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Owning Apartment in Kenya Through Sectional Title

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As population increases more and more developments will be based on sectional titles. Purchasers and investors in property market will need to understand the laws of sectional titles or work with law firms and professional competent on this. The Sectional Properties Act carries the laws guiding the Developer and Purchaser. Article 46 in Act establishes what the Developer should give to Purchaser and denies the developer the right to sell if all documents are not delivered by stating “A developer shall not sell or agree to sell a unit or proposed unit unless he has delivered to a purchaser…” Article 47 of Act states what should be in the Purchase Agreement. Article 48 states how the deposit by Purchaser shall be handled.

Sectional Properties Act Laws a Purchaser read 

46. (1) A developer shall not sell or agree to sell a unit or proposed unit unless he has delivered to a purchaser a copy of -

(a) the purchase agreement;

(b) the by-laws or proposed by-laws;

(c) any management agreement or proposed management agreement;

(d) any recreational agreement or proposed recreational agreement;

(e) the lease of the parcel, if the parcel on which the unit is located is held under a lease and the certificate of sectional property in respect of the unit or proposed unit which has been or will be issued under section 5 (1) (c);

(f) any charge that affects or proposed charge that will affect the title to the unit or proposed unit or, in respect of that charge or proposed charge a notice prescribed under subsection (2); and

(g) the sectional plan or proposed sectional plan.

(2) A developer shall deliver to the purchaser in respect of a charge or proposed charge a written notice stating – 

(a) the maximum principal amount available under the charge;

(b) the maximum monthly payment that may be paid under the charge; 

(c) the amortization period;

(d) the term;

(e) the interest rate or the formula, if any, for determining the interest rate; and

(f) the prepayment privileges, if any. 

(3) Subject to subsection (4), a purchaser of a unit under this section may, without incurring any liability for doing so, rescind the purchase agreement within ten days from the date the purchase agreement was executed by the parties to it.

(4) A purchaser may not rescind the purchase agreement under subsection (3) if all the documents required to be delivered to the purchaser under subsection (2) have been delivered to the purchaser not less than ten days prior to the execution of the purchase agreement by the parties to it.

(5) If a purchase agreement is rescinded under subsection (3) the developer shall, within ten days from his receipt of a written notice by the purchaser of the rescission, return to the purchaser all of the money paid in respect of the purchase of the unit.

 

47. Every developer who enters into a purchase agreement shall include in the purchase agreement the following -

(a) a notification that is at lease as prominent as the rest of the contents of the purchase agreement and that is printed in red ink on the outside front cover or on the first page of the purchase agreement stating as follows -

“The purchaser may, without incurring any liability for doing so, rescind this agreement within ten days of its execution by the parties to it unless all of the documents required to be delivered to the purchaser under section 46 of the Sectional Properties Act, 1987 have been delivered to the purchaser not less than ten days prior to the execution of this agreement by the parties to it.”

(b) a description, drawing or photograph showing-

(i) the interior finishing of all major improvements to the common property located within a building;

(ii) the recreational facilities, equipment and other amenities to be used by the person residing in the residential units;

(iii) the equipment to be used for the maintenance of the common property;

(iv) the location of roadways, walkway, fences, paing areas and recreational facilities;

(v) the landscaping; and

(vi) the exterior finishing of the building as it will exist when the developer has fulfilled his obligations under the purchase agreements;

(c) the amount or estimated amount of the monthly unit contributions in respect of a residential unit; and

(d) the unit factor of the unit and the basis of unit factor apportionment for all units comprised in the sectional plan.

 

48. (1) A developer or a person acting on his behalf shall hold in trust all the money paid by a purchaser under a purchase agreement other than rents, security deposits or mortgage advances; and -

(a) if the improvements to the unit and the common property are substantially completed, the money may be paid to the developer on delivery of the title documents to the purchaser; or

(b) if the improvements to the unit are substantially completed but the improvements to the common property are not substantially completed -

(i) not more than fifty percent of that money less the interest earned on it may be paid to the developer on delivery of the title document to the purchaser; and

(ii) on the improvements to the common property being substantially completed, the balance of that money and all the interest earned on the total amount held in trust in respect of that purchase agreement may be paid to the developer.

(2) The developer or a person acting on his behalf who receives money that is to be held in trust under subsection (1) shall forthwith deposit the money into an interest earning trust account maintained in a bank or financial institution licensed under the Banking Act.

(3) If money is being held in trust under subsection (1) and the purchaser of the unit takes possession of or occupies the unit prior to receiving the title document, the interest earned on that money from the day the purchaser takes possession or occupies the unit to the day he receives the title document shall be applied against the purchase price of the unit.

(4) Subject to section (3), the developer is entitled to the interest earned on money held in trust under this section.

 

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