Legal Review: Sectional Properties Laws in Kenya

 

 1.0 Introduction

The Sectional Properties Act 2020 ("Act") was enacted in 2020 to align with the provisions of the Constitution of Kenya, 2010 and the land laws enacted in 2012. Subsequently, the Cabinet Secretary for the Ministry of Lands and Physical Planning gazetted the Sectional Properties Regulations ("Regulations") on 16 November 2021. Please read the frequently asked questions (FAQs) on the Act and the Regulations below.

2.0 What is the purpose of the Sectional Properties Act, 2020 (Act) and Sectional Properties Regulations, 2021 (Regulations)?

The Act provides for the division of buildings into units to be owned by individual proprietors and common property to be owned by proprietors of the units as tenants in common and to provide for the use and management of the units and common property.

The Regulations operationalise the Act and outline the procedure for registration of sectional plans and conversion of long-term leases registered under the Land Registration Act, no. 3 of 2012 (LRA) to sectional titles, among others.

3.0 What are the benefits of the sectional regime of ownership?

         I.            It simplifies sale transactions since individual sectional titles can be transferred in the typical way that land is transferred. Lengthy lease documents will no longer be required.

       II.            Purchase of sectional units is less costly since the Purchaser will not be responsible for the Vendor’s Advocates legal fees, unless otherwise agreed. They will also not be required to incur costs for transfer of reversionary interest.

      III.            Administrative challenges surrounding transfer of reversionary interest and issuance of share certificates are eliminated.

     IV.            Land rates/rent to be paid per unit thus enhancing revenue collection.

       V.            The sectional regime increases access to financing. By simplifying the process of obtaining title documents for the units, unit owners can easily secure financing by charging the units in favour of the lenders.

     VI.            It offers better protection to the unit owners. Sectional developments are regulated by the comprehensive provisions of the Act and the by-laws of the management corporation. The rules also prescribe disclosure requirements which enable purchasers to be informed of the status of the development including any existing encumbrances when purchasing a sectional unit.

    VII.            It promotes vertical development on land & therefore optimizes the use of the limited land resources in Kenya. This increases the number of units available for homeowners. It is, therefore, good for high population density areas.

4.0 Which land interests does the Act apply to?

         I.            Freehold land

       II.            Leasehold land with a minimum residual term of 21 years

5.0 What compliance requirements must be met before creating a sectional development?

         I.            The parcel of land (mother parcel) must be properly geo-referenced and approved by the Survey Department. We are informed that the Survey Department has georeferenced many properties, particularly within Nairobi. Given this, the registration of sectional plans is ongoing countrywide.

       II.            More importantly, pursuant to section 13 (2) of the Act as read with rule 18 of the Regulations, conversion of long-term leases to sectional titles is ongoing. The Act requires the conversion process to be undertaken by 28 December 2022.

6.0 How do you create a sectional development?

         I.            A sectional plan describing two or more units is prepared by a surveyor from a building plan approved by the county government. This could be a private surveyor. In preparing the sectional plan, the surveyor will require a land search, construction permit and the floor plans. Further, the physical structures must have been erected on the land.

       II.            The application for registration of the sectional plan is lodged at the land registry for registration. The Registry Index Map will be amended upon registration.

     III.            The application to register a sectional plan is accompanied by an application to incorporate a management corporation. The management corporation consists of the unit owners. A certificate of registration of the management corporation will be issued to the applicant.

    IV.            Once the sectional plan is registered, the land registrar is required to submit the registered plan to the county government for apportionment of rates within 21 days.

7.0 What are the consequences of registration of a sectional plan?

         I.            The register relating to the mother title is closed and its title deed is surrendered to the land registry.

       II.            A separate register is opened for every sectional unit.

     III.            Certificates of title (for freehold land) or certificates of lease (for leasehold land) are issued for each sectional unit at a fee.

    IV.            The interests registered against the mother title (e.g., charges, easements etc.) are endorsed on the sectional title documents.

