Introduction
The face of urban living in Kenya has changed. An increasing number of Kenyans now own property within multi-unit buildings that share land, walls, services and amenities. The legal regime that governs how such property is owned, used and managed has until recently, struggled to keep pace.
The Sectional Properties Act, 2020 (Act No. 21 of 2020, now Cap. 286 of the Laws of Kenya) (“the Act”), which repealed the Sectional Properties Act of 1987, together with the Sectional Properties Regulations, 2021, (“the Regulations”) introduced a far more coherent statutory framework. At the centre of this framework is the management corporation: a statutory body established automatically on the registration of a sectional plan, in which every unit owner is a member and which is charged with the control, management and administration of the common property.
This article unpacks what management corporations are, how they sit alongside the rights of individual unit owners, the legal disputes that have begun to shape their operation, the recurring problems encountered in practice and the steps developers, purchasers and lenders should take to protect their interests under the new regime.
Conceptual Foundation: Sectional Ownership Explained
Sectional ownership is a hybrid form of property holding. When a development is sectionalised, three legal relationships come into existence at once for every unit owner.
The first is exclusive ownership of the unit itself. Section 3 of the Act defines a unit as “a space that is situated within a building and described in a sectional plan by reference to floors, walls and ceilings within the building and shall include its proportionate share in the common property”. The owner holds a freehold or leasehold title to that unit, registered under the Land Registration Act, 2012, in the same way as any other titled property in Kenya.
The second is shared ownership of common property. This typically includes the underlying land, structural elements, lifts, staircases, parking areas, gardens, swimming pools, gymnasiums, perimeter walls and access roads.
The third is membership of the management corporation. Under Section 17 of the Act, the corporation is incorporated automatically on registration of the sectional plan, with the prescribed name “The Owners, Sectional Plan No. _______”. It has perpetual succession and a common seal and the Companies Act, 2015 does not apply to it. Every owner is a member by virtue of ownership, with voting rights determined by the unit factor.
This structure differs from traditional land ownership in three respects. A purchaser does not own a discrete piece of land, but a defined three-dimensional space and a proportionate share in the land and shared facilities. They cannot deal with their unit in isolation from the corporate framework that governs the development. They are bound, simply by becoming an owner, by a set of by-laws designed to regulate communal living. The corporation acts on behalf of all owners collectively to enforce the by-laws, collect service charges, maintain common property and represent owners in dealings with third parties.
The Legal Framework
Establishment, Registration and Conversion
Registration of a sectional plan is the trigger that brings the management corporation into existence. The plan, prepared by a licensed surveyor from a building plan approved by the relevant county government and authenticated by the Survey of Kenya, must be accompanied by an application for incorporation of the corporation and a list of unit owners. On registration, the register of the parent parcel is closed and a separate register opened for each unit, with a certificate of title or certificate of lease issued for each, reflecting the unit factor and share in the common property.
Section 13(2), on enactment, required that existing long-term sub-leases intended to confer ownership of apartments, flats, maisonettes, town houses or offices to be reviewed and converted to sectional titles within two years of the commencement of the Act. The original deadline of 28 December 2022 has been the subject of repeated administrative extensions and conversion remains an ongoing exercise. Failure to convert exposes the parcel to a registrar’s restriction that prevents further dealings and unit owners holding unconverted titles continue to face challenges with refinancing, transfers and lender appetite.
Rights, Obligations and Governance
A unit owner may deal with the unit independently, enjoy the common property in common with other owners, participate in the affairs of the corporation and receive disclosure from the developer at the point of sale of all material information about the unit. The corresponding obligations include payment of service charges and contributions to the reserve fund, compliance with the by-laws and disclosure to the corporation of tenancy arrangements where the unit is rented out.
Section 26 of the Act establishes the board of management, constituted in the manner provided by the by-laws. Section 27 obliges the developer, within ninety days of the sale of fifty per cent of the units or one hundred and eighty days from the sale of the first unit (whichever is sooner), to convene a meeting at which a board is elected. Annual general meetings (AGMs) must be convened within fifteen months of the previous AGM. The model by-laws prescribed in the Regulations apply on first registration and subsequent amendments require a special resolution. Voting rights are tied to the unit factor, ensuring an owner’s influence is proportionate to their share in the common property.
