Introduction
On Friday, 11th December 2020, President Uhuru Kenyatta signed the Sectional Properties Bill into law repealing the Sectional Properties Act, 1987.

What is a Sectional Property?
The new Sectional Properties Act, 2019 (the Act) provides for, inter alia, the division of buildings into units to be owned by individual proprietors. Individual unit owners will have their own individual titles for their respective properties which will allow flexibility when requesting for financing or disposing off their units.

It has been suggested that independent and complete ownership of the unit will give banks an incentive to advance facilities to apartment owners since charges will now be registered against an owners’ individual title. We have highlighted some provisions of the Act below:

Salient Provisions
(a) Ownership of Units – The Act provides that an existing structure may be designated a building containing a unit or part of a unit or divided into two or more units by the registration of a sectional plan. The sectional plan must be prepared by a surveyor, which sectional plan must be registered. The Act comprehensively provides for the requirements which the sectional plans must meet in order to be registered.

For common property comprised in a registered sectional plan, the Act requires the common property to be held by the owners of all the units as tenants in common in shares proportional to the unit factors for their respective units. An owners’ respective title deed will include their respective share in the common property.

If a building contains premises that are rented for residential or commercial purposes to a tenant who is not a party to a purchase agreement, and is not included in a sectional plan, the Act prohibits the owner of the premises from selling the premises as a residential or commercial unit until the sectional plan which includes the said premises is registered at its respective registry.

(b) Mandatory Conversion of Units in Flats/Apartments to Sectional Properties – Any long-term sub-leases i.e. leases for more than twenty-one (21) years as per the Land Act (No. 6 of 2012), that were intended to confer ownership and were registered before the commencement of this Act, are required to be reviewed within two (2) years from the date of commencement. Owners will not incur additional stamp duty upon revision if they paid the requisite stamp duty fees when registering their sub-lease.

(c) Management of Sectional Properties by Corporations – Regarding management of the sectional property, the Act requires owners to register a Corporation (not subject to the Companies Act, 2015) which will consist of the owners of units in the parcel to which the sectional plan relates or persons who are entitled to the parcel when the sectional arrangement is terminated under the Act. The duties and powers of the Corporations are extensively set out in the Act. Any dealing or disposition affecting the common property must be approved by a unanimous resolution of the Corporation.

What does it mean to you and your business?
The Act requires conversion of all long-term sub-leases into units within two (2) years of the Act commencing. A person who fails to comply with the provision of conversion is guilty of an offence and shall be liable on conviction to a fine not exceeding Kenya Shillings two hundred and fifty thousand (KES.250,000/=). If a corporation fails to comply with the Act, each member of the board who is knowingly a party to the failure is guilty of an offence and shall be liable to a fine not exceeding Kenya Shillings two hundred and fifty thousand (KES.250,000/=).

Conclusion
It is important for all property owners to comply with the Act and it also provides an opportunity for property owners to give more value to lessees. We are in discussions with the Ministry of Lands to provide guidance on compliance with the Act and we will update as soon as regulations have been developed.

If you require any assistance with conversion of your apartments to sectional properties or any other land question or land transactions generally, do not hesitate to contact Dennis W. Muhindi on dmuhindi@mwc.legal. Please note that this e-alert is meant for general information only and should not be relied on without seeking specific subject matter legal advice.