LEGAL ALERT NO.2 OF 2021.
On 11th December 2020 the Sectional Properties Act, 2020 (“the Act”) was assented into Law and repealed the Sectional Properties Act, 1987 (the Repealed Act).
Application of the Act
Under section 2, the Act is meant to apply only in respect of land held on freehold title or on a leasehold title where the unexpired residue of the term is not less than twenty-one (21) years and there is an intention to confer ownership.
The Act is an amended version of the Repealed Act with additions and omissions. The Repealed Act was enacted in 1987 to specifically cater for vertical land ownership. The Act provides for the division of buildings into Units, vide Sectional Plan, to be owned by individual proprietors who will have individual Titles for their respective Units pomhub. This regime provides for ownership of houses as individual units independent from the Developers’ Title and the ownership of the common areas by the individual proprietors as Tenants in Common.
The Properties that are affected include Apartments, Flats, Maisonettes, Townhouses or offices (“The Premises”) and wherein there is intention to confer ownership through Long Term Leases.
The Salient Features of the Act
a) Registration of Sectional Units under the Act.
A Land Developer is required under section 4 of the Act to present to a Surveyor building plans approved by a County Government and proof of ownership of the Property for the Surveyor to prepare a Sectional Plan. The said Plan must have to the following features as provided for under section 9 of the Act: –
i. be described in the heading of the plan as a sectional plan;
ii. be geo-referenced;
iii. bear a statement containing those particulars as may be necessary to identify the title to the parcel;
iv. include a drawing illustrating the units and distinguishing the units by numbers or other symbols;
v. show the approximate floor area of each Unit;
vi. have endorsed on it a schedule specifying in whole numbers the unit factor for each unit in the parcel;
vii. be signed by the proprietor;
viii. be signed and sealed by the office or authority responsible for survey;
ix. have endorsed on it the address at which documents may be served on the Corporation (established under section 17) concerned;
x. clearly indicate the user of the unit; and
xi. contain any other particulars prescribed in the regulations.
The Registrar will thereafter register the Sectional Plan after confirming that: –
i. it describes two or more units;
ii. it is submitted in quadruplicate; and
iii. as provided under section 11, the plan has been endorsed by: –
(a) a surveyor’s statement confirming that the structure shown on the plan is within the external surface boundaries of the parcel which is the subject of the plan, and appurtenances of the parcel; and
(b) a certificate from the county government stating that the proposed division of the structure as illustrated on the plan has been approved by the county government. Such a certificate should be issued within thirty days with respect to a structure for which a building plan was approved once the respective county government is satisfied that the structure conformed to conditions thereon.
On registration of the sectional plan, the Registrar in accordance with section 5 of the Act shall:-
i. close the initial register (with regards to the mother title) and open new registers in respect of each sectional unit.
ii. issue after payment of the prescribed fees a certificate of title or lease for each unit as the case may be and shall include its proportionate share in the common property;
iii. ensure that any interest affecting the property and which are noted in the closed register shall be transferred and endorsed to the individual sectional registers and on the respective titles; and
iv. note any interest affecting an individual unit will be indicated on the register and on the respective title affecting that unit.
b) Establishment of the “Corporation”
Upon the registration of the Sectional Plan, the Act requires that A “CORPORATION” be established under Section 17. The main purpose for its establishment is to be in charge of common property of the developed units. It shall consist of all those persons who are the owners of Units in the parcel to which the Sectional Plan relates or who are entitled to the parcel when the sectional arrangement is terminated under this Act.
The Corporation shall be a legal person capable of being sued or suing in its own name. The Corporation shall be governed subject to the Act and the Companies Act 2015 does not apply to it.
On first registration, the by-laws prescribed by the Regulations are deemed to be the Corporation’s by-laws. The Members are, however, at liberty to amend the by-laws.
