LEGAL UPDATE ON THE SECTIONAL PROPERTIES ACT, 2020
The Sectional Properties Act No. 21 of 2020 (hereinafter referred to as “the New Act”) was enacted into law on 11th December, 2020 in alignment with the provisions of the Constitution of Kenya 2010, the Land Act No. 6 of 2012, the Land Registration Act No. 3 of 2012 and the National Land Commission Act No. 5 of 2012. Subsequently, the Sectional Properties Act No 21 of 1987 (hereinafter referred to as “Repealed Act”)was repealed, as it contained challenging and outdated provisions on land which did not align with the set principles and provisions of the above-mentioned progressive land laws.
The outstanding aspects of the New Act include:
- It provides for the division of buildings into units to be owned by individual proprietors, based on a sectional plan prepared by a surveyor. In addition, the proprietors shall be issued with either a certificate of lease (for leasehold property), or a certificate of title (for freehold property) as evidence of ownership of a sectional unit; and,
- It requires conversion of all long-term sub-leases intended to confer ownership of apartments, flats, maisonettes, town houses, villas, go-downs or offices that do not conform to Section 54(5) of the Land Registration Act, 2012 within two (2) years of the commencement of the Act.
SIGNIFICANT AMENDMENTS INTRODUCED BY THE NEW ACT, IN COMPARISON TO THE REPEALED ACT
The amendments introduced by the New Act simplify the various procedures that were contemplated under the Repealed Act as discussed below:
|NEW ACT||REPEALED ACT|
|Reduction of residue term for the application of the Act on freehold or leasehold land: Section 2 of the New Act states that the Act only applies in respect to land held on a freehold title or on a leasehold title, where the unexpired term is not less than twenty–one (21) years and there is intention to confer ownership.||Previously, the Repealed Act applied only in respect of land held on freehold title or on a leasehold title, where the unexpired residue of the term is not less than forty-five (45) years, as showcased under Section 2 of the Repealed Act.|
|Approvals of the Sectional Plans and Units: According to Sections 4 (5), 5 (5) and (6) of the New Act, approvals of Sectional Plans and Units 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 Section 4(3), 5 (5) and (6) of the Repealed Act was pegged on the Repealed Registered Land Act.|
|All Long-term sub-leases registered before the commencement of the New Act are required to conform to the New Act: Section 13(2) of the New Act provides that all long-term sub-leases registered before the commencement of the New Act on, 28 December 2020, must conform to the New Act within a period of two (2) years from the said date.||The Repealed Act threshold for affected leasehold properties to have a residue term of not less than 45 years, set out in Section 2, is no longer applicable because all long-term leases registered before commencement of the New Act are affected.|
|Inclusion of the issuance of a certificate of lease upon registration of a Sectional plan: Section 5 (1) (c) of the New Act states that upon registration of a sectional plan or property, the Registrar shall issue, in respect of each unit of the sectional property, a certificate of title if the property is freehold or a certificate of lease if the property is leasehold, upon payment of a prescribed fee, and the title shall include its proportionate share in the common property.||Section 5(1) (c) of the Repealed Act indicates that only title deeds were issued for sectional property in respect of each unit.|
|Inclusion of an internal dispute resolution mechanism: Section 20(6) and 30 of the New Act provides that a corporation may constitute an Internal Dispute Resolution Committee on a need basis to hear and determine disputes relating to enforcement of by-laws.||Section 31 (1) of the Repealed Act required certain disputes and proceedings to be referred to the tribunal appointed under the Landlord and Tenant (Shops, Hotels and Catering Establishments) Act, Cap 301.|
|Appeals to the Environment and Land Court is permitted: Under Section 30 (7) of the New Act, an aggrieved party can appeal the decision of the Dispute Resolution Committee with regard to enforcement of by-laws to the Environment and Land Court.||Section 31(8) of the Repealed Act barred any appeal to any court from a ruling of the tribunal except in respect of an error of law.|
|Appointment of an Institutional Manager is no longer mandatory: Section 20(1)(j) of the New Act states that, a Corporation is permitted to engage the services of a property manager where necessary to ensure the property is well managed.||Section 29 (1) of the Repealed Act had 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 and common property|
