Risks of Buying Off-Plan Property Without Clear Sectional Title Clarity

Off-plan property can offer early-bird pricing and high growth potential, but buyers must beware of legal and financial pitfalls when sectional title issues are unclear. In Kenya, the 2020 Sectional Properties Act now requires individual title deeds for each unit and a management corporation for common areas. Without such clarity, buyers face risks like uncertain ownership, resale difficulties, limited financing, title delays, disputes over shared areas, weak governance, and eroding value. This article explains the legal framework in Kenya and details seven key risks of buying off-plan without sectional title clarity, illustrated by local examples. We also provide a practical pre-purchase checklist, due-diligence steps (documents to request, questions to ask, red flags) and a brief case study. By following these guidelines and seeking professional advice, buyers can safeguard their investment. For personalised guidance, Aqasa Properties offers expert advisory through every step of the off-plan purchase process.

Legal Context: The Sectional Properties Act in Kenya

Kenya’s Sectional Properties Act (Cap. 286) fundamentally restructured apartment ownership. Under the new law, each unit gets its own title deed and a proportional share of the common property. Developers must prepare a sectional plan (a survey of units and common areas) approved by the county government, which the Land Registrar then registers. Upon registration, the mother title of the parcel is closed, and separate registers and title documents are opened for each unit. For example, “on payment of the prescribed fee, [the Registrar shall] issue, in respect of each unit…a certificate of title” (or lease). The Act also automatically creates an Owners’ Corporation (Body Corporate) governed by the unit owners under Section 17. This corporation is responsible for managing common areas, collecting service charges, insuring the building, and enforcing by-laws.

Before 2020, many Kenyan apartments were sold on long sub-leases with the developer holding the “mother title”. This old system left buyers with limited rights and made banks reluctant to finance such properties. The Sectional Properties Act replaced that regime with “transparent, bankable” sectional titles. Today, buyers should insist on proper sectional titles – without them, you may not truly own your unit or be able to resell or mortgage it. In fact, Kenyan law now requires conversion of all existing leases to sectional titles. The government even introduced a 2023 MOU streamlining title issuance (e.g. conditional registration) to tackle past delays.

In short: under current law each apartment unit should stand on its own legal title, and a management corporation should be in place. Any off-plan deal that lacks clear sectional planning or titles is exposing the buyer to uncertainty.

Risk 1: Ownership Ambiguity

Without a registered sectional plan and individual title, your legal ownership is unclear. In the worst case, you may end up only with a long-term lease or share certificate tied to a master title, not a standalone title deed. If the developer never subdivides the land, you technically own a percentage of a parcel rather than a defined unit. This ambiguity can trigger legal disputes: for example, if the developer goes bankrupt or the project is sold, off-plan buyers without titles may have no direct claim. (A recent court case in Kenya showed that if a developer’s mortgage is foreclosed, off-plan purchasers’ interests are subordinate to the bank’s security – essentially, their purchase agreements can be voided by higher liens.)

Hypothetical example: You purchase an off-plan flat and pay 50%. Years later, the developer never registers a sectional plan. Now the developer’s lender forecloses on the mother title. Without an individual title, your “ownership” is lost under the bank’s charge.

Risk 2: Resale Difficulty and Lower Value

A direct consequence of ambiguous ownership is difficulty reselling. Apartments with clear sectional title deeds are much easier to market. Conversely, properties without sectional plans are seen as risky: transactions get delayed, buyers back out, and prices suffer. Without a clear title, any prospective buyer or lender will hesitate. In practical terms, you might get far less than market value or endure months of legal work to find a buyer. This weak resale potential means your exit strategy is compromised.

Example: A homeowner tried selling an off-plan apartment on a long lease in Nairobi late 2025. No bank would finance buyers on such a lease, and the only offers came at 20% below price. The sale stalled until the seller agreed to wait for the developer to convert the title under Sectional Properties Act.

Risk 3: Financing Constraints

Many Kenyan banks now require sectional titles for mortgage loans. After the SPA, financial institutions view a registered title as “clean, bankable collateral”. Without a title, you may struggle to get financing at all or face far higher rates and stricter terms. This restriction limits your buyer pool to cash buyers only. Even minor defects in title documentation can lead a bank’s credit committee to reject a loan.

Practical impact: If you plan to lease out the apartment or sell to another mortgaged buyer, a missing sectional title means vastly fewer mortgage-qualified prospects. Buyers should avoid outdated sub-leases and demand proper titles under the Sectional Properties Act.

Risk 4: Title Issuance Delays

Off-plan projects often face delays even after construction when it comes to paperwork. If the developer is slow to finalize the sectional plan and submit it to Lands, you may wait months (or years) after handover for the title deed. Recent parliamentary reports highlight this issue: MPs noted that in Kenya’s Boma Yangu housing scheme, “delays in issuing sectional title deeds” are a significant problem. Often the delay is bureaucratic i.e. mother titles must first be transferred before individual titles can issue.

For a private development, such delays mean your investment is in limbo. You cannot register the unit in your name until the plan is approved, delaying any resale or refinancing. Worse, in the interim the undeveloped common areas may deteriorate.

Hypothetical example: A Nairobi condo completed in 2024 still lacked a sectional title by mid-2025. The developer cited backlog at Lands. Buyers had paid in full but could not legally occupy or rent out their units until title issuance.

Risk 5: Unclear Common Areas and Boundaries

Without a finalized sectional plan, common spaces are undefined. Sectional titles legally hold common property “as tenants in common” (with shares proportional to unit factors). In practice, this defines parking slots, gardens, and corridors. If the plan isn’t in place or lacks detail, boundaries can be disputed. For example, owners may fight over which parking slots belong to which units, or the developer might unilaterally build on what should be common land.

