Kanyi & 3 others v Nextgen Office Suites Limited & 4 others
The bottom line
#Kenyan developers cannot delay giving unit owners their management company shares until every unit is sold — the law kicks in much sooner.
What this practically means
#Executive summary
#Key legal issues
#Whether the suit is a representative suit requiring compliance with Order 1 Rule 8
The suit is not a representative suit; the Plaintiffs filed it as individual purchasers of units, and the mere fact that orders may affect other purchasers does not convert it into a representative suit.
The court read the Plaint and found the Plaintiffs sued in their own capacity as purchasers of units in Nextgen Commercial Center. Although their interests may be similar to other purchasers, the suit does not meet the requirements of a representative suit under Order 1 of the Civil Procedure Rules, and the potential effect of orders on other purchasers cannot change its character.
Whether the Plaintiffs' rights under Regulation 18 of the Sectional Properties Regulations 2021 had crystallised
The rights had crystallised because the 1st Defendant admitted an intention to transfer the reversionary interest to Nextgen Management Limited, bringing the premises within Regulation 18(c).
Regulation 18(c) applies where part of the units have been transferred and the reversionary interest is by written agreement intended to be transferred to the management company to hold in trust for owners. The 1st Defendant's own affidavit admitted that all management companies would be given one share in Nextgen Management Limited to which reversionary interest would be transferred, satisfying Regulation 18(c) once a unit is sold.
Whether the suit property is exempt as a large mixed-use development under Regulation 22
Regulation 22 does not apply because the commercial center is a distinct, well-delineated development with its own management company, albeit sharing one mother title with the residential apartments.
The 1st Defendant's own affidavit disclosed separate management companies for the different developments: Ruby Tower and Sapphire Tower for residential blocks and Nextgen Mall Management Company for the commercial centre. The Plaintiffs' interest is confined to the commercial center, which is distinct from the apartments, so the mixed-use exemption under Regulation 22 is inapplicable.
Whether the developer can defer issuing share certificates until all leases are registered
No; the Act obliges the developer to comply once units are sold, and contractual terms deferring compliance are contrary to the spirit and letter of the Act.
Section 27 requires the developer to convene a corporation meeting within ninety days of 50% of units being sold or 180 days of the first sale, whichever is sooner. The court held that it is not for the developer to decide how many units to sell before complying with the Act, and that the standard contract term conditioning share allotment on registration of all leases was unlawful.
Whether conservatory orders (leave to incorporate a corporation and inhibition) should issue
Yes; the 1st Defendant has prima facie failed to comply with the Sectional Properties Act and should be inhibited from dealing with the premises other than to establish the Corporation and convert leases.
The court found that until a Corporation is registered with all unit owners as shareholders, conversion of the property into sectional units cannot commence. The 1st Defendant's prima facie non-compliance threatened the substratum of the suit, justifying leave to incorporate a corporation and an inhibition preserving the property pending full determination.
Legal principles established
#- Membership of a sectional management corporation is not dependent on the developer selling all units; owners become shareholders the moment their leases are registered.
- A developer cannot, by contract, defer compliance with the Sectional Properties Act by conditioning share allotment on registration of all leases.
- Where details of unit purchasers are within the developer's knowledge and it fails to disclose them, the court presumes all units have been sold.
Court orders
#- 1.Pending the hearing and determination of the suit, the Plaintiffs granted leave to incorporate a Corporation of Nextgen Commercial Center on L.R. No. 209/18648, Nairobi, with membership drawn from all owners/purchasers of units, to manage common areas and common interests in compliance with the Sectional Properties Act, 2020
- 2.Other than establishing the Management Company/Corporation and conversion of all leases into sectional units, the 1st Defendant inhibited from dealing with Nextgen Commercial Center on L.R. No. 209/18648 pending hearing and determination of the suit
- 3.The 1st Defendant to pay the costs of the application
- Jurisdiction invoked
- Original jurisdiction of the Environment and Land Court over land and developments on land (interlocutory application in a pending suit)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kanyi & 3 others v Nextgen Office Suites Limited & 4 others", Case Analysis (2023). Environment & Land Case E063 of 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/16434/eng@2023-03-16
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.