Conveyancing- Sectional Properties

Origins of sectional property

• Banks and financiers resisted the existence of subleases, because they couldn’t see how one could mortgage or charge a sublease. To get over this problem they came up with the concept of a management company to be owner by e.g. apartment owners. Therefore the reversion was taken care of by the management company registered like a company with the sole objects of managing the head parcel itself and not the individual flats i.e. it would actually own the reversion.
• The lessor would then give sub leases and transfer the revision or remainder of the term to the management company, the individual property owners would own the management company.

Sectional properties Act 1987

• This is intended to create individuals titles for apartments/flats and the subdivision registered and each apartment to be given a title number under the Act.
• Under the Act the substantive law applicable is the RLA. If any property is registered under the GLA or RTA it must be converted.
• The Act provides for the creation of a body corporate similar to a company registered under the CA, except that the creation of such a body corporate becomes automatic once a building is brought under the Act.

How do you create Sectional Property?

• This is done by preparing a sectional plan done by a surveyor and upon approval of the sectional plan by the local authority where it is situate, it is registered by the registrar of lands and not of titles.
• Under S4 of the Act, the plan must describe two or more units that the property will be divided into. It must delineate the boundary of each individual unit and reveal the approximate floor area of each unit.
• The sectional plan must be presented in quadruplicate
• For purposes of the RLA a sectional plan shall be deemed on registration to be embodied in the register.
• Upon registration the register of the original piece of land is closed and a separate register is opened for each unit which will contain a description of that unit, the share apportioned of the owner of that unit any other encumbrance attached to that unit or originally attached to that parcel of land.
• Each unit will then be issued a certificate of sectional title, which is as good as any title.

Reason for shares

• The reason for shares is because a corporation will be formed under the Act.
• The name of the company is usually The owners sectional land number [registered number of sectional plan]’.
• Because the corporation comes into existence immediately, what guides you is the by laws the shareholders draw on how to run the estate.

Who controls the sectional corporation?

• The corporation is controlled by the institutional manager who must be a lawyer accountant or estate agent registered under the Estate Agents Act- S29 SPA

Termination of sectional property

• S55 SPA-The sectional status may be terminated by a unanimous resolution.
• An application to terminate the sectional status may be made to the court by the corporation, an owner, a registered chargee or purchaser under agreement for sale of units, it is just and equitable that the sectional status of the building be terminated.

Effect of termination

• On termination the corporation shall file with the registrar a notice of the termination in the prescribed form.
• On receipt of the notice, the registrar shall make a notification in respect of the notice on the sectional plan in the manner prescribed by the regulations and on the notification being made, the owners of the units in the plan are entitled to the parcel as tenants in common in shares proportional to the unit factors of their respective units.

Conveyancing- Caveats and Cautions

Caveats and Cautions

Caveats and cautions are both inhibitions, prohibitions and restrictions- These are the three types of restraints that can be registered against a title preventing the owner from disposing of the land.  Caveats are referred to as cautions under the RLA.

Who can lodge Caveats and Cautions

S57 RTA and 131 RLA- Any person claiming a contractual or other right over land amounting to a defined interest capable of creation by a registrable instrument, e.g. a lease, may lodge a caution with the Registrar against any dealing which is inconsistent with his interest. Entry of a transaction, with respect to such land, may not then be made unless the cautioner has received notice. Lodging of a caveat or caution without reasonable cause can lead to a remedy in damages. Notice and effect of Caution S132 RLA- the registrar shall give notice in writing of a caution to the proprietor whose land, lease or charge of affected. So long as the caution remains registered, no disposition which is inconsistent with it shall be registered, except with the consent of the cautioner or by order of the court.

Withdrawal/removal of the caution

S133 RLA- A caveat or a caution can be removed by the person lodging the same, or by order or the court, or by the Registrar, if such person fails to remove it after being served with a notice to do so by the Registrar. The registrar may, on the application of ant person interested, serve notice on the cautioner warning him that his caution will be removed at the expiration of the time stated in the notice. If at the expiration of the time stated the cautioner has not objected, the registrar may remove the caution.

Second caution in respect to the same matter

S134 RLA- The registrar may refuse to accept a further caution by the same person or anyone on his behalf in relation to the same matter as a previous caution.

