Personal Finance

Safeguarding shared property ownership

insurance (3)

Summary

  • The manner of establishing and registering sectional properties in Kenya has been re-defined by the Sectional Properties Act 2020.
  • Given the all- time high prices of property acquisition in Kenyan urban areas, this modernisation of the Sectional Properties Act is timely.

The manner of establishing and registering sectional properties in Kenya has been re-defined by the Sectional Properties Act 2020, which repeals and replaces the Sectional Properties Act 1987, to give effect to the provisions of the Land Registration Act,2012. Given the all- time high prices of property acquisition in Kenyan urban areas, this modernisation of the Sectional Properties Act is timely, as one of the legal instruments enabling affordable housing policies.

Simply speaking, sectional property refers to the division of property into units whose boundaries are defined with reference to floors, walls or ceilings, and sharing a common area. In common practice, this would be mainly flats or apartments which are conveyed in the form of ownership rather than as rental units. A sectional plan can also apply to maisonettes, town houses and commercial office spaces.

This new law does not depart completely from the provisions of the previous law, but it eradicates outdated provisions, while making clearer the procedures for establishing sectional units in the conveyancing process.

Once the requisite regulations are put in place to fully operationalise the Act, owners of free hold titles and those holding leaseholds with a residue tenure of not less than 21 years will be able to make an application for the establishment of a minimum of two sectional units under the Act. This will be by way of registration of a sectional plan as prepared by a surveyor, which plan could be established by either subdividing a unit or consolidating existing units into one.

This registration of units is to be done concurrently with that of the corporation whose members comprise of the owners of the units. As a major departure from the previous law where management companies were registered under the Companies Act 2015, this corporation is to be established under the Sectional Properties Act and regulated under the same regime.

Once a sectional plan is registered, the original register will be closed and new registers will be opened with respect to each of the units, and the property under the register will comprise of both the unit itself and the unit’s share of the common areas. Therefore, a tenancy in common is created with respect to the common areas. In the case of a freehold, a certificate of title will be issued for each unit while a certificate of lease is issued in the case of al easehold. Notwithstanding the regime of the original title to the property, all sectional plans registered under this Sectional Properties Act 2020 will automatically convert to a title under the Land Registration Act 2012.

The opening of an individual register essentially means that a legal interest is capable of being registered with respect to one unit without affecting the other units. As such, a developer should be able to issue a partial discharge with respect to one unit where a purchaser completes remitting the purchase price, even when the rest of the units are still encumbered under a legal charge.

In as much as sectional property confers ownership in the unit, certain restrictions are imposed on the owners of each of the unit in favour of the other units. For example, the owner of a unit cannot be allowed to modify his unit in a manner that interferes with the structural sanctity of an adjoining unit or cause nuisance to the other unit holders. Similarly, the right to use the common parts is also enjoyed and limited to other unit holders’ rights to enjoy those common areas. Compliance with these lease restrictions is primarily enforced by the corporation. Similarly, the owner of a unit is required to notify the corporation before renting out his unit to a tenant and his address thereafter.

The corporation established under this Act will be liable for legal claims that relate to the common area of the property and any amount payable by the corporation by virtue of a court’s pronouncement shall be guaranteed by all of the owners to the units, provided that if the claim arose out of the negligence of either of the proprietors, those individuals will be enjoined as co-defendants to the claim.

With respect to developers, the Sectional Properties Act regulates in detail the manner in which they can dispose the units and the specific documents that ought to be handed to a prospective purchaser before a transfer can be registered. These documents may include the sale agreement, the company by-laws, the management agreement, recreation agreement, the lease or title, any charge affecting the property and a copy of the sectional plan.

The Act further provides for three ways in which the sectional property status can be terminated. This is either through a unanimous resolution, if the building is substantially or totally damaged or through compulsory acquisition.

In its framing and detail, this law without a doubt restores confidence in sectional property transactions and consequently paves way for confidence in home ownership adopting the sectional property approach. Needless to say, it also greatly advances the big four agenda as far as affordable housing is concerned.