8.0 Will title documents be issued for sectional units?

Yes.

         I.            Where the mother parcel is freehold, the sectional unit owners will be given certificates of title.

       II.            Where the mother parcel is leasehold, the sectional unit owners will be given certificates of lease.

9.0 Will I need a share certificate for my share in the common areas?

No. Share certificates will not be required. A sectional unit owner’s interest in the common areas is endorsed on their certificate of title or certificate of lease (as applicable).

10.0 Who pays land rent and land rates in a sectional development?

Each sectional unit owner will be responsible for payment of land rent and rates for their individual unit. This will no longer be the responsibility of the management entity.

11.0 Who owns and manages the common areas of a sectional development?

         I.            The common areas are owned by the sectional unit owners as tenants in common in shares proportionate of the units.

       II.            The management corporation manages the common areas on behalf of the unit owners in accordance with the provisions of the Act and by-laws adopted by the members.

12.0 What happens to an existing management company once a management corporation is registered?

The management company is required to transfer all its assets and liabilities to the management corporation within 1 year of registration of the management corporation. The management company will then be wound up in accordance with the Insolvency Act.

13.0 Which long-term leases registered under LRA are required to be converted into sectional units under the Act?

Ø  Conversion applies only to long term leases of a period of 21 years and above and which confer ownership of building units.

Ø  Section 13 (2) of the Act as read with rule 18 of the Regulations requires all registered long-term leases (except those exempted under rule 22 of the Regulations) to be converted to sectional units where:

         I.            all units in a development have been transferred to the respective owners and reversionary interest has been transferred to the management company to hold in trust for the owners as noted on the title. In this case, the application for conversion is to be made by the management company;

       II.            all units in a development have been transferred to the respective owners and the reversionary interest is by written agreement intended to be transferred to the management company to hold in trust for the owners. In this case, the application for conversion is to be made by the developer or management company; or

      III.            part of the units have been transferred to respective owners and the reversionary interest is by written agreement intended to be transferred to the management company. In this case, the application for conversion is to be made by the developer or management company.

14.0 How do I convert leases registered under LRA to sectional titles?

v  Conversion may be initiated by a developer, the management company or an owner of any unit of a development. If the parties indicated above who are responsible for making the applications for conversion do not do so, any owner of any unit in the development can apply for conversion.

v  Where the parcel of land is encumbered, the application is submitted by the chargee or its representative.

v  Conversion is effected by submitting to the land registry an application for conversion (form SP 16) and an application for registration of the management corporation (form SP7). The applications will be accompanied by:

         I.            the sectional plan;

       II.            the leases;

      III.            the certificates of lease (where applicable); and

     IV.            the original or copy of the mother title (or if not available, an indemnity).

       V.            Upon registration, certificates of title or certificates of lease (as applicable) will be issued for the individual units.

15.0 Will stamp duty be required for conversion of existing registered leases to sectional titles?

Unit owners will not be required to pay stamp duty if it was paid on the existing lease. Stamp duty will only be required where this was not paid.

16.0 Is there a deadline for conversion?

v  Yes. The deadline is 28 December 2022.

v  The Ministry of Lands and Physical Planning may need to procure the amendment of the Act to extend this deadline to allow owners sufficient time to comply with the requirement for conversion.

17.0 Consequences for failing to convert long term leases to sectional titles before 28 December 2022

v  The land registrar is required to register a restriction against the mother parcel to prevent any further dealings from 28 December 2022. Although the interests of the owner and the chargees (if any) will not be extinguished, a chargee may face challenges when seeking to enforce their security against a mother parcel since they will need to procure that the conversion is done before realizing its security.

v  This requirement for registration of a restriction by the land registrar does not apply to leases relating to the individual units. We expect the land registry to progressively undertake the conversion of the leases as dealings continue. Given this, in the event that a chargee seeks to exercise statutory power of sale against individual units, the land registrar will issue certificate of lease in the name of the transferee upon the registration of the transfer by the chargee.

v  However, it is likely that in due time, the land registry will issue directives restricting dealings thereon until conversion is effected.

