registrar to register long-term leases and issue certificates of lease over such sectional units, if the property comprised in the said leases is properly geo-referenced and approved by the statutory body responsible for the survey of land.
In furtherance to the above provision, the Act provides that all long-term leases over sectional units registered before the commencement of the Act should be reviewed to conform to the above provisions of the Land Registration Act within a period of two years of commencement of the said Act (the period running from 28th December 2020, which period has since lapsed).
Currently, the Act stipulates that registration of any lease/transfer of a sectional unit should be accompanied by the respective sectional plan, which is defined under the Act to mean a geo-referenced plan of units or a part of the land as the case may be prepared by a surveyor and approved by the statutory body responsible of land geo referencing.
The step-by-step procedure for registration of sectional units and conversion of Long-Term Leases to Sectional Titles under the Act can be accessed on the article published on our website using the link below:-
LEGAL ALERT NO.1 OF 2022
This write-up will highlight the benefits of conforming to the provisions of the Act which include: –
- The Purchasers of the units will be issued with individual sectional titles and the owners can transact or deal with the units in the typical way that land is dealt with. Therefore, the owners can transfer or charge without the consent of the Lessor and Management Company hence simplifying any dealings in the Property for the unit owners;
- The common areas of the development will be owned by the individual unit owners as tenants in common and the share being held by the owners will be endorsed on the sectional title which will eliminate the administrative challenges facing the issuance of Share Certificates and Transfer of Reversionary Interest;
- The individual owners of the units will pay land rent and rates(if any) on their own units hence eliminating the delay caused in transactions while trying to pursue the Lessor or Management Company for the paid-up rent and rates receipts;
- The Purchasers of sectional titles will not be required to pay the Vendor’s Advocates fees, cost of Reversionary Interest Purchase, Transfer of Reversionary Interest and Management Company Formation plus the cost of Shares hence reducing the transaction costs payable; and
- The sectional titles will eradicate issues that arise wherein the mother title has been charged and the developer fails to partially discharge a unit and then the developer defaults on the loan leading to unit owners being caught up when the Bank’s statutory power of sale arises.
With most land parcels situated in Nairobi County having been gazetted for conversion to conform to the provisions of the Land Registration Act, (with some parcels being the “Mother Titles” against which several Long Term Leases have been registered) , the Ministry of Lands has developed the requisite modalities for registration of the sectional plans, surrender of mother titles for registration of sectional units and registration of the respective Corporations. A summary of the process to be followed is outlined below: –
- The Mother Title will be surrendered to the Lands Registry for conversion to the new regime;
- Upon conversion, the new title will be issued with all the encumbrances noted thereon as previously noted on the old title;
- The next step will be preparation of the sectional plans where after at the point of registration the owners of the units will be required to surrender the Long-Term Leases to facilitate the issuance of Sectional titles.
The foregoing poses a number of challenges which include:-
- The lack of measures to determine whether a development is “large, mixed-use developments and phased developments” and thereby exempt from the process of conversion or whether the same relates to “substantial transactions”;
- The lack of measures to ensure adherence to the set timelines in which approvals should be given and timelines on the duration of registration of the Sectional Titles.
In conclusion, with the provision of modules covering the sectional Properties on the digital platform (Ardhisasa) the stakeholders through their Advocates are in a position to transition to the Sectional Property noting that Regulation 34 of the Sectional Property Regulations, 2021 allows for the sectional plans and the prescribed forms be submitted in electronic form.
NB: –
*This write-up is meant for general information only and should not be relied upon without seeking specific legal advice.