Wrongful Caution

S135 RLA provides that any person who lodges or maintains a caution wrongfully and without reasonable cause shall be liable, in an action for damaged at the suit of any person who has sustained damage, to pay compensation to such person.

Conveyancing- Consents

Land Control Board Consent

1.0 Introduction 

• The purpose of the Land Comtrol Act (LCA) is to control transactions in agricultural land.
• What is agricultural land- S2 LCA:
• Land that is not within:

• A municipality;
• An area which was a township under the Township Ordinance (now repealed);
• An area which was a trading centre under the Trading Centres Ordinance (now repealed); or
• A market.

• Land in the Nairobi area or in any municipality, township or urban centre that is declared by the Minister by notice in the Gazette to be agricultural land for the purposes of the Act.

Proviso

• under the proviso to S2, the definition of agricultural land excludes land which, by reason of any condition or covenant in the title thereto or any limitation imposed by law, is subject to the restriction that it may not be used for agriculture or to the requirement that it shall be used for a non-agricultural purpose.

2.0 Transactions requiring LCB Consent

• S6(1) lists transactions which require LCB Consent:
• Sale, transfer, lease, mortgage, exchange, partition or other disposal of or dealing in any agricultural land situated within a land control area;
• Division or agricultural land into two or more parcels held under separate titles;
• Issue, sale, transfer, mortgage or any disposal of or dealings with any share in a private company or co-operative society which owns agricultural land
• S6(2)- the declaration of a trust of agricultural land situated within a land control area requires LCB consent.

3.0 Failure to obtain LCB Consent

Transaction rendered null and void:

Mbuthia Charagu v. Kiarie Kaguru

4.0 Transactions in which LCB Consent is NOT required

• S6(3) provides that LCB Consent is not required in respect of the following:
• Transmissions of agricultural land (whether by testate or intestate) unless that transmission would result in the division of the land into two or more parcels to be held under separate titles;
• Transactions to which the Government is a party or transactions which involve trusts of land.

Obtaining LCB Consent

Granting and refusing consent

• S9 LCA lists situation in which LCB consent will be granted or refused. From these situations the following objects of the LCA can be identified:
• To ensure that agricultural land is acquired by persons who can farm the land properly.
• To ensure that agricultural land is equitably distributed among persons who can farm it.
• To ensure that land is not acquired for speculative purposes.

• Note- S9 (1) (c)- where the person intending to acquire agricultural land is a non-citizen, consent SHALL NOT be given.

Presidential Exemptions

• Under S24 the President has power to exempt any transaction or person from the provisions of the LCA. Such exemption is granted by way of notice on the gazette.

Consent of Commissioner of Lands

• All leases granted by the Government are subject to such conditions as to the development and use. For this reason there is a prohibition against transferring, letting, sub-letting, mortgaging or charging leased property without the consent of the commissioner of lands on behalf of the government.

Consent of the Chief Engineer Kenya Railways Corporation

• Property adjacent to a railway line requires the consent of the Chief Engineer. This applies to dealing in leases granted by the government as well as agricultural land.

Consent of mortgagee/chargee

• Chargor or mortgagor must obtain the consent of the chargee or mortgagee before he can transfer or lease the mortgaged property that is the security of the chargee or mortgagee.

Consent of landlord and head lessor

• A tenant must always obtain the consent of the landlord if he wishes to assign his interest or sublet the property.

Clearances

• Provided for under s86 RLA which provides that the registrar will not accept any document of transfer or lease unless it is availed to the registrar.
• You will receive a registration certificate or statement of clearance from the local council confirming that all the charges from the last 12 years have been paid.

Conveyancing - Investigation of Title

 

Methods of investigation

Conducting a search; Pre-contract inquiries; and Requisitions

Reasons for investigating

Caveat Emptor- this principle provides that a seller is under no obligation to disclose patent defects i.e. those that could be discovered through inspection and investigation. Therefore buyers are under a duty to inspect and investigate property Bona fide purchaser for values without notice acquires good title- Zarina Suleiman Omar v. Musa Hersi Fahiye. You need to ascertain that title to the property is valid and to an extent discover quasi-encumbrances e.g. overriding interests.

