What to consider when buying a house

As much as apartments and townhouses have become a property of choice for property buyers, there are issues regarding aspects of legal documents that purchasers should be aware of. Here are some important ones.

Property description

This generally includes apartment number, land reference number, as well as a description of the apartment and other amenities for example, swimming pool, club house, lifts, pavements, staircases and so on.

The term

Typically, this is a bit less than that of the head title. For example, if the term of the head title is 99 years from January 1, 1990, the term on the lease could be 99 years from the January 1, 1990 less the last seven days thereof. The last seven days constitute what is commonly referred to as reversionary interest.

This is transferred by the head lessor to the management company (to which every purchaser/ lessee is a shareholder) to enable the management company renew the lease on expiry of the term on the head title.

Management Company

Formed by the head-lessor, a management companys major role is to manage the common areas such as staircases, pavements, driveways, swimming pool, gym, clubhouse and elevators, among others. The company will hold the reversionary interest for ease of renewal of lease when the term on the head lease from the Government expires.

Each lessee will be required to subscribe to the management company and should receive a share certificate for each unit owned. If they later desire to sell their apartment/townhouse, both the lease and share certificate must be transferred to the new purchaser.

Forms of title to an apartment / townhouse / maisonette

For townhouses and maisonettes, sub- division can be done so that each house has its own title. However, this is generally a lengthy, costly and time-consuming process, which most developers would rather avoid. This is not applicable to apartments.

The second option is sectional titles under the Sectional Titles Act (No 21 of 1987). This confers title to owners of sectional properties such as apartments. The purchaser gets a Certificate of Title plus a share in the management company.

The third option for developers is the use of long- term sub- leases, which is a much faster process. This applies to apartments, maisonettes and townhouses. The developer/landowner, being the head lessor from the Government of Kenya creates sub leases (for a term slightly shorter than that on the head title), which set out the terms upon which the property is to be owned by the purchasers. Sub- leases, when registered and together with shares in the management company, are good titles to the apartments.

Lessees must pay monthly or quarterly service charge for the services of managing the common areas. The amount is initially set by the lessor but can be later varied by the lessees as management company members.

Land Rent

This, where payable, is apportioned amongst the lessees and paid annually by the management company on behalf of its members.

Due Diligence

As in any other property transaction, the purchasers lawyer must undertake due diligence to establish that the ownership and validity of title, encumbrances on title, authority of counterparty to undertake the transaction and all necessary approvals (especially for a new development) have been undertaken.

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