Understanding The Corporation Under The Sectional Properties Act

As we conclude our five-part series on sectional titles, we turn our attention to one of the significant institutional features of the new legal framework, the corporation established under the Sectional Properties Act (Cap 286) ("SPA") and the Sectional Properties Regulations, 2021 ("Regulations"). The corporation is at the heart of sectional developments, replacing the former "management corporations" that operated under the repealed regime. In this final article, we explore what the corporation is, how it functions and how it differs from its predecessor.

What is the corporation?

A corporation is created automatically by law upon the registration of a sectional plan and is provided for under the SPA with clear duties, powers and owner protections. The corporation serves as the legal body representing all unit owners in a sectional development and its core mandate is to control, manage and administer the common property; insure the building and improvements; pay premiums and manage administrative funds; regulate the use and enjoyment of common areas; enforce by-laws; oversee transfers and dealings affecting units and common property; and resolve internal disputes related to by-law contraventions.

The Companies Act (Cap 486) does not apply to the corporation. Instead, the corporation's powers and limitations are set out in the SPA and the by‑laws prescribed by the regulations upon first registration, which owners may later amend by special resolution.

The corporation enjoys perpetual succession, meaning that it continues to exist despite changes in ownership of the units. It can sue and be sued in its own name, own property, enter into contracts, and carry out transactions necessary for managing the development. This grants the corporation a distinct identity from individual owners, protecting them from personal liability for its obligations, save for their proportionate contributions.

Membership of the corporation is not optional and consists of the registered owners of units. The corporation's register of members mirrors the unit register and can be updated from time to time as transfers occurs. Because membership is tied to registered unit ownership rather than shareholding, there is no concept of share capital or share certificates; a purchaser's title to the unit—together with the proportionate share in the common property endorsed on that title—is the legal basis for membership.

Prior to the SPA as set out in article 1 of the series, developers typically created a management company under the Companies Act, often a company limited by guarantee or by shares, to hold the reversion or manage common parts. Buyers received a long-term sublease to their unit and a share or membership in the company. The company's legal personality, governance, filings and director duties all flowed from the Companies Act framework, not from a specialised real estate statute.

Comparison and main differences between the corporation and management companies

Raising and recovery of money

Under the SPA, the corporation must keep a fund for administrative expenses and insurance and may levy contributions in line with unit factors. If contributions go unpaid, the corporation may recover the debt in court and, critically, may register a caution against the title of the defaulting unit, which operates as a statutory charge until discharged on payment. By‑laws may also provide for interest on arrears.

A management company relies on the lease to obligate payment, typically enforcing through debt actions, forfeiture provisions, or injunctive relief. It does not enjoy the SPA's statutory charge mechanism, so recovery is only as robust as the drafting of the lease covenant and the appetite of courts to enforce it in the circumstances.

Insurance, risk and regulatory compliance

The SPA imposes a clear duty to insure and to keep common property in good repair. It also mandates information rights for owners and chargees, annual and general meetings, and an internal dispute resolution committee with onward appeal to the Environment and Land Court. These features professionalise oversight and reduce disputes over access to budgets, minutes and policies.

Management companies insure and maintain when and as their articles and leases require. They must file annual returns and comply with Companies Act obligations, and they carry the perennial risks of corporate housekeeping: director changes not filed, failure to hold meetings, or even strike‑off. None of that dissolves the estate, of course, but it can create avoidable friction and legal workarounds just to keep the lights on.

Ownership, voting and everyday governance

With sectional titles, each unit is a separate title; the mother title is closed and a register is opened for each unit. Owners hold the common property as tenants in common, proportionate to unit factors. Voting rights follow those unit factors, and secured lenders may exercise votes in defined cases. The corporation's board manages within the SPA and by‑law framework, with prescribed meeting and record‑keeping norms.

In management companies, owners hold a lease and a share or membership in the management company. Voting is typically "one share, one vote" or as bespoke in the articles, which can create misalignment between who pays for what and who controls decisions. Transferring a unit may require a parallel transfer of a share or a new guaranteed membership, which adds additional steps to the transfer of the property.

Rates, tax and public law interfaces

Under the SPA, each unit and its share of common property is assessed for rates and ground rent separately and the corporation itself is not liable for payment of rates on the parcel. Dispositions affecting common property require a unanimous resolution and must be registered against the sectional plan, protecting the shared amenities of the estate.

Under the previous management companies, the mother title attracts rates and rent (if applicable) centrally, with cost-sharing handled through service charge, and major dealings depend on whatever safeguards sat in the company's articles and leases.

Transition from management company to corporation

Where an estate converts to sectional titles, the corporation steps into management and, in practice, the management company's assets and liabilities are transferred to the corporation and the company is then wound up. The SPA and Regulations govern conversion of legacy long‑term sub‑leases (that were intended to confer ownership) into sectional titles. See our article 4 in the series for the conversion process.

Conclusion

The introduction of the corporation under the SPA is a positive step forward in the governance of multi-unit developments. The corporation replaces and streamlines functions historically undertaken by management companies incorporated. It transforms sectional ownership in Kenya from a loosely coordinated arrangement into a well defined system anchored in law and collective responsibility.

As we close out this series on sectional titles, we reiterate that the sectional titles regime offers clarity of ownership, a fit‑for‑purpose governance body and predictable rules and regulations. It asks more of developers and owners in terms of record‑keeping, and participation, but it gives a safer, better‑run and a more bankable asset to the unit owners.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.