Investigation by way of searches Search at the Companies Registry If seller is a company, this will let you know whether the seller exists and whether it is insolvent. If a company is insolvent and a winding up petition has been filed if within 6 months the company purports to dispose of its property it will be seen as fraudulent- S316 CA Search at the local authority Local authorities are the centre of planning and all building plans must be approved by the local authorities. Search at the lands registry Search at the Survey department through public index maps, a search here will help determine if the property is actually registered. It usually costs KES 300 to conduct a search This department is very important as registration starts here- this is where the LR number is generated.

What to look for in searches

Details of ownership Terms and rent if property is leasehold Special conditions especially on leases User on the property i.e. is it residential or commercial; and Encumbrances.  Note: under the GLA and RTA, you are given this information against the register. Under the RLA the registrar indicates what he has seen from the register.

Physical inspection of the property

Though in Ag v. KCB & 3 others the Court of Appeal held that you do not need to investigate title beyond the register you should also advise the client to inspect the property. What to look for: Any defects; Who is in actual occupation; Check the boundaries of the property; Check any rights or interests affecting the property; Check fixtures and fittings of the property which you may have to include in the agreement itself and it is important to get a description of them.; Utilities supply; and  Access to the property.

Pre-contract Inquiries

This seeks to elicit information on matter not covered by the above searches, but which relate to the physical condition of the property. What should be asked? The development prospects of the property and if possible if the vendor is aware of the neighbouring property i.e. would the neighbour agree to a sale or development of the property in a particular manner; any physical defects to the property. Note, the vendor is under no obligation to volunteer such information, but if they do so they must tell you everything of the physical structure of the property.  Any disputes existing in court or before any tribunal touching the property; If there are people in the property it is good to know on what basis they reside in the property.

Requisitions

Some questions may arise from the inspection of the title document or abstract of the document supplied to you.  A question or doubt should be directed to the vendor for clarification. The vendor is expected to reply within a reasonable time.  Such questions may relate to tenure, execution of the title, identity or description of the property, testacy or intestacy, encumbrances etc.  LSK Conditions of Sale part 10 provides that the purchaser may give notice of objection to or requisition on the following within 14 days of the delivery of the abstract to be answered within 14 days of receipt: Title or evidence of title; Description of the property; The abstract; and The contract. If vendor is unable to comply, he served a notice of withdrawal of requisition and if that is not done in 7 days, the vendor may rescind the contract and refund the deposit.  As an advocate, discuss this with the client. The best approach is to proceed with the transaction, as you can get damages if the correct answer is not received from the requisition.

Rationale behind pre-contract searches and enquiries

• The principle of ‘caveat emptor’ [buyer beware applies]- therefore the solicitor must carry out searches to give the client as much information as possible

• The buyers solicitor is well equipped and best place to carry out the pre-contract searchers

• The seller’s solicitor-

• If the property is residential the seller must provide a Home Information Pack to any perspective buyers

• If the property is commercial the seller is under no obligation to provide any information other than evidence of title

• It is advisable for the seller’s solicitor to put together a pre-contract package. This would include;

• Copy of the sellers title

• Results of all the relevant pre-contract searches and replies

• By doing this, it will speed up the transaction process and answer any questions the buyer’s solicitor may have.

Personal Inspection

• You can only get so much information from a plan of the property- therefore a personal inspection is advisable

• It is important on a sale of part- helps identify

• Location of boundaries

• Issues regarding ownership and boundary maintenance

• Whether buyer benefits from existing rights in common with seller

Professional Survey- Chpt 12

• This should always be strongly recommended to the client

• What is appropriate depends on the nature of the property

• There are various types of survey-

• Property valuation

• Home Buyer’s Valuation and Survey Report

• Structural survey

Which searches should be made?

In all transactions

• Search of the local land charges register

• Enquiries of the local authority; and if appropriate additional enquiries

• Pre-contract enquiries of the seller- GE3OC

• Water and drainage enquiries

Additional searches

• Depending on the circumstance of the transaction, the following searches may need to be made-

• Mining search

• Index Map search if dealing with unregistered land

• A Land Charged Department search against the seller’s name (for insolvency) and in unregistered land, also against other previous owners of the land (to discover incumbrances)

• Environmental search

• Company search

• Chancel repair search

• Any of the less usual searches which would be applicable in the circumstances

Making a local land charges search [Made with every transaction]

• Submit form LLC1 to the unitary, district, or London borough Council in which the property is situated

• The search result is given by way of certificate, signed by an officer of the council, which shows whether any, and if so how many, entries are revealed by the search.