18.0 Which long-term leases registered under LRA are exempted from the requirement of conversion to sectional titles?

v  Rule 22 of the Regulation exempts the following LRA leases from the requirement for conversion:

         I.            where it is expressly provided for by agreement that the reversionary interest belongs to the developer or lessor or management company as legal owner and not as trustee. The Act does not define “trustee”.

       II.            leases relating to large mixed-use developments and phased developments where it is by agreement provided that the reversion shall be retained by the developer or to be otherwise held by a management company; or

      III.            leases relating to projects of strategic national importance, substantial transactions and special economic zones, which by their nature, renders it impractical to relinquish reversionary interest.

·       The Act does not define what constitutes a “large” mixed-use development or “substantial transaction”. The land registry and/or Survey Department should issue directives on this for clarity.

·       Notwithstanding the exemption, rule 76 (2) (f) of the Land Registration Act (General) Regulations, 2017 (LRA Regulations) requires that sectional plans will be prepared to accompany the lease documents (in place of the architectural drawings). Under rule 76 (3) of the LRA Regulations, the sectional plans are required to conform with the Act with necessary amendments.

19.0 Can the sectional status be terminated and if so, how?

Yes, sectional status can be terminated by:

         I.            a unanimous resolution of the corporation;

       II.            substantial or total damage to the building; or

      III.            compulsory acquisition.

20.0 Which documents must a developer deliver to a prospective buyer of a sectional unit?

         I.            the sale agreement;

       II.            by-laws for the development;

      III.            the management agreement (in relation to management of common areas);

     IV.            the recreational agreement (in relation to management of recreational facilities) (if any are in place);

       V.            the mother title or the sectional title for the unit;

     VI.            the sectional plan or proposed sectional plan; and

    VII.            the charge registered against the mother title or the sectional title (if any); and

  VIII.            where there is a charge or proposed charge, a notice indicating:

a.       the principal amount secured by the Charge;

b.       monthly instalments payable under the Charge by the developer;

c.        the amortization period;

d.       the term of the loan;

e.       the rate of interest payable on the loan;

f.         any privileges on pre-payment of the loan.

A developer who contravenes this requirement commits an offence and on conviction is liable to pay a fine of Kshs. 20 million or imprisonment for 1 year.

21.0 Can a unit owner rent their unit? What is the procedure for doing so?

Yes they can. However, the unit owner is required to give to the management corporation:

         I.            prior written notice of the intention to rent out the unit and setting out the unit owner’s address for purposes of service of notices by the management corporation

       II.            a prior written undertaking to be liable for any damage caused by the tenant;

      III.            written notice of the name of the tenant within 20 days of commencement of the tenancy; and

     IV.            written notice within 20 days of the tenant vacating the unit to the effect that the unit is no longer rented out.

       V.            Where a tenant contravenes the estate by-laws and the unit owner fails to take necessary action, the management corporation is entitled to give the tenant notice to vacate the unit.

22.0 Proposals for redress or reform

While the Act is progressive, we propose the following reforms:

         I.            The Act should allow for sectional ownership of land. It currently applies to division of buildings only;

       II.            The Act should provide for multi-tier management corporations to cater for complex developments and phased developments;

      III.            Section 13 (2) of the Act should be amended to extent the deadline for conversion of long-term leases to sectional units;

     IV.            The Land Registry should issue practice guidelines:

       V.            clarifying the process on conversion of LRA leases to sectional titles where the mother parcel is listed for conversion of the parcel number;

     VI.            clarifying the meaning of holding reversionary interest “in trust” and as “legal owner” under rules 18 and 22 of the Regulations; and

    VII.            defining “large” mixed use developments and “substantial transactions” under rule 22 of the Regulations.

 

Credits: IKM Advocates/DLA Piper

Legal Review: The Legal Process Involved in Purchasing Land

 

Any person willing to buy land in Kenya should follow the following steps below and through the assistance of a competent Advocate:

 

1.0 Parcel identification

The buyer in this case identifies the parcel of land which suits his/her needs, this being the acreage, location etc. at this point the buyer should take a further step to visit the physical location of the property to ascertain the boundaries, ensure that there are no occupants, to avoid instances of adverse possession.

