Introduction

In the interest of ensuring that land in Kenya is used in a manner that is equitable, efficient, productive and sustainable, the Constitution of Kenya, 2010 required Parliament to revise, consolidate and rationalise existing land laws through legislation.

To give effect to this, the Land Act, Land Registration Act and National Land Commission Act came into force on 2 May 2012 (together, the 2012 Land Laws).

The transition from the old regime to the new regime has been slow but steady. On 28 December 2020, more than eight years after the 2012 Land Laws were enacted, the Sectional Properties Act, 1987 (the Repealed Act) was repealed and replaced with the Sectional Properties Act, 2020 (the New Act) which now aligns with the Constitution, 2010 and the 2012 Land Laws.

The New Act is not a complete departure from the Repealed Act but rather an improvement of the previous requirements following removal of many provisions that were considered challenging or outdated. 

The principle of the New Act remains similar to that of the Repealed Act, being the division of buildings with shared common areas into sectional units. Such units will be owned by individual owners and the common property owned by owners of the units as tenants in common. It also addresses the use and management of the units and common property. 

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.

Some of the substantive changes are:

Residue term for application of leasehold properties reduced

The New Act now applies to leasehold properties with unexpired residue terms of not less than 21 years. The threshold under the Repealed Act was 45 years.

Issuance of certificate of title/lease

Sectional properties shall now be issued with a certificate of title (freehold property) or certificate of lease (leasehold property), and the title shall include the unit’s proportionate share in the common property. The Repealed Act provided for issuance of title deeds for sectional property in respect of each unit.

Conversion of long-term sub-leases registered prior to the New Act

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. 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 Act had a threshold for affected leasehold properties to have a residue term of not less than 45 years. This is no longer material, as all long-term leases registered before commencement of the New Act are affected.

Introduction of an internal dispute resolution mechanism

The New Act provides for an internal dispute resolution mechanism through a Dispute Resolution Committee to determine disputes relating to enforcement of by-laws. This is a departure from the 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.

Appeals to the Environment and Land Court

Under 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. 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

The New Act has done away with the mandatory requirement for appointment of an institutional manager to manage the units, the common property, and the movable and immovable property of a corporation. A corporation is a body corporate created automatically by law upon registration of a sectional plan for sectional units and consists of all owners of the sectional units on the building (Corporation). A Corporation is permitted to engage the services of a property manager where necessary to ensure the property is well managed. Under the New Act, the powers and duties of the Corporation are to be exercised by the board of the Corporation.

Investments to be endorsed

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.

Introduction of restriction on the use and disposition of common property

Corporations now cannot make by-laws that permit material change in use or density of common properties without approval of the relevant county government. Any such by-laws made by the Corporation shall have no force or effect. Further, the New Act now only permits the Corporation 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. Previously, the Repealed Act permitted disposition of common property or any part of it by way of transfer or lease.

Termination of sectional property status

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.

Automatic dissolution of Corporations

The Corporation will be automatically dissolved upon termination of the sectional property status.

Abolition of 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. These have been done away with in the New Act.

Abolition of caps on rental security deposits

A developer may charge a security deposit at will if a purchaser opts to rent a unit prior to receiving the title. Initially, 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

The New Act requires sectional plans to geo-reference the units. This move is fundamental to geospatial technologies which are modern mapping tools. Additionally, the New Act allows Corporations to use technology in executing their duties, but the scope has not been defined.

Conclusion

Other than the goal of conforming to the new land regime, the New Act appears to address the challenges associated with the Repealed Act which include:

• provisions which were perceived as strenuous and burdensome;
• realities of sale transactions relating to apartments, flats, maisonettes, townhouses or offices not corresponding with the provisions in the Repealed Act; and
• the need to convert land to the repealed Registered Land Act (Cap. 300, Laws of Kenya) which was the substantive law governing sectional units.

Given this, the amendments may achieve a legislative win for both developers and purchasers of sectional units.