A failure to clarify common areas can also mean homeowners pay unfair service charges or lose access to amenities. For instance, one off-plan buyer we know agreed on including a rooftop garden as a shared space. When the plan was finally registered, the garden was listed as private to only one penthouse unit.

Risk 6: Weak or Non-Existent Management Corporation

The Sectional Properties Act requires formation of an Owners’ Corporation to manage the building. If a developer does not set this up immediately, shared spaces may be managed poorly or by the developer indefinitely. Even after incorporation, a weak board (with developer control or inattentive owners) can fail to enforce by-laws or maintain common areas.

Without a competent management body, service charges can balloon (some owners don’t pay on time), and amenities can run down. This hurts living conditions and the building’s value. A development without by-laws or budgets in place is a red flag – it means owners have little legal recourse if costs skyrocket or facilities degrade.

Risk 7: Long-Term Value Erosion

All the above risks compound into reduced long-term value. As noted, properties without solid sectional titles “often face delays during transactions, lower resale value, and difficulty accessing financing”. Over time, buyers lose confidence. For instance, if a neighboring tower in the same estate has registered titles and yours does not, your block will be perceived as inferior. Even if the building is otherwise well-constructed, uncertainty over ownership and management will cap its market price. In contrast, properly titled apartments tend to appreciate steadily, especially in prime Nairobi locations.

Illustration: Consider two similar units in Parklands. In 2023, one was fully titled, the other was still a mother-title sublease. By 2025 the titled unit resold at a 15% premium over the other, purely due to its secure ownership status and ready bank financing.

Pre-Purchase Checklist

Before signing anything for an off-plan unit, demand documentation and answers:

• Sectional Plan & Title: Has the developer registered a sectional plan? Ask for the registration number. If registration is incomplete, insist on a clear timeline. Check at the Lands Registry that a separate title is ready for your unit.

• Mother Title Closure: Ensure the master (mother) title of the land will be closed. The Sectional Properties Act requires the mother title be surrendered once the sectional plan is registered.

• Owners’ Corporation Status: Confirm whether the Owners’ Corporation has been formed (it should be automatic on title registration). Ask for a copy of its provisional by-laws and service charge budget. Without a registered corporation, shared areas cannot be legally governed.

• Approvals & Compliance: Verify all county building permits and survey approvals. Check that the development has genuine planning approval. Rogue developers sometimes sell units before even getting architectural clearance; a huge red flag.

• Deposits & Financing Terms: Where is your deposit held? Kenyan law does not mandate escrow accounts for off-plan deals (unlike Dubai or Singapore). Ideally, payments should go into a trust/escrow account or construction account with withdrawal tied to milestones. Avoid deals where the developer demands large upfront payments without controls.

• Financing Condition: If you need a mortgage, include a clause that completion of the loan (and/or issuance of the title) is a condition precedent to full payment. This protects you if the title is delayed.

• Developer Track Record: Research the developer’s history. Have their past projects been completed on time and titles delivered? Look for reviews or news of any stalled projects.

• Red Flags: Beware of excuses like “sectional titles aren’t needed until after handover” or “we will convert later.” In Kenya, conversion must happen regardless. Also avoid “unlimited” time frames for title issues or no penalties for delay in the contract.

Due-Diligence Steps and Documents

Engage a knowledgeable conveyancing lawyer (or our advisory team) to help with these steps:

1. Title Search: Conduct a land search for the master parcel to see all charges (mortgages, caveats, liens). If a mortgage appears, the bank may have priority.

2. Sectional Plan Registration: Ask the developer for proof that a surveyor has submitted the sectional plan to Lands. Even if not fully registered yet, an approved plan or application is a must.

3. Verify Ownership: Request a copy of the unit’s title deed or lease certificate, or at least the proposed title number. Confirm the seller’s name matches the contract.

4. Check Owners’ Corp: If titles are issued, request minutes of any initial meeting or list of corporation board members. If not formed, require the developer to convene an AGM within a set period after handover.

5. Review the Sales Contract: Ensure clauses cover Sectional Properties Act obligations: e.g., that the developer will register the plan and transfer title by a certain date. Include a penalty or refund clause if titles aren’t issued by a deadline.

6. Inspect the Property: Visit the site (or have a local agent do so) to confirm what has been built vs what was promised. Off-plan projects often deviate from original renders; make sure the delivered unit matches the contract plan.

7. Ask Tough Questions: For example: “Is there a current management company or board?” “How and when are service charges reviewed?” “Are there any encumbrances on common areas?” A good developer will provide clarity.

Navigating off-plan purchases requires expert guidance. At Aqasa Properties, we help our clients interpret developers’ documents, verify compliance with the Sectional Properties Act , and negotiate safeguards. Our team advises on obtaining and reviewing all relevant documentation – from sectional plans and title registers to Owners’ Corporation reports – long before you sign on the dotted line.

In summary, buying an apartment off-plan without clarity on sectional titles exposes you to legal and financial risks that can undermine your investment. By understanding the Sectional Properties Act rules, insisting on proper documentation, and following the checklist above, you can avoid these pitfalls. Aqasa’s specialists offer end-to-end support: from thorough due diligence and legal review to coordinating with surveyors and Lands officials.

Don’t gamble on title uncertainty. Contact Aqasa Properties today for a private consultation. We will review your off-plan purchase, check all documentation, and ensure your ownership is secure before you commit. Your dream home should be a source of peace, not questions. Let Aqasa make it so.

Sources:

• Sectional Properties Act (Cap. 286)