• The search should reveal the following-

• Financial charges (e.g. for adoption of estate roads)

• Tree preservation orders

• Smoke control orders

• Some compulsory purchase orders (which make it lawful for an acquiring authority to take steps to acquire the land without the owners consent)

• Planning permission granted

• Any restrictions on permitted development

• Orders revoking or modifying planning permission

• Advise the buyer on the entries that affect the property and their significance

• Consideration should also be given as to how the entries will affect the buyer’ proposed use for the property. 

Enquiries of local authority [Every Transaction]

• These must be made in every transaction by submitting form CON29R to the appropriate unitary, district, or London Borough council in which the property is situated.

• Note- This form is relevant to every transaction

• CON29O which is more specialised in nature and not all the questions will be relevant to all transactions- A separate fee id chargeable for each enquiry raised in this form.

• The CON29R search should reveal the following-

• Enquiry 1-Whether any planning consents or building regulations approvals have been granted, or are pending, or have been refused so that the buyer’s solicitor can check that the client’s proposed use is the authorised use for planning purposes and there are no conditions in the planning permission which might interfere with that use.

• Enquiry 2-Whether roads serving the property are maintained at the public expense

• Enquiry 3.4 and 3.5-Whether there are any new roads and railways proposed within 200 meters of the property

• Enquiry 3.6-Whether there any proposals for permanently stopping up roads or footpaths, or putting traffic schemes into operation

• Enquiry 3.9-Whether any planning enforcement and stop notices have been served in respect of breach of planning control and if so whether they have been complied with

• Enquiry 3.11-Whether there are any proposed compulsory purchase orders

• Enquiry 3.12Whether any notices have been served in relation to remediation of contaminated land (in which case the buyer may incur liability for clean up if he proceeds with the purchase). 

• Examples of what a CON29O enquiry may include;

• Enquiry 5-Whether the property is crossed by a public path or bridleway

• Enquiry 19-Whether an environmental and pollution notices have been served; and

• Enquiry 22-Whether the property, or land abutting it, is registered as common land or village green under the Commons Registration Act 1965.

Differences between Forms LLC1 and CON29R/O

• Form LLC1 will only reveal matters which fall within the statutory definition of a local land charge (e.g. planning permission granted); Forms CON29R/O cover a wider range of subject matter and are not restricted to land charges (e.g. planning applications made, including refusals)

•  The liability for the local authority for errors is different- CON29R/O enquiries, negligence has to be established; this is not necessary for LLC1 search

• Form LLC1 is restricted to information which is on the register at the moment the search is made; Forms CON29R/O may reveal information which has affected the property in the past, or will do so in the future. 

Pre-contract enquiries of the Seller [Every Transaction]

Purpose of the search

• To elicit from the seller information, mainly relating to the physical aspects of the property which he is not bound by law to disclose

Residential property

• In cases where the Protocol is used, the seller’s solicitor should ask his client to complete;

• TA00 (Property Information Questionnaire)

• PIF for freehold properties; or

• TA7 (Leasehold Information Form), for leasehold properties. 

• These contain various questions about the property, phrased in layman’s language so that the average client should be able to compete these forms with minimal help

• The form is the submitted to the buyer’s solicitor as part of the pre-contract package.

• Erroneous or misleading reply could give rise to liability in misrepresentation. 

Commercial property

• Commercial Property Standard Enquiries (CPSE) have been drafted for used in commercial transactions to try bring some uniformity to preliminary enquiries.

• The CPSE Form 1 which should be used in every transaction includes the following questions;

• Boundaries;

• Adverse rights;

• Access to the property;

• Fire safety;

• Compliance with planning and building regulations;

• The VAT status of the transaction. 

