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Kenya: Long term leases transformations in light of the new sectional properties act, 2020

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published on 6 August 2021 | reading time approx. 3 minutes

 

Long term leases have for a long time been used to confer ownership of fractional units of land, apartments, flats, town houses and offices in Kenya. The Land Registration Act No. 3 of 2012 (LRA) provides under section 54 (5) that the Registrar shall register long-term leases and issue certificates of lease over apartments, flats, maisonettes, townhouses or offices having the effect of conferring ownership, if the property comprised is properly geo-referenced and approved by the statutory body responsible for the survey of land. Section 54 (6) further provides that the Cabinet Secretary for Lands shall prescribe regulations for registration of long term leases.

 

  

The Sectional Properties Act No. 21 of 2021 (SPA) is an  Act of Parliament to provide 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 and for connected purposes, The Act under section 13 provides that all long term sub-leases that are intended to confer ownership of an apartment, flat, maisonette, town house or an office that were registered before the commencement of this Act shall be reviewed to conform to section 54 (5) of the LRA within a period of two years of the commencement to this Act. This in essence means that for long term leases to be registered and a certificate of title issued pursuant to a sub-lease, the property has to be properly geo referenced. Geo referencing has been defined in the Land Registration Act to mean means the reference of an object using a specific location either on, above or below the earth’s surface.

 
Long term leases are usually registered on the strength of architectural plans / drawings. Such drawings do not fall within the meaning of geo referencing. The SPA stipulates that registration of sectional units should be accompanied by sectional plans as opposed to architectural drawings. Sectional plans have been defined under the LRA to mean a geo-referenced plan of units or a part of land as the case may be, prepared by a surveyor and approved by the statutory body responsible survey of land. In compliance with section 13 of the SPA, the Cabinet Secretary in charge of Lands published a notice to the effect that the Ministry will no longer register long-term leases supported by architectural drawings intending to confer ownership. The notice further specified that all sectional plans submitted for registration shall;

  •  be geo-referenced
  • indicate the parcel number
  • indicate units’ numbers
  • indicate approximate floor area of each unit
  • be signed by the proprietor
  • be signed and sealed by the Director of Surveys
  • clearly indicate the user of the unit

 
Property holders with long-term leases or hold/subleases have been given a two-year ultimatum to ensure that they get to register their long term leases to conform with the stated section 13 of SPA, as well as the title requirements as laid out in the LRA.

 
For purposes of conversion of already registered long- term sub-leases, the owners of the property will be required to make an application in the prescribed form and attach the following documents at the land’s registry:

  • a sectional plan;
  • the original title document;
  • the long-term lease previously registering the unit; and
  • the rent apportionment for the unit.

 

The Registrar may however dispense with the production of the original title if the developer is not willing or is unavailable to surrender the title, for the purposes of conversion.

 
Upon submission of the above, the sectional plan will be registered, and the previous register closed. A new register will be opened with respect to each unit in a registered sectional plan and a Certificate of Lease issued. It is indicated that owners will not incur fresh or additional stamp duty charges upon conversion if the requisite stamp duty was paid when registering the long-term lease.

 
As for the lands outside Nairobi with the repealed land registration regimes, the same shall continue applying the old methods but shall have a transition period to upgrade and update the same to meet the current laws threshold as stated above.

 

The ongoing transactions

This generally relates to the documents / long term leases that had been lodged in the registry pending registration, those which stamp duty had already been paid for or presented for stamp duty assessment.
The documents that had been presented in the registry but not dealt with will now be completed using the new registration system which requires registration of sectional plans.  The same applies for those to which stamp duty had already been paid for or presented for stamp duty assessment. The registrar shall however be at liberty to ensure that the documents are compliant with the current requirements and can therefore summon the parties doing the registration and seek for further particulars or requirements.

 
Where no lease has been presented for registration

Leases that have not yet been lodged for registration will therefore be lodged pursuant to the current system as introduced in the 2020 SPA.

 

Conclusion

The conversion of long term leases reflects some of the recent developments in the property and  conveyance space. The changes however have been plagued by challenges. These include with respect to conversion of long term leases, lack of proper regulation that will guide the conversion process. Draft regulation have however been prepared and are currently under review.

 
We shall keep you updated on further developments on the conversion process. In the meantime we remain available to answer any queries you may have in regard to the conversion and purchase of property in general.

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