A Prudent Buyer’s Guide to Sectional Titles in Kenya: Legal Framework and Due Diligence
Investing in a sectional property can be a rewarding experience, be it an apartment, a townhouse, a flat or an office unit. However, the legal complexities require careful navigation. Ensuring you understand the legal framework and conduct thorough due diligence is not just advisable – it is essential!
Our guide provides key information every prudent owner of a sectional unit should be aware of.
- What are Sectional Titles?
A sectional title is a proof of ownership of a unit within a larger property such as an apartment, a maisonette,a flat, an office unit or a townhouse. The unit exists within a building or a block of buildings and an owner of a sectional unit has a share in the common property of the larger property.
Common property is every other space other than space that constitutes a unit. Some examples of common areas include parking spaces, recreational facilities, pathways, stairs, lifts, ramps, and gardens.
Depending on the tenure of the land, a Sectional Title can either be a Certificate of Title for freehold property or Certificate of Lease for Leasehold Property.
The Sectional Properties Act, No. 21 of 2020 (and the Sectional Properties Regulations, 2021) is the primary legislation governing sectional titles in Kenya.
- What are the advantages of having a Sectional Title
- Sectional titles simplify the transfer process to another purchaser since lengthy lease documents are no longer required.
- They increase access to financing. A unit owner can secure financing easily by charging their title in favour of a lender.
- Optimizes the use of land as a resource by encouraging vertical development.
- The owner’s corporation provides a more democratic and transparent structure for managing areas and finances.
- Better protection for unit owners as the laws have clear obligations for developers on registration of sectional plans and the handover of common areas to the Owners’ Corporation.
- What due diligence should a Prudent Buyer Undertake before Purchasing a Sectional Property
At Waithira M. & Co. Advocates, we advise our clients and facilitate the due diligence process on behalf of our clients. The due diligence is extensive, covering both the property and the details of the Seller. Our due diligence checklist is as follows:
| No. | Due Diligence Item | Purpose |
| Verification of Title | Conducting an official search at the relevant Land’s registry to confirm the Seller’s ownership, the tenure of the title and check whether the title is encumbered (charges, caveats or court orders)Ensuring the Sectional Plan is registered and accurately reflects the unit you intend to purchase | |
| Developer and Development Credentials | Conducting a search on the Developer, if a company, conducting a Company Search;Confirming that the Developer has the requisite approvals from the relevant authority such as the County Government, the National Construction Authority (NCA), Water Resources Authority (WRA), National Environmental Management Authority (NEMA), and National Government (where necessary) | |
| Physical Inspection | Physically inspecting the property assess its condition and state of common propertyEngaging a surveyor to verify the boundaries of the unit as per the Sectional Plan. | |
| Review of Legal Documentation | Carefully reviewing the terms and conditions of the Agreement for Sale, the By Laws of the Corporation, the Instrument of Transfer and Management Corporation Documentation. | |
| Conducting financial checks | Conducting due diligence to ascertain payment of land rent and land rates |
4. Other than an Agreement for Sale, what other documentation should a Purchaser look out for?
- The Sectional Title for the Unit in the Purchaser’s name or their nominee
- The By-laws by the Developer;
- Management Agreement (in relation to the management of common areas);
- Recreational Agreement (in relation to the management of recreational facilities);
- Sectional Plans: contains reference to floors, walls and ceilings within the building; and
- Any charge that affects the title of the unit.
5. What are the Common Pitfalls faced by Buyers of Sectional Titles
- Non-compliance with Development Approvals : The developer might not have obtained all the necessary approvals from the relevant authorities such as NEMA, NCA, or the County government;
- Hidden Costs : Failure to uncover hidden costs such as service charge, unpaid land rates and land rents.
- Unregistered Sectional Plans : Some developers may fail to register sectional plans leading to delays in obtaining your title.
- Defects in Construction : Some developers fail to adhere to the building plans leading to significant structural defects.
- Disputes over Common Areas : Ambiguities in the management or use of common areas can lead to conflicts between residents.
6. Who owns and manages the common areas
The common areas are owned by all unit owners who are members of the Management Corporation. The Owner’s corporation then manages and maintains the common property, establishes a fund for administrative expenses, maintenance and repairs, enforcing by-laws and resolving disputes among unit owners.
7. Can a unit owner rent their unit?
Yes, they can rent their unit. However, they should notify the management company of their intention to rent the unit. The notice should contain the name of the tenant.
Our experienced team of real estate lawyers provide you with comprehensive legal guidance throughout the entire process. Reach out to us for thorough due diligence on the property and the developer, reviewing and advising on the sale agreement, verifying the sectional plan and titles, understanding the implication of the Owner’s Corporation by laws and ensuring a smooth and legally sound transfer process.
Authors:
Valentine Magato – Conveyancing Lawyer
Contact us : info@wmcoadvocates.co.ke
Disclaimer –This Article is in general terms for guidance only and is not intended to substitute professional advice. While due diligence has been undertaken, in ensuring the accuracy of information provided herein, Waithira M. & Co. Advocates is not responsible for any actions , omissions undertaken as a result of the same.
