Salient Features Of The Sectional Properties Regulations, 2021

The Sectional Properties Regulations, 2021 (Regulations) were gazetted on 10th December, 2021 pursuant to section 59 of the Sectional Properties Act, 2020 (the Act). The Regulations generally operationalize the Act and outline the process of registering sectional plans in respect of developments as well as the conversion of registered long- terms leases that had been issued under the repealed Act. Vide this article, we highlight in detail, some of the important issues to note regarding the Regulations.

1. Preparation and Registration of a Sectional Plan

Regulation 2 states 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 plan for the building must be approved by the relevant county government which is a long standing practice and position in law. The sectional plan is drawn in accordance with the Regulations and must show the floor plan for the building and illustrate and express the individual units therein as prescribed by the Regulations. This regulation further specifies the material to be used for purposes of drawing the sectional plan. The plan must be prepared by a licensed surveyor and endorsed by the Department of Survey as per the Act and the Regulations. An application for registration of the sectional plan must be in the form prescribed, Form LRA 9, and must be accompanied by:-

1. the original title document for the land in respect of which the sectional plan is made;
2. an application for registration of the corporation in the prescribed form; and
3. the rent apportionment form for purposes of rent apportionment to each unit, where applicable.

Upon registration of the sectional plan, the Registrar shall close the register of the parent title, open a separate register for each unit/apartment described in the plan and issue a certificate of title if the property is freehold or a certificate of lease if the property is leasehold. The common property comprised in the sectional plan shall be held by the owners of all the units as tenants in common in shares proportional to the unit factors for their respective units and the said proportion shall be set out in the respective certificates of Lease. The title to a unit comprised in the plan shall, with effect from the date of the registration of the sectional plan, be deemed to be issued under the Land Registration Act, 2012.

2. Conversion to Sectional Units

2.1 Categories of long-term leases eligible for conversion Regulation 18 requires all long-term leases registered within the following categories to be converted to sectional units: -

1. where all the units have been transferred to the respective owners and the reversionary interest has been transferred to the management company to hold in trust for the owners as noted on the title; or
2. where all the units 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; or
3. where part of the units 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.

2.2 Requirements for Conversion Under regulation 19, applications for conversion need to be accompanied by the following documents: -

1. The sectional plan;
2. The sub-lease or long-term lease;
3. Certificate of lease; or
4. The parcel title or its copy thereof.

Where the original title is missing and the same is unencumbered, an indemnity shall be issued and the Registrar shall by notice in the Kenya Gazette call for the title for purposes of conversion and after lapse of 60 days, certificates of title or lease shall be issued to the respective unit owners after registration of the sectional plan. 2.3 Who is responsible for Making an application for Conversion? The management company or developer shall make the application for conversion. However, where the management or the developer fails to make the application for conversion, any of the unit owners can make the application. 2.4 What happens if the title is encumbered by way of a Charge? Where the property is charged or otherwise encumbered, the applicants shall deliver the application for conversion to the encumbrancer who shall then submit it to the registrar. The encumbrance shall then be noted in the new certificate of title or lease issued. 2.5 Effect of non-conversion where property is charged The failure by a registered proprietor of a parcel, a developer, a management company, or an owner of a unit to submit a sectional plan for registration does not affect any security interest held by the encumbrancer. 2.6 Long-Term Leases Exempt from Conversion Regulation 22 provides that long-term leases not falling within the categories set out in Regulation 18 are exempt from the requirement to convert to sectional units. Additionally, the following long-term leases are also exempt: -

1. 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;
2. 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
3. projects of strategic national importance, substantial transactions, and special economic zones, which by their nature, renders it impractical to relinquish reversionary interest.

3. Registration of Corporations

Under the regulations, the application for registration of a corporation is lodged together with the application for registration of the sectional plan. By-laws for the corporation as more specifically laid out in the regulations will accompany such application for registration. However, such by-laws may be modified by including terms and conditions of long-term leases that are subject of conversion. This is because corporations are expected to replace management companies as we now know them.

4. What happens to Management Companies in existing developments?

Management Companies where the long-term leases are the subject of conversion are required to transfer all their assets and liabilities to a corporation registered under the Act, within one (1) year from the date of registration of such corporation.

5. Extension or Renewal of Lease

Regulation 33 provides that applications for extension or renewal of lease terms are to be made by individual owners of units in a sectional plan, as provided under the Land (Extension and Renewal of Leases) Rules, 2017.

Conclusion

In the ensuing articles, we shall analyze specific aspects of the Act and the Regulations with a view to elaborate and expound on each of the above salient features and address the transition. Be on the lookout!