Implementation of the Act
On 9th May 2021, the Ministry of Lands and Physical Planning (“the Ministry”) issued a Notice (“the said notice”) notifying the public that the Sectional Properties Act was enacted into law and that from the 10th May 2021,henceforth, ALL long-term Leases that are intended to confer ownership in respect of apartments, flats, maisonettes, town houses, villas, go-downs or offices (“the Premises”) are to be registered in accordance with the Act.
The impact of the Act and the said Notice issued by the Ministry on:-
a) Long Term Leases that have been prepared and are due for registration.
The said Notice provides that there shall be no further registration of Long-Term Leases for the Premises, cited above that are supported by Architectural Drawings.
This direction affects all Long-Term leases that have not been registered and a deed file or green card opened in respect of the Premises. This therefore means that until such a time the Ministry states otherwise vide a notice to the Public, all pending registrations regarding the said Long-Term Leases have to be undertaken is strict conformity with the Act.
b) Already registered Long-Term Leases.
Vide the abovementioned Notice, the Ministry indicated that it had embarked on the process of converting Long-Term Leases registered on the basis of architectural drawings to conform to the Sectional Properties Act, 2020 and the Land Registration Act, 2012. To aide Practitioners and members of the public, the Ministry has released a Conversion Manual to guide the process of conversion.
a) The registered Proprietor of the Head Title, Developer, Management Company or the Owner of a Lease of a Unit shall make an application for a replacement of a title on Form LRA 97 attached with a Sectional Plan;
b) The Said Plan is prepared by a Licensed Surveyor from already approved Building Plans and must adhere to section 9 of the Act;
c) The prepared Plan is then submitted to the Lands Registry together with the Original Title, previously Registered Lease and payment of the Rent apportionment for the Unit (where applicable);
d) The Ministry will then geo-reference the Sectional Plan and have it duly authenticated by the Director of Survey;
e) The Registrar will then close of the old registers and open new registers for each of the sectional unit; and
f) Thereafter issuance of replacement titles under the Act.
These Leases are expected to be converted to conform to the provisions of the Act within a period of 2 years from the commencement of the Act i.e. (28/12/2020-27/12/2022
Areas of concern
1. Regulations on implementation of the Act.
The Ministry is yet to release Regulations under section 59 of the Act to guide the procedural aspects of the implementation of the Act. We are however guided by section 24 of the Interpretation of General Provisions Act which provides for the use of the existing regulations as long as they are not in contravention to the Act.
2. Management Companies
The Act and the said Notice are silent on what happens to existing management companies for the existing developments which under section 13 are due for conversion. The Act stipulates that there shall be simultaneous registration of the Sectional Plan and the corporation. This then means that the Management Companies will be rendered obsolete and all the function they undertake will be taken over by the Corporation established under the Act.
3. Existing encumbrances/interests
The Act provides under section 5(2) and 43 for the existing interests registered in the closed register to be transferred to each and every Sectional Units opened as per the geo-referenced Sectional Plan.
It is then unclear how the Chargees will be able to secure their interest in the charged Property and/or in the event of default on the part of the Chargor, how the Chargee will exercise their statutory power of sale. It is the expectation of practitioners that once the Regulations are developed, this issue will be clarified. Check it out.
As a mitigating factor, the Law Society of Kenya (LSK)- (Nairobi Branch)- released a communication on 11th May 2021 with respect to resolutions of a meeting between the officials of the Society and the Ministry. In the said communication, the Ministry undertakes to finalize ongoing registration under the current practice, provided that the transaction is not in respect of a new development, with respect to:
a. Documents in the registry pending registration;
b. Documents already paid stamp duty and pending presentation;
c. Leases submitted for assessment of stamp duty; and
d. Partially registered developments where plans have already been registered under RDA and some leases have been registered.
The Ministry is yet to release a Public Notice with regards to the communication by LSK and direct its Officers accordingly.
We shall continue to keenly observe the unfolding events in this area and we will keep you posted on any further developments.
*This write up is meant for general information only and should not be relied upon without seeking specific legal advice.
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