2.0 Preliminary investigation of Title

The buyer should obtain copy of the Title to the property and conduct an official search which is a very important step in buying land in Kenya and should not be skipped. This usually involves lodging an official search at the lands registry depending on where the property is located, paying the requisite search fees which is usually Kshs. 520/=. The search results usually takes three(3) working days and they usually ascertain ownership and any encumbrances on the property. It is also prudent to conduct a search at the Ndungu Land Report to ensure that the parcel of Land is not listed as one of the illegally and irregularly allocated land. 

3.0 Preparation of the Sale Agreement

This is usually done by the Seller/Vendor's advocates. The Sale Agreement usually sets out the terms agreed between the parties. The buyer or if represented the buyer's advocates should ensure that they review the Agreement for Sale to ensure that the terms are favorable. The Sale Agreement usually contains the following terms i.e the description of the parties, purchase price, deposit, warranties, termination, completion, governing law etc. Once the parties have agreed on the terms, the same is engrossed and sent for execution by the purchaser then the vendor or their powers of attorney. Once executed nominal stamp duty is paid for the Agreement.

4.0 Obtaining the rates and rent clearance certificates where the same are applicable

Rent clearance property is usually obtained for leasehold properties only and rates clearance certificate is obtained for properties for properties in the municipalities.

5.0 Preparation of the Transfer

This is usually done by the purchaser's advocates and reviewed by the vendor's advocates, and executed by both parties.

6.0 Obtaining the requisite consent to transfer

Depending on whether the property is agricultural or not,consent to transfer should be obtained. In the case of Agricultural land, the consent to transfer should be obtained from the relevant Land Control Board.

7.0 Valuation of the property and Payment of Stamp duty

Valuation of property in Kenya is usually done by a registered Government valuer. Once one lodges a valuation for Stamp duty application at the Ministry of Lands with the accompanying documents the valuer usually contacts the party and visits the site and values the property, a report is then compiled and the value is endorsed on the transfer and then assessment of stamp duty which is usually 4% of the value of the property located in the municipalities, for agricultural property it is 2% of the value of the property. Once payment is made the documents are lodged at the lands registry for stamping where the collector of Stamp duty is fully satisfied that payment has been made.

8.0 Registration formalities

Booking for registration of the transfer in favor of the purchaser. The Original Title, the transfer (in triplicate), land rent and rates clearance certificate(where applicable), consent to transfer, valuation for stamp duty form, the stamp duty declaration, assessment and pay-in-slip, PIN and IDs of the purchaser and vendor are lodged for registration.

9.0 Post registration search

This is a very important step after registration, to ensure that the transfer of the property in favor of the purchaser is ascertained.

 

Legal Review: What Happens When A Deputy Governor is Impeached?

 1.0 Introduction

There are various reasons for the removal or impeachment of a Deputy Governor in Kenya. Legally, the procedure for impeaching a county governor in Kenya applies, with the necessary modifications, to the impeachment of a deputy governor.

Therefore, the Senate is in charge of the process of impeaching a Deputy Governor in this context.

2.0 Grounds for Impeachment or Removal of Deputy Governor

A Deputy Governor can be removed/impeached from his/her position if he or she violates the Constitution or any other law, and/or commits a crime under national or international law, abuses office, or displays gross misconduct.

When the Deputy governor commits any of the offenses, the MCAs move a motion for removal of the DG whereby a notice is filed to the speaker of the county Assembly, and in which the motion ought to receive support by 2/3 (two-thirds) of the members for it to proceed.

