The Sectional Properties Regulations, 2021 (Regulations) were gazetted on 10 December 2021. The Regulations are pursuant to section 59 of the Sectional Properties Act, 2020 (Act) and they set out the forms and procedures for undertaking various processes under the Act. We highlight some of the important issues to note regarding the Regulations below:
Preparation of a sectional plan
Regulation 2 states that an existing structure may be designated a building containing a unit or part of a unit or divided into two or more units by the registration of a sectional plan. The sectional plan shall be prepared by a surveyor and must be in accordance with the Regulations.
Conversion to sectional units
Regulation 18 requires all long-term leases within the following categories to be converted to sectional units:
- where all the units have been transferred to the respective owners and the reversionary interest has been transferred to the management company to hold in trust for the owners as noted on the title; or
- where all the units have been transferred to the respective owners and the reversionary interest is by written agreement intended to be transferred to the management company to hold in trust for the owners; or
- where part of the units has been transferred to the respective owners and the reversionary interest is by written agreement intended to be transferred to the management company to hold in trust for the owners.
The management company or developer shall make the application for conversion. However, where the management or the developer fails to make the application for conversion, any of the unit owners can make the application.
Where the property is charged or otherwise encumbered, the applicants shall deliver the application for conversion to the encumbrancer who shall then submit it to the registrar. The encumbrance shall then be noted in the new certificate of title or lease issued. The failure by a registered proprietor of a parcel, a developer, a management company, or an owner of a unit to submit a sectional plan for registration does not affect any security interest held by the encumbrancer.
Long-term leases exempt from conversion
Regulation 22 provides that long-term leases not falling within the categories set out in Regulation 18 are exempt from the requirement to convert to sectional units. Additionally, the following long-term leases are also exempt:
- where it is expressly provided for by agreement that the reversionary interest belongs to the developer or lessor or management company as legal owner and not as trustee;
- large mixed-use developments and phased developments where it is by agreement provided that the reversion shall be retained by the developer or to be otherwise held by a management company; or
- projects of strategic national importance, substantial transactions, and special economic zones, which by their nature, renders it impractical to relinquish reversionary interest.
Winding up of management companies
Regulation 21 states that where the long-term lease is the subject of conversion, the management company shall transfer all its assets and liabilities to the corporation registered under the Act, within one year from the date of registration of the corporation.
Extension or renewal of lease
Regulation 33 provides that 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.