The Sectional Properties Act, 2019: A timely addition to Property Law

A really needed Act of Law in our real estate industry, The SPA, seeks to provide for the division of buildings into units to be owned by individual practitioners and common property (what is currently known as common area) to be owned by proprietors of the units as tenants in common. This Act guides on the use and management of the units and common property. The current regime of laws are not sufficient enough and they do not respond to the emerging market needs such as the growing demand of affordable housing, mixed use developments and master planned communities.

Section 5 of the Land Registration Act is still the grundnorm as it stipulates that no other written law, practice or procedure relating to land shall apply to land registered or deemed to be registered under the Act in so far as it is inconsistent with it. To this end, the SPA has considered rather carefully the subjects of land policy, physical planning, land transactions, existing land legislations, survey and mapping, land adjudication, settlement, land registration, land valuation, administration of private, public and community land and land information and management system. The simplification of this Act on the process of registering section properties creates an enabling environment for investors and property owners at large.

The SPA stipulates that all long term leases have to conform to this law in twenty (24) months after it is enforcement. This will, must and shall apply to Apartments, Flats, Maisonettes, townhouses and offices. The process can be initiated by a Developer, a Management Company/Corporation or any property owner. The SPA applies to freehold and leasehold titles where the unexpired residue term is not less than twenty one (21) years and there is an intention to confer ownership. The sectional plan that will be registered MUST be prepared by a Surveyor and will be approved by the County Government. All existing units may be designated a building containing a unit or part of a unit by the registration of the sectional plan.

When you consult Adelante Legal Network for this process, we will require you to present to us all the original elements that show proof of ownership together with all the plans for the building. These include but not limited to; warranties and guarantees of the property by the corporation (management company), structural, electrical, mechanical and architectural drawings, drawings for the common area, plans for underground utility services and sewer pipes, agreements to which the corporation/management company is a party and all certificates and permits of local authority, government and relevant government agencies. For a new development, the Developer must submit a draft purchase agreement, the corporations by laws, the management agreement, recreational agreement, title of the building and any charge on the property.

The Sectional Plan shall be endorsed by a Surveyor and County Government or any other person approved by the Director of Survey. Once the registrar approves the plan for registration and the property owner has paid the requisite prescription fees, the registry will proceed to register the plan and will issue the property owner with a Certificate of Title for a current freehold title or a Certificate for Lease for a current leasehold title. The Registrar shall include the property owners share in the common property and all the interest endorsed on the sectional title shall be borne by the property owner. These titles will be deemed to be registered under the Land Registration Act of 2012 and the Registrar is required submit to the County Government a copy of the registration plan within twenty one (21) days after registration.

For new developments, your Advocate, meaning Adelante Legal Network from now henceforth J, shall prepare a document of sale known as a Purchase Agreement. Note the flow of a purchase agreement is totally different from the flow of an Agreement for Sale as prescribed under the Land Act and Land Registration Act. On matters boundaries, a property will be described by its walls and ceilings including doors and windows. You will not be required to pay stamp duty if you paid it during the initial transfer of your freehold or leasehold title. For off plan units, the Developer is tasked to insure all the units before registration of the sectional plan. This insurance with then be passed to the property’s Corporation after registration.

The Act introduces the formation and functions of a Corporation; what is currently known as a Management Company in the Land Act. This proviso is a welcome guide to property managers and developers at large in enforcing its estate welfare and service charge costs. Upon registration of the sectional plan, a Corporation must be formed and it is to be called “The Owners Sectional Plan Number …” It is to be formed ninety (90) days after fifty percent (50%) of the Units are sold or one hundred and eighty (180) days after the first unit in the development is sold. This Corporation shall have perpetual succession and a common seal and the provisions of The Companies Act No. 17 of 2015 shall not apply to it. The Corporation has to have a board but will have no power to carry on any trading activities. The Corporation must meet yearly with its stakeholders who are in this case the owners. Dispute resolution matters of the property have been pegged on the Corporations Committee and if the Committee cannot come to a sound finding, the matter shall be escalated to the Courts of Law. By-Laws of the corporation must be registered to guide the affairs of the property.

Property Managers, this Act empowers your corporation to put a caution on to an owner’s title when they incur unpaid bills, charges and contributions. This caution must be registered on the owners Sectional Title like a Charge through a Bank or Financier. The caution must be withdrawn within thirty (30) days after payment of the costs owed by the owner. The corporation can charge interest over the unpaid bills, charges and contributions in accordance to its set by laws.

An Owner who wishes to rent his or her unit must notify the corporation of his or her intention to do so. The Owner will be liable for every damage to the unit and common area that his or her tenant will cause. If the Owner does not do the repairs that the tenant made, the corporation has powers to evict the tenant from the property and charge the owner of the unit all costs incurred in the process of enforcing its laws. After the tenant exits the unit, the Owner must also notify the corporation.

It is important to note that, Units will now pay County Government Rates and not rates for the Common Area as was previous practice. Owners must be prompt with their payments or City Council askaris will now be joining them for breakfast and lunch and even worse, put cautions to their sectional titles or clamp their doors inevitably.

As any law, there are fines imposed for lack of compliance. For not registering a sectional plan, you will be eligible to a fine not exceeding Kenya Shillings Twenty Million (Kshs. 20,000,000/-) or a jail term not exceeding twelve (12) months. For negligence in enforcing this law, a developer, a corporation, its board or an individual owner will be fined Kenya Shillings Two Hundred and Fifty Thousand (Kshs. 250,000/-). Do not fall trap into that Kenyan evil spirit of doing things last minute. It will end in premium tears.

This Act of Law is welcome to our real estate industry. As much as, again, this is another money making scheme by our County Governments, the Act addressed a few securities that were much needed in this investment arm of our GDP. Among many other advantages, we needed a vesting of the reversionary interests to individual owners and this is equivocally highlighted in the Act. The Act also collapses any mischief by property developers by closing to mother titles and head leases for good. All long term leases and sub-leases will now be reviewed properly in accordance with section 54 of the Land Registration Act. The powers mandated upon the Property Corporations and especially on dispute resolution, allows property managers to conduct the affairs of their estates in an orderly and legal manner as opposed to the craftiness that most tenants have experienced in the previous past.

For further legal engagement and other property services, kindly reach us via Email: legal@adelante.co.ke and Tel: +254 100 100 138. We will be ready to serve you.

Adelante Legal LLP | Where Value Is Law.