• The other CPSE Forms which are available in addition to Form 1 are;

• CPSE 2- for use on the sale of property subject to tenancies

• CPSE 3- For use of grant of a new lease

• CPSE 4- for use on the assignment of a lease

• Two copies of whatever form should be sent to the seller’s solicitor

Additional enquiries

• These should be raised either in the space at the bottom of the printed form, or on a separate sheet (in duplicate). Additional enquires extend to queries arising out of the draft contract

• They should be confined to those matter to which an answer cannot be obtained from reading the documentation supplied by the seller, from the estate agent’s particulars, or from a survey or physical inspection of the property. 

Summary of information to be obtained from the search

• The following enquiries should be made as a minimum in every case;

• Whether there are any disputes with neighbouring owners/occupiers;

• Who is in occupation of the property;

• Whether there have been any alterations or other building work carried out on the property and, if so, whether planning permission/building regulation consent was obtained;

• Whether there has been any charge in the use of property;

• Whether services (e.g. water) to the property pass through adjoining land;

• Whether services to other properties pass through the land to be sold.

Liability

• An incorrect reply to pre-contract enquiries may lead to liability in misrepresentation. Any exclusion clause purporting to avoid or minimise liability for misrepresentation will be subject to the reasonableness test in S11 of Unfair Contract Terms Act 1977, and cannot therefore be guaranteed to afford protection to the seller

• Where the erroneous reply stems from the seller’s solicitor’s negligence, he will be liable to his own client, but in this respect he does not owe a duty directly to the buyer

Water and drainage enquiries [Every Transaction]

• Liability for the cost of drain and sewer repairs can be of considerable cost to the buyer, should be identified prior to contracting

• Search should be made using the application form published by the water service company serving the property. 

• The search should reveal (among other things)-

• Whether the property has foul water drainage to the public sewer

• Whether the property has surface water drainage to the public sewer

• Whether there is a water main within the boundaries of the property; and

• Whether the property is connected to the public water supply. 

[Note- For additional searches refer to text book at pg 164-169]

Results of Searches- Check lists

• On receiving results of searches, they buyer’s solicitor must check the answers given to ensure that the information supplied complies with the client’s instructions

• Any unsatisfactory reply must be pursued with the appropriate authority ( or seller in the case of pre-contract enquiries] until a satisfactory explanation is received.

• Failure to do so= results in loss being suffered by the client, and the buyer’s solicitor being liable to his own client in negligence.

Property built within the last 10 years

• For residential properties, check that you have copies of NHBC documentation- This provides insurance cover against many structural defects- Revealed by pre-contract enquiries of the seller

• Check that there is planning permission and you have copies- Revealed by pre-contract enquiries of the seller, LLC1 and CON29R

• Check that any conditions attached to the planning permission have been complied with- Enforcement revealed by CON29R

• Check that building regulation consent was obtained and a copy provided- Revealed by pre-contract enquires of the seller; proceedings for breach revealed by CON29R

• Check that the roads and drains are adopted or that agreements and bonds exist- Copies should be provided- Revealed by CON29DW

• If roads etc, are not adopted, check that adequate easements exist for access- Check title documents.

• If no agreements and bonds exist consider whether a retention should be made from the purchase price until the roads and services are adopted

Access to property or services to property across neighbouring land

• Revealed by pre-contract enquiries of the seller- Check title to ensure that there are easements for access etc. If no express easement exists will there be an implied or presumed by long user

• What are the arrangements for maintenance and repair? Are these express arrangements in title documents or are there any informal arrangements?

Occupiers

• Revealed by pre-contract enquiries of the seller

• Do the occupiers claim an equitable interest or a tenancy

• If so ensure that they will sign agreement to give up rights/surrender the tenancy and leave on completion

• In the case of non-owning spouse, have rights of occupation under the Family Law Act 1996 been registered? Whether of not such right have already been registered, the spouse should be required to agree to leave and remove any registration prior to completion

Extension or alterations carried out by previous owner

• Are there any guarantees for work? See pre-contract enquires of the seller

• Was planning permission required/obtained for works?

• Are works within GPDO or were permissions withdrawn?

• Have copies of any required planning permission been obtained?

• Have any covenants on the title been complied with e.g. consents for work?

• If consent was required but not obtained, can it be obtained now, or insurance cover obtained?

• Was building regulation consent obtained?

• Did the survey cover the work to check that it was carried out to a proper standard?