Pursuant to Section 59 of the Sectional Properties Act, 2020 (the “Act”), the Cabinet Secretary for Lands and Physical Planning gazetted the Sectional Properties Regulations, 2021 (the “Regulations”) through legal notice number 236 of 2021.
The Act provides for the division of buildings into units to be owned by individual proprietors and common property to be owned by proprietors of the units as tenants in common. The individual proprietors are then issued with their individual sectional titles. This offers flexibility and ease in conducting transactions on their sectional titles such as using their unit as security for credit facilities or transferring the unit to another party.
Generally, the Regulations help to operationalize the provisions of the Act by providing a framework on the procedures and specifications for registration of sectional plans, outlining the statutory forms to be used for the purpose of the Act and guiding on the conversion of long-term leases to sectional units.
In this article, we shall briefly focus on the significant features of the Regulations:
1. Preparation and registration of sectional plans
A registered surveyor shall prepare and endorse the sectional plan before presenting it for registration. A sectional plan is a geo-referenced plan of units or a part of land as the case may be that is prepared by a surveyor and approved by the statutory body responsible survey of land. The manner of preparation and the form of endorsement is provided in Regulations 2 and 3 respectively. In addition to the surveyor, the sectional plan is to be endorsed by:
a. County Executive Committee Member in charge of approval of buildings;
b.Owner of the property; and
c. Land Administration Officer who shall also confirm that the land rent has been apportioned to each unit on the sectional plan.
Once this is done, the sectional plan is forwarded for registration together with the original title deed for the property and the application for registration of the corporation.
The Registrar reviews the applications then if all is in order, they proceed to close the register for the property and open unit registers for each sectional unit of the building. Each unit will therefore have its own certificate of title issued separately. The title will also provide the proportion of ownership in the common property of the building.
It is noteworthy that as the land rent is apportioned among the units, if the building is situated in an area where land rates are payable, the Registrar is required to submit a copy of the registered sectional plan to the relevant county government so that the rates can be apportioned among the units.
After the enactment of the Act, the Ministry of Lands through its Cabinet Secretary issued a public notice directing that it is embarking on a process of converting long-term leases registered on the basis of architectural drawings to conform with the principles of the Act. It was therefore necessary that the Regulations capture this conversion process and clearly outline the requirements for this to be conducted.
According to Regulation 18 (1), long-term leases that are eligible for conversion include:
- where all units have been transferred to the respective owners and the reversionary interest has been transferred to the management company to hold in trust on behalf of the owners;
- where all the units have been transferred to the respective owners and the reversionary interest is, by written agreement, intended to be transferred to the management company to hold in trust on behalf of the owners; or
- where part of the units have been transferred to the respective owners and the reversionary interest is, by written agreement, intended to be transferred to the management company to hold in trust on behalf of the owners.
The following parties may apply for the conversion:
- management company;
- owners/long-term lease holders - where the shares in the management company have not been issued and the management company has failed to apply for conversion; or
- developers – where only a portion of the total units have been transferred to the owners.
If the property is encumbered i.e. where a third-party’s interest has been registered against the property (e.g. charges), the applicants must deliver the application to the encumbrancer who will then submit it to the Registrar. This is to ensure that the encumbrance is registered against the new titles after the conversion is completed.
Notwithstanding the above, the following long-term leases that are exempt from conversion. These include:
- where an express provision in agreement confirms that reversionary interest belongs to the developer, lessor or management company as the legal owner and not as a trustee;
- large mixed-use developments and phased developments where it is noted in agreement that reversionary interest is retained by the developer or the management company; or
- projects of strategic national importance, substantial transactions and special economic zones which by their nature makes it impractical to relinquish reversionary interest.
3. Corporations – registration and management
As provided above, the registration of the sectional plan shall correspond with the registration of the corporation. The certificate of the corporation shall be issued by the Registrar in confirmation. The main duty of the corporation is managing the common property in the building.
In terms of the management of the corporation, the by-laws as detailed in the Second Schedule of the Regulations shall be used to guide the operation of the corporation. The corporation may also amend the by-laws as necessary and the amendments are noted on the corporation register.
4. Dispute Resolution
The Act allows the corporation to constitute an internal dispute resolution committee (the “Committee”) to hear and determine disputes and enforcing the by-laws. The members of this Committee are elected at every annual general meeting of the corporation.
When a party is aggrieved by the decision made by the Committee, they may appeal the decision at the Environment and Land Court.
The inclusion of an appeal is important as it enhances the adjudication process by ensuring that as far as possible, the dispute resolution process is fair.
5. Extension and renewal
Regulation 33 provides that the individual owners of the sectional units may apply for the extension or renewal of the lease term under the Land (Extension and Renewal of Leases) Rules 2017.
6. Electronic forms
Lastly, Regulation 34 provides that the sectional plans and the prescribed forms may be submitted in electronic form. With the introduction of the Ardhisasa platform, an online platform that allows for undertaking various land transactions electronically, this move shall ensure a smooth transition once the platform extends to sectional properties.
Currently, the platform only covers the Nairobi Registry i.e., land in Nairobi and registered under the repealed Registered Land Act – these properties have title numbers ‘Nairobi/Block/…….’. You may refer to our previous articles here and here for more details on the platform.
In conclusion, with the Regulations in place, we expect the popularization of sectional properties throughout the country and ease of management of the sectional units. In terms of the conversion process, as the Ministry receives the applications, we hope for cooperation between the various stakeholders to ensure that the data is captured accurately to ensure a seamless transition.
For further details, the Regulations are accessible here.
Article by Judy Kabubu and Christine Wambui. Judy is a Partner and heads the Banking and Finance and Real Estate practice areas while Christine is a Junior Associate in the same practice groups whose background is in commercial and corporate law specializing in Real Estate, Banking and Finance.
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