|Investments to be endorsed through a special resolution: Section 35 of 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.|
|New restrictions regarding the disposition and dealings affecting the common property: Section 29(7) of the New Act states that Corporations cannot make by-laws that permit material change in use or density of common properties without approval of the relevant county government. In addition, 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 during a mandatory meeting of the corporation, as indicated under Section 22 (1) and (3) of the New Act.||Section 22(1) of the Repealed Act permitted disposition of common property or any part of it by way of transfer or lease, grant of easement or any other dealing, approved by unanimous resolution of the Corporation. A meeting of the corporation was not mandatory, for the approvals of the dispositions and dealings affecting the common property.|
|Extension of the means of termination of sectional property status: Section 47 of the New Act now extends the means of terminating sectional property status to include substantial or total damage to the building and compulsory acquisition. However, 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 Section 55 (2) of the Repealed Act.||Section 55 (1) of the Repealed Act provided that unanimous Resolution as the only means that the sectional status of a building may be terminated. Subsection (2) further provided that, an application to terminate the sectional status of a building may be made to the Court by the Corporation, an owner, a registered chargee of a unit or a purchaser under an agreement for sale of a unit.|
|Automatic dissolution of Corporations: Section 50 of the New Act provides that the Corporation will be automatically dissolved upon termination of the sectional property status.||Section 58 of the Repealed Act stated that the Court, on an application by the Corporation, a member of the Corporation, or an institutional manager, may by order provide for the winding up of the affairs of a Corporation.|
|Deletion of certain provisions relating to purchase agreements: The New Act does not contain provisions on the rescission of a purchase agreement by a purchaser, mandatory contents of a purchase agreement, protections afforded to purchasers with regard to handling of sale proceeds by a developer or any person acting on behalf of the developer.||Sections 46 (3), (4) and (5), 47 and 48 of the Repealed Act contained provisions relating to rescission of a purchase agreement by a purchaser, mandatory contents of a purchase agreement, protections afforded to purchasers with regard to handling of sale proceeds by a developer or any person acting on behalf of the developer.|
|Deletion of Limits on Security deposits: Limits on Security deposits have not been included in the New Act. Hence, the developer may charge a security deposit at will if a purchaser decides to rent a unit prior to receiving the title.||Section 49 of the Repealed Act provided that the security deposit shall not exceed one month’s rent charged for the unit.|
|Sectional plans to be geo-referenced: Section 9 (1) (b) of the New Act requires sectional plans to geo-reference the units. This move is fundamental to geospatial technologies which are modern mapping tools.||This was not provided for by the Repealed Act.|
|Sectional plans to be signed and sealed: Section 9 (1) (h) of the New Act also requires the sectional plans to be signed and sealed by the authority responsible for survey, currently the Director of Survey.||This was not provided for by the Repealed Act.|
|Use of technology by corporations: Section 20 (7) of the New Act allows Corporations to use technology in executing their duties, but the scope has not been defined.||This was not provided for by the Repealed Act.|
On 7th May 2021, the Cabinet Secretary of the Ministry of Lands and Physical Planning notified the public that the Ministry had embarked on the process of converting long-term leases registered on the basis of architectural drawings, to conform to the Sectional Properties Act, 2020 and the Land Registration Act, 2012. The Ministry further notified the public that they shall no longer register long-term leases supported by architectural drawings with effect from 10th May 2021.
From the above discussion, it is evident that the New Act has greatly impacted the state of real estate ownership by introducing the aspect of ownership of sectional units in buildings by individual proprietors. This has greatly addressed the challenging and outdated provisions on land set out in the Repealed Act, and is a positive and progressive step towards the development of land laws in Kenya.