News Extract

 Boma : Home of Property & Leisure 

Lawyers, KPDA poke holes in law that allows flat ownership titles

Developers are poking holes in the new Sectional Properties Act that permits issuing of title deeds for single units in apartment blocks. They say, homeowners are still exposed to fraud by rogue developers, among other challenges

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 n 2019, Daniel Muthomi wanted to dispose of one of his three-bedroom apartment in Nairobi’s South B estate. However, he couldn’t sell it when he needed to because he didn’t have a title deed to prove ownership of the unit. Having no option left, he decided to rent out the house. But even the renting process was not an easy one.

“I was obligated to disclose to the property manager (referred to in the Act as the Corporation) the amount of rent chargeable for the unit, as well as pay a deposit to them for maintenance, repairs, and or replacement of anything in the common areas of the property. I vowed I will never invest in apartments again,” he narrates.

  A corporation is a corporate body made up of the owners of units in one parcel to which the sectional plan relates, who are entitled to the parcel when the sectional arrangement is terminated under this Act. It is automatically created by law upon registration of a sectional plan and is mandated with the responsibility of administration and management of the common areas of the sectional property.

Retract statement

   Muthomi’s stance has, however, since changed and is willing to continue investing in apartments, thanks to the passing of a crucial law by parliament that guarantees the ownership of their houses.

   For a long time, owners of residential flats within multi-storeyed buildings could not acquire title deeds for their units as the developer retained the original title, even after selling the units because there was no legal mechanism to subdivide such common properties.

The law has, however, changed following the enactment of the Sectional Properties Act, No. 21 of 2020 into law on December 11, 2020 thus repealing the Sectional Properties Act No. 21 of 1987 by allowing individual apartment owners to acquire title deeds for their units, among other revolutionary provisions.

The transition from the old regime to the new regime has been slow, but steady. However, while a section of players in the industry such as Muthomi are happy about the new law, others have teared it down pointing at various challenges that come with the law.

During a recent CEOs Breakfast forum hosted by the Kenya Property Developers Association (KPDA), developers and lawyers said there needs to be statutes of owning sections of a building. The sectional titles, they say are only dealing with the aspect of having separate ownership in a building.

   Ribin Ondwari of Ashitiva Advocates LLP says the Act applies only in respect of land held on freehold title or on a leasehold title where the unexpired residue of the term is not less than 21 years and there is an intention to confer ownership.

   “The challenge is that we are having extensive lease terms, which increases the liability of the owners of these buildings if the lease term expires or is cancelled,” notes Ribin.

   Another challenge is the inadequate management of the conveyance of release of the sublease model, and new apartment owners might fall in the trap of rogue lawyers. “When it comes to purchasing property, the purchaser is the party most interested in this process being done well. But because of the practicalities of the aspect that it is a sublease model, the sublease has to be registered against the head title, which means that the developer cannot release the title for each purchaser,” he says.

[THE NEW LAW: The new law grants all unit owners holding sectional titles greater power, freedom, and liberty to deal with their units as they please, as well as the ability to access financing and dispose of their units. A developer may charge a security deposit at will if a purchaser opts to rent a unit before receiving the title unlike before when the provision was that the security deposit would not exceed one month’s rent charged for the unit. 10,000 sectional title deeds will be issued in Nairobi as part of a pilot phase that began in February 2022. This is 10% of the estimated 100,000 sectional units in Nairobi alone.] 

Samuel Mwangi, an Advocate of the High Court of Kenya with a specialization in Commercial Law says the new Act seeks to protect the interests of buyers whose property was previously under shared mother titles, and any other loopholes can be easily sealed. The new law also bars property developers from putting up additional units on the same plot where already old blocks of apartments stand.

George Mwangi, the Chief Executive Officer at Verified Real Estate said the new act will change things, not only for apartment investors, but for all sectional property owners, even those who have invested in properties that occupy less than an eighth acre piece of land, noting that currently an eighth of an acre is the smallest legal subdivision that guarantees an investor a title deed.

Since true ownership of a real estate property is proven by the existence of a title deed, George says that this act will make more Kenyans invest into real estate. Another advantage of this new act is that it will also ease the way of doing business for developers, because one needs not to finish the whole project to get the titles. One can get partial discharge of the sectional deeds.

(Extracted from: People Daily - Friday, July 29th 2022)