The Sectional Properties Act 2020

On 28 December 2020, the Sectional Properties Act, 1987 (the Repealed Act) was repealed and replaced with the Sectional Properties Act, 2020 (the New Act) which now aligns with the Constitution, 2010 and the 2012 Land Laws. It is an improvement from the 1987 Act.

The Act applies in respect to land held on a freehold title or on a leasehold title where the unexpired term is not less than 21 years and there is intention to confer ownership. The Act deals with the division of buildings into units to be owned by individual proprietors.

Summary of the act

1. Preliminary
2. Preparation and Registration Of Sectional Plans And Units
3. Establishment Of The Corporation
4. Provisions Relating To Residential Units
5. Miscellaneous Provisions

Clauses:

1. The preliminary provides for the short title, the application of the Act, and interpretation of the definition of terms in the Act. The Act shall only apply to land held on a freehold title or on a leasehold title where the unexpired residue of the term is not less than 21years and there is an intention to confer ownership. Some of the terms defined include a developer, unit, management agreement, purchase agreement, sectional plan, corporation, court, etc.
2. This part deals with subdivision of buildings into units, registration of sectional plans, Certificate to indicate share in common property, Incidental rights of owners of common property, etc. liability of the owner of a unit, requirements of sectional plans, boundaries of sectional units, certificates to accompany sectional plans, application for sub-division, etc., of a unit, conversion to units, easements in favor of the owner, against the owner or restrictions exist without mention.
3. This part deals with the establishment of the corporation where matters covered include Actions by or against the Corporation, Liability in tort, Duties, and Powers of the Corporation. Disposition and dealings affecting the common property, Registration of transfers of common property, Voting rights, and where the owner is incapable. Board of management and meetings of the Corporation, Bylaws and their enforcement, Administrative expenses, Interest on outstanding account, Recovery of money, Recovery of costs, Investments, Information on request, Handing over of documents, Insurance and policies, Exclusive use areas, Covenants benefiting parcel, Procedure for granting restrictive covenants
4. The provisions relating to units include the sale and renting of units, management agreement, and the notice to give up possession
5. Miscellaneous provisions regard Termination, the effect and sale of sectional property, Dissolution, Assessment, taxation, and liability of the Corporation. The Right of entry, Service of documents and notices, Change of address for service, Fees for documents. The Offences and penalties, Waiver, release, etc., as well as relevant Regulations and Repeal

A Comparison Between the 1987 and 2020 ACT.

	2020	1987
1	This applies to leasehold properties with unexpired residue terms of not less than 21 years	The threshold under the Repealed Act was 45 years.
2	Sectional units shall now be issued with a certificate of title (freehold property) or certificate of lease (leasehold property), and the title shall include each unit’s proportionate share in the common property	The repealed Act provided for issuance of title deeds for sectional units.
3	Approvals will be done by county governments and registration will be effected under the Land Registration Act, 2012.	References to local authorities were the approving entities and registration under the Sectional Properties Act, 1987 was pegged on the repealed Registered Land Act.
4	Long-term sub-leases registered before 28 December 2020 must conform to the New Act within a period of two years from the said date	The Repealed Act threshold for affected leasehold properties to have a residue term of not less than 45 years is no longer material, as all long-term leases registered before commencement of the New Act are affected.
5	The New Act provides for an internal dispute resolution mechanism through a Dispute Resolution Committee to determine disputes relating to enforcement of by-laws.	Repealed Act that required certain disputes and proceedings to be referred to the tribunal appointed under the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act.
6	An aggrieved party can now appeal the decision of the Dispute Resolution Committee with regard to enforcement of by-laws to the Environment and Land Court	The Repealed Act barred any appeal to any court from a ruling of the tribunal except in respect of an error of law.
7	Under the new Act, a Corporation is permitted to engage the services of a property manager where necessary to ensure the property is well managed. The powers and duties of the Corporation are to be exercised by the board of the Corporation.	There was a mandatory requirement for appointment of an institutional manager to manage the units, the common property, and the movable and immovable property of a corporation
8	The New Act has introduced a layer of protection requiring a Corporation seeking to invest any funds not immediately required by it to obtain endorsement through a special resolution passed in accordance with the New Act. Additionally, Corporations are not permitted to acquire or dispose of an interest in immovable property.	This was not provided for under the Repealed Act
9	Corporations now cannot make by-laws that permit material change in use or density of common properties without approval of the relevant county government. Further, only the Corporation is to grant a lease to an owner of a unit for the exclusive use of an area or areas of the common property following a unanimous resolution	The Repealed Act permitted disposition of common property or any part of it by way of transfer or lease.
10	The New Act now extends the means of terminating sectional property status to include substantial or total damage to the building and compulsory acquisition.	There is no reference to an application being made to any court by a Corporation, an owner of a unit, a registered chargee of a unit or a purchaser under an agreement for sale of a unit as was provided under the Repealed Act.
11	The Corporation will be automatically dissolved upon termination of the sectional property status.
12	The new Act has abolished certain provisions relating to purchase agreements.	The Repealed Act contained provisions relating to rescission of a purchase agreement by a purchaser, mandatory contents of a purchase agreement, and protections afforded to purchasers with regard to handling of sale proceeds by a developer or any person acting on behalf of the developer.
13	A developer may charge a security deposit at will if a purchaser opts to rent a unit prior to receiving the title.	The Repealed Act provided that the security deposit shall not exceed one month’s rent charged for the unit.
14	The New Act requires sectional plans to geo-reference the units and be signed by the authority responsible for survey, currently the Director of Survey. Additionally, the New Act allows Corporations to use technology in executing their duties. This move is fundamental to geospatial technologies, which are modern mapping tools.

The sectional title vs long term leases:

A sectional unit is space situated within a building and includes its proportionate share in the common property. They include apartments, flats, mansions, townhouses, or even offices. It is described in a sectional plan by making reference to the floor, wall & ceilings within a building. Confirmation of ownership is by a certificate of lease (for leasehold property) or through a certificate of title (for freehold property)

A long-term lease is any lease for more than 21 years intended to confer ownership of apartments, flats, masionettes, town houses or even offices. Long term leases will require conversion by the developer, the Management Company or the Owner, which means all long-term sub-leases that are intended to confer ownership of an apartment, flat, maisonette, town house or an office that were registered before the commencement of the 2020 Act shall be reviewed to conform to Section 54 (5) of the Land Registration Act, 2012.

Any lease for more than 21 years intended to confer ownership should be converted within 2 years of the commencement of the Sectional Properties Act, 2020.

Conclusion

The objective of the new Act remains the same, the division of buildings into units to be owned by individual proprietors. The common space, to be managed through a corporation established under the Act, is owned by the unit owners in proportionate shares as tenants in common. The new Act will definitely escalate real estate ownership in Kenya.

The implementation process will require approval of building plans by County governments, sectional plans by the Survey of Kenya, and registration of titles in land registries. Experience shows that a lack of, or inadequate technical capacity to expedite submissions and ensure quality in these institutions, undermined the success of the 1987 law.