The Sectional Properties Act No.21 of 2020 (the “Sectional Properties Act”) as read with the Sectional Properties Regulations, 2021 (the “Sectional Regulations”) provides for the division of buildings to units and issuance of sectional titles to purchasers who buy units/apartments from developers.
Sectional titles are title documents or ownership documentations in respect of the separate ownership of units within a complex or building.
The major change introduced by the Sectional Properties Act, 2020 and the regulations thereof relate to the legal structure of developments and titling.
We set out below a comparative analysis between the legal structure prior to the coming into force of the Sectional Properties Act, 2020 and the current applicable structure under the new law.
(a) Management Companies vis-a-vis Corporations
Under the previous legal regime governing sectional properties, management companies were incorporated with the intent of managing common areas and holding reversionary interest in the head title, on behalf of the owners of the units.
The new law provides for registration of corporations and this is done at the Ministry of Lands as opposed to incorporation at the Companies Registry. Corporations will take over the management and administration of the common areas within a development. However, a corporation will not be holding any reversionary interest on behalf of the owners of the units, since the issue of reversionary does not arise under the new law.
(b) Membership
In regard to Management Companies, each purchaser of a unit was required to subscribe for shares in the Management Company and a share certificate indicating the number of shares held by a unit holder would be issued.
Under the new law, membership to the corporation is through registration as a member only and no shares are issued. Share certificates are therefore a thing of the past.
(c) Reversionary Interest
Under the Sectional Properties Act, 1987, if the title where a development is situate was a leasehold, the proprietor would be required to apply for an extension of the term of the lease. In a development where there are a number of units, the right to apply for extension of the leasehold term is transferred to the management company which holds the reversionary interest.
Under the new legal regime, in cases where the tenure of the land where a development sits is a leasehold, the reversionary interest will vest in the individual unit holders.
(d) Document of Title
The title document under the old law was the Sub-lease together with a share certificate in respect of the shares held in the management company.
The Sectional Properties Act, 2020 and the regulations thereof introduces sectional titles for units within a development that will either be a Certificate of Lease or a Certificate of title, depending on the tenure of the land on which the development is situate.
(e) Rules and Regulations
The rules that are to govern developments are the corporation By-Laws and the regulations provide a sample for adoption, under schedule 2 thereof. These sample regulations are a guide and can be amended to suit a specific development’s needs.
For new developments, the By-laws are to be presented for registration at the time of lodging the application for registration of the corporation and the sectional plans. However, for existing developments and where leases had been issued and the said leases are subject of conversion, the By-laws may be amended by including duly modified terms and conditions as contained in the long-term leases. Each member of a corporation shall be bound by the By-laws as if individually signed by each member.
The regulations provide for amendment of the By-laws of the Corporation by a special resolution of not less than 75% of the members of the Corporation. A copy of the amended By-laws shall be filed with the Registrar and the Registrar shall make a memorandum of the filing on the sectional plans. The By-laws also set out the powers and duties of the Corporation.
HOW WE CAN HELP?
We are well conversant with the new law on sectional titling and our team of experts will be happy to help with: –
(a) the preparation of the By-laws for your development’s Corporation;
(b) amendment of the By-laws of your development’s Corporation to ensure that they are compliant with the new law; and
(c) processing sectional titles for your development.
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