Common Property, Service Charges and Internal Dispute Resolution
The corporation is required to keep common property in good repair, insure the buildings against fire (unless owners unanimously resolve otherwise), comply with notices from public bodies, control and administer common property and enforce the by-laws. To fund these duties, it levies contributions on owners, recoverable as a debt and capable of being secured by registration of a caution against the title of any defaulting owner. The corporation has broad incidental powers, save that the corporation cannot carry on trading activities. Disposition of common property requires a unanimous resolution.
The corporation constitutes an Internal Dispute Resolution Committee of three to five members, with determinations enforceable through and appealable to, the Environment and Land Court. This is an improvement on the 1987 regime, where disputes were referred to the Business Premises Rent Tribunal and remedies were narrow.
Drafting Gaps
The exemption in Regulation 22 for “large mixed-use developments”, “substantial transactions” and “projects of strategic national importance” is undefined and unquantified. Enforcement of Committee determinations still requires recourse to the Environment and Land Court, undermining the speed advantages of internal dispute resolution.
Case Law Analysis
Although the 2020 Act is still relatively young, the courts are already shaping its key concepts.
Skyview Properties Limited & another v Njoroge & 4 others (Environment & Land Case 605 of 2012) [2025] KEELC 568 (KLR) (13 February 2025)
The plaintiffs were the developers of a residential estate of ten apartments, with a management company incorporated to hold the reversionary interest (a future legal right to possess or own property after a specified interest held by another party ends) on behalf of the lessees. Years after selling sixteen units, the developers had retained four units and refused to transfer the reversionary interest, later seeking to assert proprietary control over portions of the development. The Environment and Land Court rejected the developer’s position, holding that where leases plainly contemplate transfer of the reversionary interest to the management entity once units are sold, a developer cannot indefinitely retain that interest as a means of preserving control. The court endorsed Munyao J’s earlier observation in Rehman v Luhar [2022] KEELC 13714 (KLR) that the 1987 statute had allowed sectional units to be sold via subleases tied to a developer-controlled management company, with little provision for how common areas would be held; the 2020 Act was enacted to address precisely this circumvention. The principle is that the management corporation is the rightful custodian of common property and developers cannot withhold the reversionary interest, refuse to transition the management structure or exploit common areas at the expense of unit owners.
Lagat & 20 others (Suing as the Registered Unit owners of Apartments at the development known as Viraj Garden Apartments) v Transeshvi Limited & 5 others (Environment & Land Case E247 of 2022) [2023] KEELC 51 (KLR) (18 January 2023) (Ruling)
The plaintiffs, unit owners in an apartment complex, sought injunctive relief (court ordered mandate) against a management company that had allegedly excluded them from corporation affairs, failed to convene AGMs, refused to provide audited accounts and levied service charges without disclosure. The court granted temporary and mandatory injunctions restraining the disconnection of essential services, directed reconnection of water at the defendants’ expense and ordered the convening of an AGM. It also required the unit owners to continue paying service charge to a designated party pending the AGM, recognising that maintenance of common services could not be held hostage to the dispute. The case illustrates several issues, including utility disconnections used coercively, opaque financial reporting and failure to convene statutory meetings. It goes to show that courts will intervene to enforce participatory rights and to compel compliance with Section 27 of the Act.
Nextgen Mall Management Company Limited & another v Kimani & 14 others (Environment & Land Case E002 of 2023) [2023] KEELC 21778 (KLR) (21 November 2023) (Ruling)
The Nextgen Mall litigation, in which a body presenting itself as the management company brought proceedings against a unit owners’ association over the collection of service charge, illustrates the confusion that arises where the transition from a 1987-era management company to a Section 17 of the Act corporation has not been properly effected. The court was confronted with parallel claims of legitimacy: the developer-aligned plaintiff asserting it was the corporation contemplated by section 20 and the owners’ association maintaining that the plaintiff was no more than a developer-controlled vehicle masquerading as a corporation. The underlying lesson is that where the developer fails to transition control to a properly constituted corporation, disputes over governance and service charges become difficult, costly and protracted.
Recurring Issues in Practice
Five issues dominate the dockets of the Environment and Land Court and the practical experience of property managers and conveyancing advocates:
- Developer control versus transition to unit owners: Despite the timelines in Section 27 of the Act, developers regularly delay the first meeting, retain unsold units to maintain voting blocs and resist transferring the reversionary interest. The longer this transition is delayed, the deeper the financial and governance entanglement becomes.
- Mismanagement of corporations, where boards are not properly constituted, AGMs are not convened and audited accounts are not provided, opportunities for misappropriation of service charge funds proliferate.
