Although the law outlines the conditions governing ownership and management of a building with multiple owners, not all owners and property managers know their rights and duties, writes NJOKI CHEGE
When David and Linet Karanja* bought an apartment in Westlands five years ago, they thought they would finally have some space of their own and a place to call home. Besides, isn’t every family’s dream to own a home, and a good one for that matter?
But nothing prepared them for what they would be facing today. No, it’s not the noisy neighbours or an insecure neighbourhood; it has everything to do with the management of their apartment block. It is not only inadequate, but also lacks the transparency it should have.
|A flat in Kileleshwa. Most owners of sections of a property do not know their rights and duties.|
“First, there are no records to account for the money we pay in form of service charge. Second, the chairman of our apartment block is not democratic at all; he is uncooperative, imposing, disrespectful and uses bullying leadership tactics. We feel more like tenants, rather than unit owners,” says Linet, a housewife.
This is what happens when people, particularly apartment owners, get wrong the concept of sectional titles.
Sectional titles came into being through the Sectional Properties Act of 1987, an Act of Parliament that provides for the division of buildings into units to be owned by individuals while the ownership of the common areas is shared. This, at a glance, seems a great idea, but at a closer look, is a maze of procedures that has left many a unit owner stranded and trapped.
While the Sectional Properties Act provides for the establishment of a corporation constituting all individual unit owners that is charged with the responsibility of managing the affairs of the property, many owners find themselves sidelined and excluded from this process. Just ask Linet.
“There are many informalities in the way this property is managed. All unit owners are supposed to have equal rights and access to the common areas, such as the parking and swimming pool, but for us, the chairman has two parking slots and my family has only one. It may seem petty, but it is a sign of bigger underlying problems,” says an irate Linet.
Charles Peter Mwangi, a valuer, real estate consultant and chief executive officer of Rubyland Limited, says the corporation is responsible for setting up by-laws in respect to the management of the property, including handling all issues that may occasion conflicts between individual proprietors.
“The Act empowers the corporation to have a board of management appointed by the proprietors to discharge the duties of the corporation on behalf of individual sectional owners. Section 29 sub-section One provides for the appointment of an institutional manager to manage the affairs of the units, including the common areas. The institutional manager, according to sub-section Two of the Act, can either be an accountant, an estate manager or an advocate,” Mwangi says.
Hubs of power
In every sectional property, there are three hubs of power — the corporation that comprises all the units’ owners, the board of management elected by the corporation and the institutional manager elected by the board.
This, therefore, means the welfare of the unit owners is taken care of.
Section 20 of the Act stipulates the duties, powers, operations and expectations of the corporation, which include setting up of by-laws determining the management and running of the properties. This encompasses organising the insurance of all the premises and managing and maintaining the commonly owned properties.
To effectively carry out this task, it is important that the corporation employs a professional managing agent with background knowledge on real estate management, as most emerging issues in such arrangements have everything to do with property management.
Sadly, this is not the case for most apartments, much to the detriment of the unit owners and tenants as well.
“The need to levy service charge to meet service costs associated with the common facilities and manage the same is a fundamental duty of the managing agent,” says Mwangi.
After coming up with a budget that caters for all service costs including cleanliness, common electricity and water, repairs and maintenance, land rates, land rent and management fees among many other responsibilities, depending on the facilities available in the corporation, the institutional manager then divides the cost among all the units. This becomes the service charge or levy payable monthly.
“It is the responsibility of the manager to ensure these costs are managed effectively. No costs related to individual units should be passed to the service charge and the manager should provide statements to the board regarding the managing of service costs. It is recommended to have an independent auditor check the accounts to enhance transparency and accountability,” says Mwangi.
For errant unit owners or tenants who may not be co-operative in paying their service charge, the act allows the corporation to charge interest on the amount not paid at a rate determined by the corporation. The amount may be registered as a charge against the title and may even lead to selling the unit to recover the costs.
Mwangi says there will always be odd characters who will not pay the service charge, want to paint the outside of their units in a different colour, want to park anywhere and fix their TV dishes anywhere.
“This is when the property manager’s skills are put to the test. The actions to take to deter such unit owners include termination of essential services such as water or electricity where the services are registered in the corporation’s name, maintaining an open register at a public place where defaulters are listed and shamed, and writing notices among others. It is more a question of people management,” says Mwangi.
While this arrangement paints a rosy image of the whole situation, there is a flipside to this act; the property manager cannot act in favour of the developers.
Faith Waigwa, a property lawyer, gives another perspective to the Sectional Properties Act. According to her, while the Act is uniquely tailored to meet the purchasers needs and protect them, developers are shunning the sectional arrangement altogether.
She says: “Its uniqueness lays in the fact that it states that whatever land on which the sectional property sits, it must be converted to the Registered Land Act (RLA) regime in order for the sectional titles to be issued.”
When land is converted into the RLA regime, the owners automatically lose freehold, but attain leasehold of 99 years. This process, needless to say, is not easy, since it takes at least two years to complete and it has to go through the commissioner of lands.
Secondly, the Act is commended for protecting property buyers because it requires the developer to open an ‘escro account’ where they put in the deposit for the purchased units.
“The account contains the deposit for the purchased units and it is geared towards protecting the unit buyers. The developer cannot touch this money until they acquire the architect’s certificate of practical completion. This is when the property is a quarter or three quarters done,” says Waigwa.
This sectional properties arrangement does not go down very well with many developers, therefore, most of them are shunning it.
However, in the event that developers opt for this arrangement, the law requires that upon completion of the property and with the sale of sectional units, the developers are supposed to apply to the registrar for the registration of the sectional titles.
Waigwa further clarifies that “titles should be released upon completion of your particular unit and you don’t have to wait until the whole property is done”.
The law further requires that you have a sectional plan that demarcates the size of your particular unit. The developer is required to submit the original title deed to the registrar for issuance of individual sectional titles. The original title register is then closed and a separate register for each individual sectional title is opened.
“The developer is supposed to do this upon the sale of all the sectional titles or in a situation whereupon ownership of all the sectional titles has been determined,” says Mwangi.
Any dealings by the corporation should be deliberated upon and approved by the unit owners. According to Waigwa, the sectional title has all the features and rights like any other title and can be used as security to acquire a loan.
“The corporation can invest as a group, but cannot trade in the stock market,” says Waigwa.