Reference is made to Article 181 of the Constitution which provides the grounds upon which a deputy governor can be removed from office and states as follows:

1.      Gross violation of the Constitution or any other law.

2.      Where there are serious reasons to believe that the deputy county governor has committed a crime under the national or international law;

3.      Abuse of office or gross misconduct.

4.      Physical or mental incapacity to perform the functions of the office of the deputy county governor.

3.0 The process involved in the impeachment of a Deputy Governor in Kenya

The process for removal of a deputy county governor from office in Kenya is set in section 33 of the County Governments Act.

It begins with the move of a motion to impeach a deputy governor by the County Assembly.

Any Member of the County Assembly moves a motion to remove a deputy county governor by notice to the speaker.

The member relies on the grounds to remove a deputy county governor to move the motion as set out under Article 181 of the Constitution of Kenya, 2010.

The member must receive the support of two-thirds of all the other members to move the motion.

If the motion goes through, the county assembly speaker informs the speaker of the Senate within two days. The information is in writing and refers to the county assembly resolution passed to impeach the deputy governor.

The deputy governor continues to perform the functions of the office pending the outcome of the impeachment process.

Generally, the process of impeachment of a deputy governor adopts a similar process as the impeachment of a county governor, as a guide to the County assembly and senate.

Role of the Senate in the Impeachment Process of the Deputy Governor

Legally, once the impeachment motion has gone through in the county assembly, the county assembly speaker shall then inform the Senate speaker within two days in writing.

The deputy governor continues to perform the functions of the office until the impeachment process is completed and outcome is determined in or against his Favor.

At the Senate, the speaker convenes a meeting aimed at hearing the charges the county assembly brought against the deputy governor.

The Senate at this point appoints a special committee that comprises of eleven (11) members who are obliged to investigate the matter, and this is to be carried out within seven days from the day the Speaker received the notice of impeachment.

The 11-member special committee of the Senate thereafter investigates the matter and reports to the Senate within ten days. The report should contain details on whether it finds proof for the charges the accuser brought against a deputy governor.

During the entire process, the deputy governor holds the right to appear and be represented before the committee to defend himself.

Notably, where the 11-member special committee finds no proof against the allegations facing the Deputy Governor, then the proceedings end there, and the Deputy Governor continues with his duties. In cased where the special committee finds proof, the Senate proceeds to vote on impeachment charges which only takes place after the assurance that the deputy governor receives a fair hearing as a constitutional right.

Thereafter, If the majority of the members of the Senate vote to uphold the impeachment, the deputy governor ceases to hold office. Where the recommendations vote to reject the impeachment charges, the Senate speaker ought to notify the speaker of the respective county assembly about the outcome of the decision by the members of the Senate.

The same charges can however be introduced before the assembly after three months from the day the Senate votes against the impeachment by any member of the county assembly.

Vacancy in the office of the Deputy Governor

Where the senate has upheld the impeachment of the deputy governor as established by the assembly, a vacancy is established in the office of the deputy governor and remains vacant until the next deputy governor is elected or nominated. As such, the County Governor is mandated to nominate a new deputy governor within 14 (fourteen) days.

Thereafter, the MCAs are mandated to vote and approve or reject the nominated deputy governor and this should happen within 60 days.

The vacancy does not occur if the Senate rejects the impeachment charges facing the deputy governor. It also does not occur when the special committee finds no proof for those charges since no further proceedings take place. And that is the complete process to impeach a deputy governor in Kenya.

Conclusion

When the deputy governor has been impeached, the Court now remains the only option available for the impeached Deputy Governor to save his lucrative job and protect his political career from crumbling.

At this point, the impeached deputy governor no longer earns a salary, nor allowances nor enjoys the immense benefits that come with the office of deputy governor that includes round-the-clock police protection. Worse, the impeached DG  is permanently barred from holding any public office, including running for a political position in the future according to Article 75 (3) of the Constitution which bars a person impeached from a public officer from ever holding any public office.