By: Kendi Latoya

This Article will cover a comprehensive brief on the Sectional Properties Act No. 21 of 2020 and its effect on the current long-term leases.

The Sectional Properties Act No.21 of 2020 was assented to on 11th December, 2020 and its date of commencement was 28th December, 2020.

This Act repealed the Sectional Properties Act, 1987. The previous Sectional Properties Act, 1987 failed due to the requirement of conversion of titles to RLA, lock out of titles below 45 years and cumbersome compliance requirements by developers.

Hence due to the above, it became necessary to re-enact the Sectional Properties Act, 2020.

Ownership conferred in the Sectional Properties Act,2020?

There are two parts of ownership under the Act where each owner owns their unit and also unit factor of the common areas on the transfer of property.

Section 3 of the Act defines a unit as a space that is situated within a building and described in a sectional plan by reference to floors, walls and ceilings within the building and shall include its proportionate share in the common property.

Application of the Act?

The Act applies 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.

It is important to note that the Act has omitted absolute interest and assumes that freehold interest is equivalent to an absolute interest which is not the case.

Registration under the Act

A surveyor is required to prepare a sectional plan from a building plan that has been approved by the County Government and proceed with its registration at the lands registry.

It is important to note that a surveyor can only proceed with registration once he has been provided with proof of ownership being either an Original Title deed, Certificate of Lease or Certificate of Title.

The application for registration should be accompanied with an application for registration of a corporation with a list of owners of the units which can be updated at any time.

Every plan presented for registration as a sectional plan shall be endorsed by a surveyor and should be accompanied by 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.

Once there is registration of the sectional plan, the registrar proceeds to close the register of the parcel described in it and opens a separate register for each unit described in the plan and once the required fee is paid, a certificate of title if the property is freehold or a certificate of lease if the property is leasehold is issued.

The Title shall be deemed to have been issued under the Land Registration Act No. 3 of 2012 and any further dealings with the Title shall be done according to the Act.

The Title and the register of each unit should include its proportionate share in the common property.

The common property in the title shall be held by unit owners as tenants in common in shares proportional to their units.

Changes brought about by the Act

• The Act abolishes the concept of reversionary interest, which is a positive as it is not grounded under any law and did not facilitate issuance of individual Titles. It also was dependent on all units in the development being sold prior to the transfer of the reversionary interest.
• It provides for a Certificate of Lease in cases of leasehold and Certificate of Title in cases of freehold property.
• It takes away the reliance on the Registration of Documents Act.
• It has increased applicability of Titles by including titles with an unexpired residue of the term not less than 21 years.
• Introduces survey plans in the survey records with the requirement of geo-referencing.

Conversion of Long-term Leases

Section 13 (1) of the Act provides that if a building contains premises that are rented for residential or commercial purposes to a tenant who is not a party to a purchase agreement and not included in a sectional plan, the owner shall not sell the premises to any buyer until the sectional plan that includes those premises is registered at a registry.

Section 13(2) of the Act provides that all long-term leases registered before the 28th day of December 2020 should be converted within two (2) years to conform with section 54(5) of the Land Registration Act, 2012.

The conversion can be initiated by the developer, the owner of the unit or management company.

If conversion is not done within the said period stipulated then a restriction shall be placed on the property to prevent any further dealings.

Stamp duty shall not be payable in this conversion process, where an owner already paid for stamp duty for a sub-lease.

Section 54(5) of the Land Registration Act provides that the Registrar shall register long-term leases and issue certificates of lease over apartments, flats, maisonette, townhouses or offices having the effect of conferring ownership, if the property comprised is properly geo-referenced and approved by the statutory body responsible for the survey of land.

The process of conversion entails submission of:

• Sectional plan
• Original title
• Long term lease previously registered
• Rent apportionment for the unit where applicable

Once a sectional plan is registered, the original registers shall be closed and new registers opened with respect to each of the unit described in the plan.

Management Corporation

The concept of a management company has been done away with as previously utilized in developments.

The Act provides for a management corporation which on the registration of a sectional plan it shall be constituted under the name as follows:

The owners Sectional Plan No.……………………… (The number to be specified here is the number given to the plan on registration). The registrar shall issue a certificate of registration of the corporation.

The corporation shall consist of all persons who are 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 the Act.

The corporation shall not be regulated by the Companies Act, 2015 but shall have perpetual succession, a common seal and shall be capable of suing or being sued.

The Corporation shall be regulated by the Act and the bylaws specified in the regulations.

Insurance of Units

The developer is required to insure units and the common property under section 38 of the Act where a sectional plan has not been registered prior to the sale of any units. The developer shall insure the units and the common property against:

1. Loss resulting from damage or destruction by fire;

2. Loss from such other perils; and

3. Damages awarded against the developer, the owner of a unit or the corporation in an action for occupier’s liability.

Once registration of the sectional plan is however done, the insurance interest in the units and the common property passes to the Corporation.

CONCLUSION

On 7th May, 2021, the Ministry of Lands notified the general public that they shall no longer register long-term leases supported by architectural drawings with effect from 10th May 2021.

However, on 11th May, 2021 the Law Society of Kenya held a meeting with the Ministry of Lands and Physical planning and the following issues were addressed:

Ongoing transactions, being documents in the registry pending registration, documents already paid stamp duty and pending presentation and leases submitted for assessment of stamp duty shall be finalized under the current practice provided that the transactions are not in respect of a new development.

For partially registered developments where plans have already been registered under RDA and some leases have been registered, for RTA/GLA – Central Registry (LR) and County Registries outside Nairobi, Transactions and dealings with these titles will proceed under the current practice but the owners will be required to commence the regularization process and complete the process set out under Section 13(2) of the SPA. The government will cater for the cost of georeferencing. For RLA – Nairobi Registry (Blocks) Parcels, all dealings and transactions will be required to be undertaken through NLIMS.

Where there is a new development where no lease has been registered, they have to comply with SPA Act, 2020 and LRA Act, 2012.

The Sectional properties regulations,2021 are still undergoing stakeholder participation. Their aim is to actualize the provisions of the Sectional Properties Act,2020. They are yet to be gazetted, hence presenting regulatory gaps.

We are following up keenly on any new developments and shall note to keep you notified.

In case of any queries on the above subject, kindly contact us on: info@kendikadvocates.co.ke or call us on +254768028504