- Service charge and sinking fund disputes, where owners challenge the quantum of contributions, the absence of supporting receipts and the use of funds for purposes outside the corporation’s mandate.
- Encroachment or misuse of common property: Unauthorised construction of additional units, conversion of common areas into private storage or commercial space and the leasing of parking bays without owner consent.
- Weak enforcement of by-laws and quorum challenges: Many corporations struggle to achieve the special or unanimous resolutions required for major decisions, particularly where significant numbers of units are owned by absentee landlords or remain in developer hands.
Practical Impact on Market Participants
Developers. The Act creates clear compliance obligations such as prescribed disclosures to purchasers before sale (including details of any charge over the parent title and prepayment terms), convening the first general meeting within statutory timelines and transferring the reversionary interest where units have been sold. Failure exposes developers to litigation, reputational damage in a market that increasingly values governance and the risk of being drawn into disputes from which the original sale was supposed to provide a clean exit.
Purchasers and unit owners. Purchasers acquire stronger protection than under the 1987 regime: a unit-based title independent of the developer, voting rights tied to the unit factor and access to internal dispute resolution. They also assume continuing financial obligations: monthly service charges, contributions to reserve funds and shared liability for major repairs. They must accept restrictions on the use of their units imposed by the by-laws and remain exposed to the consequences of poor governance, including service interruptions, deteriorating common property and eroding asset values.
Lenders and investors. Lenders’ financing sectional units must look beyond the title to the unit. The state of governance of the corporation, the adequacy of insurance, the level of service charge arrears and the condition of common property all bear on the value of the security and the likelihood of recovery. A well-run corporation enhances marketability; a poorly run one impairs it. Prudent lenders increasingly conduct corporation-level due diligence alongside their standard charge perfection checks.
Implementation Challenges
Several systemic challenges remain prevalent. Conversion from long-term leases to sectional titles is administratively burdensome and dependent on the cooperation of multiple parties. Awareness among purchasers, particularly first-time buyers, is uneven. Governance culture within many corporations is weak, with low AGM attendance and limited financial literacy among elected board members. Internal Dispute Resolution Committees often lack capacity and ultimate enforcement still depends on the Environment and Land Court, which is itself burdened.
The Way Forward: Practical Guidance
For developers, full compliance from the outset is the strongest position. Sectional plans should be prepared and registered concurrently with the sale of the first unit, the first general meeting convened within statutory timelines, by-laws tailored to the development and the reversionary interest transferred to the corporation as soon as sales are complete. Where Regulation 22 on long-term leases exempt from conversion are relied on, the contractual basis should be clearly documented in the sale agreements.
For purchasers, due diligence should include verification that the development has been properly sectionalised or is on a credible conversion pathway, examination of the corporation’s records, audited accounts and minutes of recent meetings, review of the by-laws and any restrictions on the use of the unit, confirmation of service charge arrears across the development and clear understanding of the unit factor allocated. Sale agreements should require the developer to procure, as a condition of completion, the proper registration of the corporation and transfer of any reversionary interest.
For management corporations, governance discipline matters. AGMs should be convened on time, financial statements audited and circulated, board members trained in their statutory duties, by-laws reviewed and updated and the Internal Dispute Resolution Committee constituted in advance of any dispute. Adoption of digital tools for voting, communications and record-keeping (which the Act expressly permits) significantly enhances transparency and participation.
For lenders, internal credit policies should incorporate corporation-level due diligence into the underwriting process for sectional unit charges, with particular attention to insurance, arrears and the state of common property.
Conclusion
The Sectional Properties Act, 2020 represents a genuine attempt to align Kenya’s law of multi-unit property ownership with the realities of urban living and modern conveyancing. By placing the management corporation at the centre of the governance of common property, by giving unit owners independent and bankable titles and by integrating sectional ownership with the broader land registration regime, the Act has materially strengthened the position of every market participant compared with the 1987 statute it replaced.
But statute alone does not deliver outcomes. Case law confirms that disputes over the transition from developer control, the management of common property, the levying of service charges and the convening of meetings will continue to occupy the courts. Stakeholders who treat the management corporation as a meaningful governance institution rather than a paper formality, who comply with their obligations promptly and transparently and who take the time to understand their rights will reap the benefits of the new regime. Those who do not will find that communal ownership, without communal discipline, can be an expensive lesson.
