President Uhuru Kenyatta on December 11th 2020, signed the Sectional Properties Bill into law repealing the Sectional Properties Act,1987. The Sectional Properties Act,2020 is aligned with the Constitution of Kenya, the Land Act,2012 and the Land Registration Act ,2012. The New act is not a complete departure from the Repealed Act but rather an improvement to it.
The Ministry of Lands and Physical Planning recently sent a notice to the public, notifying the Ministry’s intentions to convert all Long-Term Leases in to the new regime.
A sectional unit is defined as a space that is situated within a building and described by reference to floors, walls and ceilings within buildings and the concept of sectional properties entails a sectional unit together with a distinct share of the common area.
The Sectional Properties Act 2020 mainly seeks to simplify the process of registering sectional properties in Kenya. It provides for the division of buildings into units to be owned by individual proprietors who will hold individual titles for their respective units.
Key Highlights of the Sectional Properties Act 2020.
- Reduction of Residue Term for Application of Leasehold Properties
The New act seeks to provide for leasehold properties with unexpired residue terms of 21 years as opposed to that in the 1987 Act that provided for 45 years.
- Issuance of Certificate of Title/Lease.
Under the New Act, Sectional Properties shall now be issued with a Certificate of title (freehold property) or Certificate of Lease (Leasehold Property) and the title shall include each units proportionate share in the common property while the Repealed Act provided for issuance of title deeds for sectional units.
- Conversion of Long-term sub-leases that were registered prior to the enactment of the 2020 Act.
Section 13(1) of the Sectional Properties Act,2020 states that , “if a building contains premises that are rented for residential purposes to tenant who is not a party to a purchase agreement and not included in a sectional plan the owner of the premises or a person acting on his behalf shall not sell those premises as a residential or commercial unit until the sectional plan that includes those premises is registered at a registry”.
The above section suggests the existence of a sectional plan that is not registered and requires the same to be registered prior to the sale of the premises.
Long-term sub-lease registered before 28th December 2020 must conform to the New Act within a stipulated period of two (2) years from the said date. These are long- term sub-leases intended to confer ownership of apartments, flats, maisonettes, townhouses or offices. The conversion may be initiated by a developer, a management company or an owner and, if not done within the prescribed period, the registrar shall register a restriction against the title of the parcel to prevent any further dealings on it.
The Repealed statute had a threshold for affected leasehold properties to have a residue term of not less than 45 years. This is however no longer material, as all long-term leases registered before commencement of the New Act are affected.
The process of conversion entail s submission of:
- Sectional Plan
- Original Title
- Long Term lease previously registered
- Rent apportionment for the unit where applicable
The Act further provides that owners will not incur additional stamp duty with respect to the above if they paid the requisite stamp duty fees when registering their sub-leases.
However, on 9th May the Ministry of Lands released a public notice that states that long term leases prepared on the basis of architectural plans will no longer be registered with effect from 10th May 2021 and further that the Lands Registry shall no longer register long term leases for units. This may however be viewed as a hindrance to land transactions hence causing delays when it comes to land transactions where ownership is meant to be conferred by way of long-term leases and for financing transactions where the security is a new long-term lease over the units.
Registration of Sectional Plans.
A registrable sectional plan ought to describe two or more units and is required to be presented to the Land Registrar in quadruplicate. The act provides that a sectional plan ought to be accompanied by an application for registration of a Corporation and a list of the owners of the units.
Once a Sectional Plan has been registered, the registrar is required to close the register of the parcel described in it, open a separate register for each of the units described in the Sectional Plan and issue a certificate of title if the property is freehold or a certificate of lease if the property is leasehold in respect of each unit of the sectional property and its proportional share in the common property.
Insurance of Sectional Units.
Section 17 of the Sectional Properties Act,2020 provides that where a sectional plan has not been registered prior to the sale of any units, the developer is required to insure the units and the common property against the following:
- Loss resulting for destruction;
- Damages awarded against the developer, the owner, or the Corporation in an action of occupier’s liability;
- Damage caused by fire; and
- Other like perils.
Termination of Sectional Properties.
Section 47 of the Sectional Properties Act provides that sectional status of a building may be terminated by a unanimous resolution of the Corporation, substantial or total damage to the building, or compulsory acquisition. The Corporation is thus mandated to file a notice of termination with the registrar in the prescribed form to effect the termination. Once the Sectional Status of property changes to terminated, the owners are entitled to the parcel of land on which the building is erected as tenants in common with shares proportional to their respective units.
Section 50 further provides that the Corporation shall automatically stand dissolved upon the termination of the sectional property.
Disclaimer: Kindly note that this write-up does not constitute legal advice but is provided for information purposes only. If you have any specific inquiries on the subject and other related matters, please contact the undersigned.
Kathure Mururu Mungai
Advocate of the High Court of Kenya
Partner- Omusolo Mungai & Company Advocates
Tel: 0790 481 799 (ML)