The Sectional Properties Act no. 21 of 2020 (the “Act”) was enacted into law for the purposes of creating sectional titles. Sectional titles are individual titles for units within a development which includes residential apartments, offices, townhouses, maisonettes and complexes. Sectional titles can be created for both freehold and leasehold land. Prior to the enactment of the Act, ownership over individual units was procured through long term leases which would be registered with the Registrar of Lands under the mother title of the property.
How is it created?
A sectional title is created by closing the Mother Title of the parcel of Land at the Land Register, and new titles for each individual unit are subsequently registered through the opening of individual files at the Land Registry. Common areas within the development are held by the owners of the units as tenants in common.
The process of creating sectional titles begins with seeking approval for the building plans from the County Government. Then, a surveyor will prepare and register a sectional plan based on the approved building plans and the sectional plan must be georeferenced. Once the sectional plan is duly registered, the Mother Title is closed and new titles are issued for each of the units within the parcel of land.
Thereafter, a corporation is then be formed and registered as per section 17 of the Act. The Corporation is comprised of the individual unit holders, who each hold a share in the corporation, and hold the common areas of the land parcel. The Corporation is in charge of managing the property and enforces the by-laws in order to maintain the property.
Benefits of a Sectional Title
There are several benefits emanating from the enactment of the Act, especially for the unit owners. The Act provides a framework which defines each owners interest in the property by way of geo-referencing. This means that there exists detailed definition of the areas and units owned by an owner giving them more control over their unit.
Furthermore, the reversionary interest is passed to individual unit owners who will be at liberty to apply for renewal of their sectional titles (for leasehold titles) upon expiry making it a faster, and more efficient process for the unit owners.
Previously, unit owners couldn’t acquire individual title deeds, because developers retained original titles after selling the individual units due to the legal impossibility of subdividing common property. Post enactment of the Act, unit owners have an amplified ability to acquire financing from financial institutions as the individual titles for the unit can be used as collateral without requiring the consent of the corporation.
The Corporation is established under this Act is not subject to the provisions of the Companies Act. Therefore, costs incurred under the Companies Act, such as filing fees, incorporation costs and tax obligations, are not applicable to the Corporation created under this Act.
