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The Ministry of Lands Gazetted the Sectional Properties regulations in December 2021 to provide a framework for the implementation of the Sectional Properties Act 2020.&nbsp;

The regulations outline the process of registration of sectional plans and conversion of registered long-term leases into sectional units.

The Process

The 6-step process (see image below) describes the development of the sectional titles from preparation to rate payment for each unit:

<img alt="Chart Source: Kaplan &amp; Stratton Advocates" src="/Images/uploads/2022/06/05/process_tK4VnxP.PNG" style="height:588px; width:632px" />Source: Kaplan &amp; Stratton Advocates

The Ministry had in a notice issued last year, stated that effective 10th May 2021, it would no longer register long term leases that did not comply with the provisions of the Act.

The Ac is intended to govern and simplify the process of registering sectional properties and provides for the division of buildings into units. In addition, it provides for the regularization/conversion of long term leases that are already registered at the Lands Registry.

Developers, owners or management companies are required to initiate the conversion process and submit the documents to the Ministry of Lands.

According to the Act, all long term leases that intend to confer ownership should be reviewed within two years from the date of commencement of the Act (28th December 2020), otherwise, the Registrar shall register a restriction against the title to the property to prevent further dealings on it.

Failure to comply with the conversion process amounts to an offence and the person shall be liable on conviction to a fine not exceeding KES 20,000,000 or one-year imprisonment.

Under the Act and Regulations, the common property shall be managed by a corporation incorporated in accordance with section 17 of the Sectional Properties Act.&nbsp;

According to a <a href="https://www.kaplanstratton.com/wp-content/uploads/2022/03/Note-on-Sectional-Properties-Regulations-2021-03-04-2022.pdf">commentary</a> by legal firm Kaplan &amp; Stratton Advocates, the corporation will be bound by provisions of the Act and not by those of the Companies Act, 2015

Rights and Obligations of Sectional Title Holders

<ul>
	<li>Upon issuance of sectional title, an owner may sub-divide or consolidate their unit by registering a sectional plan of sub-division, or consolidation respectively.</li>
	<li>Issuance with a sectional title also places the obligation to pay rent and rates with each unit owner.</li>
	<li>Applications for extension or renewal of lease terms are to be made by individual owners of units in a sectional plan, as provided under the Land (Extension and Renewal of Leases) Rules, 2017.</li>
	<li>An owner desiring to rent out his/her unit is required to notify the corporation of the address for effecting service, the name of the tenant and lapse of the tenancy.</li>
</ul>

New developments, where no lease has been registered will have to comply with the provisions of the Sectional Properties Act and Land Registration Act.

(Disclaimer;&nbsp;This article is for information purposes only and does not constitute legal advice)

&nbsp;

Prime residential sale prices in Nairobi marginally improved by 1.2% over the past 6 months to December, compared to a 1.1% decline in the same period in 2020 due to re-opening of economy and increased investment activity.

This is according to Knight Frank&rsquo;s 2nd Half 2021 Kenya Market Update.&nbsp;Prime residential rents remained unchanged over the past 6 months to December, compared to a 4.17% decline in during the same period in 2020. The stability in rentals is mainly attributed to increased occupancies across most high-end gated properties.

The prime residential sector still remains a buyers&rsquo; and tenants&rsquo; market due to continued oversupply in most locations.&nbsp; &ldquo;We are seeing a rebound in the residential market as there is now less uncertainty that had been brought about by the pandemic. We expect the prime residential sale and rental rates to remain stable in the first half of 2022 due to the favourable projected economic environment,&rdquo; said Knight Frank MD Ben Woodhams.

A significant amount of office space was released into the Nairobi office market in the 2nd half of 2021, after completion of several Grade A office blocks in the capital. This includes the iconic mixed-use Global Trade Centre (GTC) whose office tower has circa 625,000 sqft. of lettable area.

In the second half of 2021, absorption of Grade A and B office space increased by 60% compared to the first half of 2021 as a result of pent-up demand from 2020. Players in the co-working space and those in financial services took up most of this space with average occupancy rates across commercial buildings at the end of the year improving to 78% from 73% in the 1st half of 2021.

