Conversion of a Long Term Lease to the New Sectional Units

Transition from the Repealed System 

The former Sectional Properties Act of 1987 was specifically catering for vertical land ownership arrangements. However, on 11^th December 2020 the Sectional Properties Act was assented into law and repealed the Sectional Properties Act, 1987. In the past, the Ministry of Lands and Physical Planning had been registering long-term leases in respect of apartments, flats, maisonettes, townhouses and offices based on architectural drawings but with the enactment of the Sectional Properties Act 2020, the Ministry required that all the long-term leases registered based on architectural drawings be converted in compliance with Section 54(5) of the Land Registration Act. Section 54(5) of the LRA empowers Land Registrars to 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 the land.

Further, the Act had to be aligned with other legal provisions such as; Section 7 of the Land Act which provides that title to land may be acquired through long-term leases exceeding 21 years created out of private land. Consequently, Section 13(2) of the Sectional Properties Act, 2020 now requires the review of pre-existing long-term sub-leases to ensure conformity with the provisions of the Land Registration Act. This move signaled a significant shift in land registration practices as from 10^th of May 2021, the Ministry ceased the registration of long-term leases.

Significant Amendments introduced by the New Act

The crux of the issue lies on the challenges faced under the repealed Sectional Properties Act, 1987 that in effect delayed and/or impeded the completion of transactions. Some of the challenges faced under the repealed Act included:

1. The repealed Act did not provide for the establishment and management of a corporation that was to maintain the common property where the building lies. The new Act fills this gap and further provides for the automatic dissolution of the corporation upon determination of the Sectional status, previously one had to apply for the winding up of the corporation.

• Payment of land rent and rates by unit holders was made corporately through the holder of the main title thus leading to delays in dealings in the specific units.

• It only applied to properties registered under the repealed Registered Land Act (RLA). This in effect required a property registered under a different regime to be converted first to the RLA first and subsequently to the Sectional Properties Act, 2020.

• Previously, the repealed Act applied only in respect of land held on freehold or on a leasehold title, where the unexpired residue of the term is not less than 45 years. However, with the new Act, the residue period has been reduced to where the unexpired term is not less than 21 years.

• The repealed Act provided for the issuance of only the title deed for each sectional unit but with the new Act, pursuant to Section 5(1)(c) , a certificate of title is issued where the property is freehold and a certificate of lease for leasehold property.

• Section 31(8) of the repealed Act barred any appeal to any court from a ruling of the tribunal except in respect of an error of law. While the new Act provides for an avenue of appealing the decision of the Dispute Resolution Committee to the Environment and Lands Court pursuant to Section 30(7) of the new Act.

• Appointment of an institutional Manager is no longer mandatory under the new Act pursuant to Section 20(1)(j) of the new Act.  

In addition, the New Act introduced new features that were not existing under the old regime. These features include:

1. A special resolution pursuant to Section 35 of the new Act is used to endorse investments.

• Deletion of limits on security deposits

• Sectional plans to be geo-referenced, signed and sealed pursuant to Section 9(1)(h)

The requirements for Conversion

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 to the Land’s registry:

1. A Sectional Plan- Prepared by a surveyor from a building plan approved by the County government. The Surveyor will require a land search, construction permit and the floor plans. Further, the physical structures must have been erected on the land.
2. The original title document
3. The long-term lease previously registering the unit; and
4. The rent apportionment for the unit.

The Conversion process

1. The registered Proprietor of the Head Title, Management Company, Developer or the Owner of a Lease of a Unit shall make an application for a replacement of a title.
2. The application is done on Form LRA 97 attached with a Sectional Plan.
3. The Sectional plan is then submitted to the Lands Registry together with the Original Title, previously Registered Lease, and payment of the Rent apportionment for the unit.
4. The Ministry of Lands will then geo-reference the Sectional Plan and have it duly authenticated by the Director of Survey
5. The Registrar will then close the old registers and open new registers for each of the sectional units
6. Issuance of replacement titles under the Act.

Conclusion

At times one is encountered  with a technical hurdle during this conversion. For instance, where the Original Title is unavailable and it is not encumbered at the time of conversion, the Act provides that a deed of indemnity must be lodged at the Land Registry. Concisely, the financier or appointed representative submits the application where the long-term lease is held as security.