KENYA: THE SECTIONAL PROPERTIES REGIME

By Dominic Indokhomi,Cornelius Kigera,Alex Njage Tuesday, May 11, 2021
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The Sectional Properties Act, No. 21 of 2020 (the Act) was enacted into law repealing the Sectional Properties Act No. 21 of 1987 (the Repealed Act). This update sets out the changes made to the Act and the potential effect these changes may have to the conduct of business in Kenya.

Majority of the changes to the Act are to streamline it with the provisions of the 2010 Constitution, the Land Act No. 6 of 2012 (the LA) and the Land Registration Act No. 3 of 2012 (the LRA). Importantly, most amendments also seek to simplify the various procedures that were contemplated under the Repealed Act. Some of the key changes in the Act include the addition of ad-hoc dispute resolution committees by companies managing sectional properties, the assessment of rates will now be done considering each of the units as a separate piece of land, and the conversion of units via formal registration of geo-referenced long term sub-leases according to the provisions of the LRA.

As part of its assessment of the impact of the Sectional Properties Regulations, 2021 (the Regulations) The Ministry of Lands and Physical Planning, issued a call for memoranda from persons likely to be affected by the proposed Regulations. The main objective of the Regulations is to actualize the provisions of the Sectional Properties Act, 2020 (the Act).

We would like to highlight the pertinent legal provisions in the Act and we have also included areas where further consultation and clarification with the Ministry of Lands will be required:

Phase of Legislation

The Act is in force whereas the Regulations are undergoing a stakeholder participation phase.

The Ministry of Lands and Physical Planning issued a call for comments as part of a regulatory impact assessment on 23 April 2021. The process of addressing these comments has begun, and the Regulations are yet to be gazetted as regulations by the Cabinet Secretary.

Despite the Act being in force, provisions that rely on forms provided for in the Regulations are yet to be fully operationalised.

However, please note that the Ministry has begun the process of conversion of long term leases that were made under repealed land regimes to conform to the provisions of the Land Registration Act, 2012. In this regard, long term leases will no longer be registered by the Lands Registry from 10 May 2021.

This is part of the conversion of all titles that were issued under repealed statutes to conform to the LRA.

Scope of the Act

Applies to the division of buildings into units that are to be owned by individual persons and common property to be owned by proprietors as tenants in common and to provide for the use and management of the units.

Procedure of application and conversion of long term leases

The Sectional Properties Act stipulates that all long term sub-leases for apartments, flats, maisonettes, town houses or offices that were registered before the commencement of the Act are to be rationalized to conform to the Act within 2 years from the Act’s date of commencement. In this regard, the Regulations propose to simplify the procedure of conversion by the submission of Form SP 13 (a mutation form). 

The full conversion manuals and forms published by the Ministry of Lands are available here

User specified in the Act

Shops and Malls have not been included as one of the buildings that are governed by the Act.

In the Act, it is stated in section 13 (2) that long-term sub-leases for apartments, flats, maisonettes, town-houses or offices have to be reviewed to conform with section 54(5) of the LRA within a two year period.

Given the prevalence of malls that are being built and the long term leases that are being issued by proprietors, it is unclear why “shops” have been omitted from the list. We anticipate that they may be included in county specific regulations however.

Closure of old registers and opening of new registers

The Registrar shall close the registers made under the certificate of title/lease and register the Sectional Plan in a Sectional Plan Register. The registrar shall proceed to open new registers depending on the nature of interest that was in the title/lease that was submitted.

Effect on securities held on original unconverted titles

Where an owner of a building eligible for registration under the Act fails to register a sectional plan, it is proposed in the Regulations, that this will have no effect on the encumbrances on the title. The securities registered on the title remain valid despite the failure of the owner/management to register the building as a sectional property. This secures the interest of financial service providers that have provided facilities to developers.

Use of Seals by Sectional Properties Corporations

Sectional Properties Corporations
will be obliged to affix their corporate seals on instruments.

It is not clear why this provision has been put in place. Given that sealing by companies was done away with after recent amendments to the Companies Act and land laws. In land transactions, where the requirement for companies to seal instruments was also done away with.

We note that there has been a gradual removal of processes that are expensive or cumbersome for business and
land transactions. We propose that this provision be removed with the rationale for ease of doing business.

The Bowmans General Finance and Real Estate team will be conducting a series of webinars explaining the changes to the Sectional Property Regime. We are also equipped to assist with the Ministry mandated applications for conversion of titles and long-term leases to conform with the provisions of the LRA.

In this regard, our webinars will take into account the implications for our clients who are developers, owners of existing units, and potential investors. Do let us know if you have any specific concerns arising from the Regulations, that you would want us to include and/or consider, in the webinar.