Over the review period, prime commercial office rents increased from US$1.10 to US$1.20 per sqft. per month. However, the sector continues to be a tenant&rsquo;s market due to the prevailing oversupply situation. The retail sector saw a slight increase in prime retail rents in the second half of 2021, from US$ 4.00 per square foot (sq. ft.) per month to US$ 4.10 per sqft. per month.

This was driven by increased demand for prime retail shops that are strategically located in developments. The period under review also saw supermarkets like Naivas, Chandarana, and Carrefour expand their retail footprint across the country while South African retailer Massmart that operates the Game Stores revealed its plan to sell its three stores in Kenya.

The 2nd half of 2021 saw foot and vehicular traffic increase in retail centres, which was attributed to the reopening of the economy, and the holiday season which saw consumers going to malls to take advantage of seasonal retail offers.

The National Construction Authority (NCA) has published a new set of regulations intended to protect building owners from fraudulent building service providers.

NCA's Defect Liability Regulations 2020 introduces a provision to safeguard commercial building owners from concealed structural flaws in a commercial building or fixed installations that may not be detectable during the ordinary patent defect liability period included in contracts.

According to the regulation, every contract for the construction of a commercial building shall prescribe a latent defects liability period shall be a minimum period of six years from completion of the patent defects liability period.

In the regulations, NCA has also extended the patent defect liability period from six to 12-months. This gives owners at least 7-years to recall contractors for faulty works.

It adds that a contractor shall be liable for the rectification of patent defects that become apparent during the latent defects liability period while building professionals are also required to obtain a professional indemnity cover for latent defects that may become apparent during the period.

The regulation has a cost effect on contractors since it requires them to obtain insurance cover for latent defects that may become apparent during the latent defects liability period.

The new regulations also require all owners of commercial buildings to have building insurance at all times to cover structural damages attributable to the owner.

Construction industry players have responded negatively to the new laws saying it is bad for business since it will increase costs for both parties.

The Institute of Construction Project Managers in Kenya chairman Tom Oketch told Business Daily that the new regulations undermined the role of architects as supervisors during the implementation of projects and was bad for business.

He said extending the patent defect liability period from 6 to 12 months will negatively affect cash flows for contractors since contractors will require more funds to facilitate their future operations as most of their income will be withheld to cushion property owners of any eventuality.

Other Kenyans outside the construction industry, however, are of a different opinion. Gilbert Josiah Mungu, a lawyer in Construction Law and Arbitration, told the Standard that the law should be extended to cover all construction contracts except for owner-occupiers.

“The idea that the regulation only applies to commercial buildings does not seem to be informed by commercial necessity geared towards reviving the construction industry and the application of National Construction Act, 2011,” he said

Read; <a style="color: #ff6600;" href="https://estatecloud.co.ke/construction-and-real-estate-key-beneficiaries-of-loan-restructuring-and-relief/">Construction and real estate key beneficiaries of loan restructuring and relief</a>

NCA slaps contractors with a 7-year defect liability period

Commercial property developer, AVIC International Real Estate (Kenya) Ltd has appointed Knight Frank Kenya to oversee leasing of the Global Trade Centre (GTC) Office Tower in Nairobi.

The two firms signed the agreement which gives Knight Frank the responsibility for leasing out prime office space in the 42 &ndash; floor - 184-metre skyscraper&nbsp;situated along Waiyaki Way, Westlands.

In a media release, Knight Frank said GTC has world-class AAA standard offices and sits at a location ideal for Fortune Global 500 companies and renowned global corporations looking to leverage the mixed-use development.

&ldquo;Adding the Global Trade Centre to our portfolio further demonstrates our market leadership in commercial property leasing in the country. GTC is a prime office space in Nairobi in arguably the best office location in the city. Our track record of catering to the best in class commercial office spaces will ensure we bring in a great mix of tenants to occupy this exclusive space,&rdquo; Knight Frank Kenya Managing Director, Ben Woodhams said.

AVIC Kenya Managing Director, Frank Wang said GTC is the first HOPSCA (hotel, office, parking, shopping mall, convention, and apartment) project in Kenya.

