Introduction

Sectional property ownership, which includes apartments, townhouses, and office suites within managed developments, has become immensely popular in Kenya’s urban centers. This growth is largely driven by increasing urbanization, land scarcity, and the need for organized community living. This guide provides a comprehensive overview of the legal, financial, and practical aspects of purchasing sectional property in Kenya. It is designed to equip both new buyers seeking clarity and experienced investors aiming for a compliant and successful acquisition.

Understanding Sectional Property

Sectional property refers to immovable property where a buyer acquires individual ownership of a unit (a defined space within a building) and a shared ownership of the common areas of the development (e.g parking, gardens, swimming pools etc).

Key Characteristics

The core concept is the division of ownership into two parts:

  1. The unit: Owned exclusively by the buyer and is defined by boundaries (walls, floor, ceiling).
  2. Common Property: Owned collectively by all unit holders as tenants in common, proportional to the unit factor (the percentage share assigned to each unit) (Section 6 (2) of the SPA 2020)

The Sectional Properties Act, 2020 (SPA)

The Sectional Properties Act, 2020 provides a clear legal framework for managing and registering multi-unit developments.

The Act replaced the use of long-term leases (sub-leases) for apartments, giving unit owners a certificate of title for their individual unit and a defined share of the common property.

Key Provisions:

  • Registration: Requires developers to surrender the head title, which the Land Registrar shall close its register and open a separate register for each unit, described in the sectional plan. Thereafter, a certificate of title will be issued to each registered unit.   
  • Management: Mandates the formation of a corporation or Management Company comprising all unit owners to manage and maintain the common areas.
  • Dispute Resolution: Provides clear mechanisms for resolving disagreements among unit owners and with the Corporation.

Types of Sectional Property

Sectional properties in Kenya encompass:

  • Residential: Apartments, townhouses, and maisonettes within gated communities.
  • Commercial: Office suites in high-rise buildings, retail units in malls.
  • Mixed-Use: Developments containing a combination of residential, commercial, and retail spaces.

Essential steps before purchasing a sectional unit. 

Due Diligence

Due diligence is the most critical phase when investing in sectional units. It is critical to consult a lawyer during this step. It entails the following;

Title Search

  • A title search verifies the seller’s ownership and identifies any encumbrances (charges, caveats, or restrictions) against the property.
  • Your lawyer will conduct an official search at the Lands Registry using the property’s Land Reference (L.R.) Number or the sectional unit number.
  • During this step, it is important to ensure the property is genuinely registered under the SPA, 2020, resulting in a Certificate of Title for the unit, and not a long-term lease.

Review of the Sectional Plan

  • The Sectional Plan is the blueprint that legally defines the boundaries of your unit and the common property.
  • Verify that the sectional plan is officially registered at the Lands Registry and that its details match the physical structure.
  • Confirm the specific unit boundaries, the assigned unit factor (your share of common property), and that the common areas listed are consistent with the development’s features.

Inspection of the Property

  • Physical Inspection of the sectional unit and the common areas is key to confirm and note the   functionality of fixtures, and general maintenance level.
  • It is also important to engage a surveyor or engineer to conduct a structural assessment especially for older buildings. 

Financial Due Diligence

  • It is important to determine all costs related to the purchase of the sectional unit, beyond the purchase price. Additional charges may include; Stamp Duty, legal fees, service charge contribution

The Sale Agreement

The Sale Agreement is the legally binding contract between the buyer and the seller. It is important to contact a lawyer to review or draft the agreement. 

Taxes and Levies

Stamp Duty

  • Explanation: This is a tax levied on the transfer of ownership of property.
  • Calculation and Rates: Stamp Duty is calculated on the value of the property. The current rates are typically: 4% of the value for property located within municipalities and 2% of the value for property outside municipalities.
  • Responsibility: The buyer is legally responsible for paying the Stamp Duty. The transfer process cannot be completed until this tax is paid.

Capital Gains Tax (CGT)

  • Explanation: CGT is tax payable on the profit realized from the sale of property.
  • Application: It applies to the seller (the transferor). The current rate is 15% of the net gain (selling price minus acquisition cost and allowable expenses).

Land Rent and Rates

  • Land Rent: Payable to the National Government (Ministry of Lands) for leasehold properties.
  • Rates: Payable to the respective County Government (e.g., Nairobi County) for property services.
  • Obligation: Ensure the seller clears all outstanding Land Rent and Rates up to the date of completion.

Service Charge

  • This is a continuous operational levy and not a tax. Service charges are calculated based on the unit’s unit factor (proportional share) as outlined in the Sectional Plan.

Management of Sectional Property

The Management Company (The Corporation)

Under the SPA, a corporation (or management body) is legally established when the Sectional Plan is registered. Its primary role is the maintenance, repair, and control of the common property; administration of the development’s by-laws; and collecting service charges.

Unit owners are automatic members of the Corporation. They have the right to elect the management committee and must adhere to the rules and pay the service charges promptly.

The Corporation is exclusively funded by the Service Charges collected from all unit owners.

Leasing Sectional Property

Before leasing a section unit, it is important to consult a lawyer to help you reviewthe development’s by-laws and the Sectional Plan. Some developments may impose restrictions on short-term rentals (like AirBnBs).

It is also important to engage a lawyer to draft a lease agreement which is essential to protect both the landlord and the tenant. 

Seeking Legal Advice.

Contact DVM Advocates LLP today for expert legal advice on purchasing sectional property in Kenya. Our experienced team can guide you through every step of the process, ensuring a smooth and successful transaction from due diligence to final registration.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. You should consult with a qualified legal professional for advice on your specific situation.