FREQUENTLY ASKED QUESTIONS ABOUT SECTIONAL PROPERTIES
- What does this Act seek to implement?
The Act provides for the enforcement of Sectional Titles which bestow separate ownership of a unit within a group-owned complex or development. A Sectional title can be issued for an apartment, flat, maisonette, townhouse or for office units.
A Sectional Title of a unit also confers rights to the ownership of a share of the common property with other unit owners in the building or development. In a residential estate, a homeowner will exclusively own their apartment and jointly own the compound or driveways in the estate with the other homeowners in undivided shares as tenants in common.
It establishes a corporation which comprises all homeowners of units within an estate development. The corporation’s core mandate is to take care of the common areas of the Estate. The parking bays, walkways, garden areas, playgrounds and so forth. The advantage of the corporation is that it is not a company under the Companies Act. There are no filing fees or incorporation costs payable for its set up. Also unit owners automatically become members by owning the unit. The developer doesn’t have to allot shares to them.
- What are the main differences between The Sectional Properties Act 2020 and the Repealed Act?
Previously, the structure for ownership of units or apartments in Kenya has been through sub-leases. A sublease is the re-renting of property by an existing tenant to a new third party for a portion of the tenant’s existing lease contract.
An example is whereby a developer would buy a piece of land and erect a block of flats. He would then form a management company under the Companies Act of Kenya. He would sell the units or apartments to purchasers through sub-leases of 99 years. With each unit sold, he would allot the buyer or homeowner a share in the management company.
Since the homeowners were holding sub-leases, they were dependent on the Mother Title which was held by either the developer or the management company. Their sub-leases were borne from the Mother Title and could not exist independently of the Mother Title.
Secondly, the 2020 Act applies to leasehold properties with unexpired residue terms of not less than 21 years while the threshold under the Repealed Act was 45 years.
Furthermore, previously an owner renting out their unit was required to disclose to the Corporation the amount of rent chargeable to the unit as well as pay a deposit to the Corporation for maintenance, repair and or replacement of the common property. This is not a requirement under the new law which recognizes the autonomy of an individual unit owner to deal with their individual unit as they please.
It is also important to note that, under the repealed law, any disputes relating to the contravention of the by-laws of the Corporation were referred to a tribunal established under the Landlords and Tenants Act. Under the new law, disputes in relation to contravention of the by-laws are referred to the Committee which is an internal dispute resolution mechanism of the Corporation.
- Who is entitled to a Sectional Title?
The Sectional properties Act applies to both Kenyan Citizens and Foreigners.
Foreigners, however, can only hold leasehold sectional titles of up to 99 years only while Kenyan citizens can hold both leasehold sectional titles of more than 99 years and freehold sectional titles in accordance to article 65 of the Constitution of Kenya.
- How does the Sectional Properties Act 2020 Advantage me?
Simplification of Registration Process – The new law seeks to simplify the process of registration of sectional properties and create an enabling environment for investors and property owners. Sale transactions have been extensively simplified since individual sectional titles can be transferred in the typical way that land is transferred. Cumbersome lease documents will no longer be required.
Access to Financing – The sectional regime increases access to financing. By simplifying the process of obtaining title documents for the units, unit owners can easily secure financing by charging the units in favor of the lenders. Lenders and financiers are motivated to offer credit facilities to the individual unit owners as they may now charge the individual units directly without requiring the consent of the developer and or the manager.
Less Expenses – Purchase of sectional units may be less costly since the Purchaser will not be required to incur costs for transfer of reversionary interests among other costs.
Safer Option for Unit Owners – Sectional developments are regulated by the comprehensive provisions of the Act and the by-laws of the management corporation. The rules also prescribe disclosure requirements which enable purchasers to be informed of the status of the development including any existing encumbrances when purchasing a sectional unit.
- Can I Convert my lease registered under LRA to a sectional unit under the new Act?
Yes, provided it is over 21 years. The developer, owner or the management company can apply for conversion of the units under conditions set out in the Act.
Where shares in the management company have been transferred to the owners, the conversion can be initiated by the management company. If the shares in the management company have not been issued to the owners as per agreement and the management company has failed to apply for conversion under paragraph, any owner or owners may apply for conversion.
A developer can also apply for conversion, if a developer fails to apply for conversion, the management company or any owner or owners may apply for registration. If the developer is not willing or is unavailable to surrender the title to the parcel for conversion. The Registrar shall register a restriction against the title of the parcel to prevent any further dealings on it if a proprietor or developer fails to comply.
- What effect will registering a sectional plan have?
The register relating to the mother title will be closed and its title deed will be surrendered to the land registry. A separate register will then opened for every sectional unit. Certificates of title (for freehold land) or certificates of lease (for leasehold land) will be issued for each sectional unit at a fee.
- Who pays land rent and land rates in a sectional development?
Each sectional unit owner will pay the land rent and rates for their individual unit. This will no longer be the responsibility of the management entity.
- Can the sectional status be terminated and if so, how?
Yes, sectional status can be terminated by:
- A unanimous resolution of the corporation;
- Substantial or total damage to the building; or
- Compulsory acquisition.
- Where can I find a lawyer qualified to facilitate my Sectional Title?
Call: 0776995521 or 2229887