&quot;We enlisted the services of world-class designers, consultants and suppliers to work on this outstanding project for the Nairobi market. We are therefore glad to be working with Knight Frank Kenya who are highly regarded in the market and we value their competency in leasing commercial properties,&rdquo; he said. Construction of the 43-storey mixed-use building began in 2015 with the cost of the building estimated to at about Ksh. 40 billion. The facility was expected to be complete by 2020.

Related;&nbsp;<a href="https://estatecloud.co.ke/avic-unveils-the-global-trade-centre-in-nairobi/" style="color: #ff6600;">AVIC unveils the Global Trade Centre in Nairobi</a> &nbsp;

Global Trade Centre (GTC) Tower Appoints Knight Frank As Leasing Agent

Nairobi ​Prime Residential Sale Prices in Marginally Improved in 2nd Half of 2021

Pan- African housing and urban development financier, Shelter Afrique has urged African countries to fast-track urbanization to stimulate economic development across the continent. &nbsp;

Speaking at the 9th Africities Conference held in Kisumu, Kenya between 17-21 May, 2022 and attended by over 11,000 people, including 8,000 official delegates from across Africa and globally, Shelter Afrique&rsquo;s Head of Policy, Research and Partnerships Dr. Muhammad Gambo said urbanization could play a major role in economic and social progress, if well managed.

&ldquo;No country has grown to middle income without industrializing and urbanizing and none has grown to high income without vibrant cities. China, for instance, is widely held up as an example of how urbanization can fuel industrialization and transform living standards. This is why we strongly believe African countries should put more emphasis on effective urbanization if they intend to lift their people out of mass poverty, and doing so, fast,&rdquo; Dr. Gambo said.

A report by the Organization for Economic Co-operation and Development (OECD), Africa&rsquo;s Urbanisation Dynamics 2020: Africapolis, Mapping a News Urban Geography&rdquo;, the pace of urbanization and urban population growth in Africa has changed significantly across the continent generally as well as within its various regions.

According to the report, Africa&rsquo;s urbanization rate will continue to grow among the fastest of the world regions in the coming years as its population grows, which is expected to double by the year 2050.

&ldquo;We urge policymakers across the continent to enact policies that will encourage urban growth modeled around economic development and poverty eradication,&rdquo; Dr. Gambo said.

Dr. Gambo, however, noted that funding urban growth still remains a formidable challenge for many countries, but believes it&rsquo;s achievable. &nbsp;&nbsp;&nbsp;&nbsp;

&ldquo;Shelter Afrique recently completed a debut ₦46 billion (US$110.7 million) Series 1 Fixed Rate Senior Unsecured Bond Issuance in Nigeria&rsquo;s capital market under its ₦200 billion (US$481.3 million) bond issuance programme for housing and urban development in Nigeria. This issue was 60.7% oversubscribed, meaning there is an appetite for such bonds, not only in Nigeria but also in other countries like Kenya, South Africa, Morocco, etc. What African countries need is the know-how to create financial ecosystems that can support the mobilization of municipal and subnational finances for urban infrastructure development,&rdquo; Dr Gambo said.

The African Development Bank estimates that the continent&rsquo;s infrastructure financing needs will be as much as US$170 billion a year by 2025, with an estimated gap of around US$100 billion a year.

Africities is a Pan Africa conference that is convened by the United Cities and Local Governments of Africa&rsquo;s (UCLG-A) and brings together the leadership of cities and sub-national governments and their associations for the advancement of decentralization and local governance aimed at improving the living standards of the citizens.&nbsp;

This year&rsquo;s conference discussed the role of Intermediary Cities of Africa in the Implementation of Agenda 2030 of the United Nations and the African Union Agenda 2063.

Kenya’s development status was upgraded to a lower middle income country by the World Bank in 2015, after the country revised it GDP giving it more room to borrow and invest in infrastructure among other sectors. Real estate development is closely influenced by infrastructure expansion and indeed some of the most likely investment destinations have been those where the government has invested heavily in infrastructure. Investments especially in land, the most basic resource, is at the centre of human development. A report released by HassConsult last week, the Land Price Index, may have given Kenyans more reason to invest in land. Here are some interesting figures from the report.

