This is the first of a two-part series seeking to demystify sectional title ownership in Kenya. With the enactment of the Sectional Properties Act, 2020, there are a lot of questions among developers of housing estates and prospective buyers of apartments on how they can own sectional titles. In this write-up, we will explore general aspects of sectional title ownership and how this differs from the framework that has been there in the past.
1. What is a Sectional Title?
A sectional title describes a type of property tenure where a person can have a separate proprietary or ownership interest in an apartment unit within a building or a development.
2. Can one hold a sectional title in Kenya
Yes, the Sectional Properties Act of Kenya, 2020 came in to provide a framework for division of buildings into units and for those units to be owned by individual owners. The legislation also provides for ownership of common areas and the use and management of common areas.
With the passing of the Sectional Properties Regulations, 2021, the sectional titles regime is fully operationalized, and it is possible to hold a sectional title in your name to your apartment.
The provisions are similar for both foreign nationals and Kenyan citizens the exception being that foreign nationals can only hold leasehold sectional titles of up to 99 years only while Kenyan citizens can hold leasehold sectional titles of more than 99 years and freehold sectional titles as well pursuant to article 65 of the Constitution of Kenya.
3. How does the Sectional Properties Act, 2020 differ from past unit ownership regimes in Kenya
Previously, the framework for ownership of units or apartments in Kenya has been through sub-leases (the “Management Company Framework”).
A developer would buy a piece of land and erect a block of flats. He would then form a management company under the Companies Act of Kenya. He would sell leasehold interest in the units or apartments to purchasers through sub-leases. With each unit sold, he would offer the buyer or homeowner a share in the management company. After all units were sold, he would transfer the land on which the block of flats was erected to the management company. By this time, all purchasers would be shareholders in the management company and therefore be the beneficial owners of the land on which their homes were erected.
As such the homeowners holding sub-leases were dependent on the underlying title to the land (commonly called the “Mother Title”) which was held by either the developer or the management company. Their sub-leases were borne from the Mother Title and could not exist independently of the Mother Title.
This past regime was problematic for various reasons.
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At times a developer would not issue shares in the management company to the purchasers of units in his development meaning such developer retained ultimate control of the development and could at any time threaten to terminate their sub-leases.
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A developer would refuse to exit the management company framework once all the units are sold and insist on continuing to collect service charge set to very exorbitant rates without consulting the unit owners.
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Because the sub-leases are usually set to 99 years, a developer would at times fail to include a renewal clause in the sub-lease or even where there was such a renewal clause would fail to renew the sub-lease or the lease under the Mother Title and this would result in the homeowner’s title being in jeopardy. We have even come across instances where the company that owns the Mother Title is erroneously wound up leaving a homeowner unable to renew their sub-lease on expiry.
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Developers who were financed would fail to discharge the units or apartments sold from the financier’s security leaving innocent buyers liable for repossession.
The Government of Kenya had in the late 80’s attempted to enact sectional titles legislation. The Sectional Properties Act of 1987 did however not take off primarily because it was based on the now repealed Registered Lands Act (RLA). Since a majority of the titles existing at the time were not RLA titles they had to be converted to RLA titles at significant cost before one could process section titles under the 1987 Act. As a result, a lot of developers often opted for the Management Company Framework.
The Sectional Properties Act, 2020 can cure some of the issues arising from these past regimes. It:
- introduces sectional titles registrable for freeholds properties or leaseholds of over 21 years. This means if the units are to be erected on a leasehold parcel of land, that parcel must have over 21 years on the lease for a sectional title to be processed for such a unit.
- establishes a corporation which comprises all homeowners of units within an estate development. The corporation’s core mandate is to take care of the common areas of the Estate. The parking bays, walkways, garden areas, playgrounds and so forth. The advantage of the corporation is that it is not a company under the Companies Act. There are no filing fees or incorporation costs payable for its setup.
- It established a dispute resolution committee that determines dispute with the development between unit owners. This makes it cheaper to resolve disputes.
We hope this content has been useful to you. On our next newsletter, we shall delve into what a sectional title is, the steps to acquiring one, the consequences of not having one and the fate of existing sub-leases. There is a deadline for conversion of sub-leases to sectional titles so remember to tune in to understand how to achieve compliance.
If you are a developer or homeowner looking to understand the sectional titles regime in Kenya or undertake the conversion of your sub-leases to sectional titles, please reach out to Divinah Ongaki (d.ongaki@agema-analysts.com) or Elizabeth Omol (e.omol@agema-analysts.com)