The Nairobi Satellite- 14 index is representative of land for sale in 14-satellite towns outside Nairobi. This towns include Athi River, Juja, Kiambu, Kiserian, Kitengela, Limuru, Mlolongo, Ngong, Ongata Rongai, Ruaka, Ruiru, Syokimau, Thika and Tigoni. According to the index, an investment in land 9 years ago would have grown seven fold by December of 2015. The average value for land has gone from 2.4 million in December 2007 to 19.0 million in December 2016, states the report. This is an increase of 691.7 per cent in total.

On the supply of advertised land from the 14 satelite towns, much of the supply came from Kitengela 19.1 per cent followed by Ruiru at 16.0 per cent and Juja with 9.2 per cent. These have been new frontiers in real estate in recent years and high on speculation. On the lower end Tigoni supplied just 1.3 per cent and 2.7 per cent from Ruaka.

The report also highlights the land price trends in 18 highest activity suburbs of Nairobi, which are represented by the Nairobi Suburbs- 18 Land Index. According to this index, land in those suburbs has increased in value 6.03 fold since December 2007. The average asking price for lands in these areas has gone from 30 million in Dec\ember 2007 to 185.2 million in December 2016.

Investments in these areas would have yielded 508 per cent returns in 9 years.

The market supply in these from these suburbs mostly came from Karen 28.9 per cent, followed by Lavington and Runda at 13.0 per cent and 10. 1 per cent respectively whereas Gigiri took up 1.2 per cent while Eastleigh and Donholm took 1.3 per cent and 1.4 per cent respectively. The later apparently lagging in supply due to their congested nature. With these figures, investors can easily decide where to go shopping.

As an investment in the 14 satellite towns are likely to have outperformed those in the 18 highest activity suburbs with an index value of 779 compared to the suburbs index value which was 503 or 276 less as per the index. This was double the performance of cattle which had an index value of 123.7, gold at 145.8 and crude oil performing with only 60.1 index value.

From the report, the investment tag line is this; Ksh. 1 million invested at the end of 2007 would have been worth ksh. 7.79 milllion if invested in land in Nairobi Satellite-14 areas, Ksh. 6.03 million if invested in land in Nairobi Suburb-18, Ksh. 2.37 million if invested in property, Ksh. 2.16 million if invested in lands bonds and Ksh. 1.15 million of invested in savings.To invest or not to invest in land is not up to debate.

Investing in Land

The relatively high mortgage rates in Kenya have drawn significant attention over the years with more efforts being applied over the past few years to control or bring the rates down to more affordable levels.

In the latest move, KMRC last week announced its first tranche of loans to financial institutions which it says will enable banks to drive down rates to less than 10 per cent.

This is in addition to the Central Bank of Kenya&#39;s past interventions through a variety of monetary measures that include the reduction of the Central Bank lending rate, (CBR), to 7% from 8.25% in January.

These benefits are supposed to be passed on to borrowers in the form of reduced mortgage rates, with the aim that more customers will take advantage of preferential mortgage rates from banks.

KMRC expects that as a result, banks will see an increase in the number of first-time loan applications and those looking to lock in fixed-rate mortgages.

The goal of these measures is to get more people onto the property ladder and encourage investment, boosting the housing market and aiding recovery in the residential sector.

Banks however have already reported increased mortgage defaults, a representation of the economic hardship being experienced in the country.

As a number of firms struggle and move into losses, we have also seen high levels of unpaid leave and job cuts, with unemployment at 42% in June 2020, up from 35% in March 2020 based on KNBS data.

In a&nbsp;recent analysis of&nbsp;mortgage rates, property firm Knight Frank sees the current market conditions, in addition to the likelihood of a &ldquo;second wave&rdquo; of infections, as an indicator that lenders will be more stringent.

With this likelihood, the <a href="https://www.knightfrank.co.ke/">firm</a> says that lenders will likely be more cautious with their approach to new loans and be more diligent in their review and approval processes. In effect, getting loans even at reduced mortgage rates may still prove a challenge to ordinary Kenyans.&nbsp;

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How to Get Sectional Titles for Property in Kenya

By Estate Cloud - 12 months ago - Kenya

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