How Can a Management Company Increase the Service Charge in Nairobi or Kenya?
Under Section 255 of the Companies Act, 2015, members of a company can pass resolutions either as written resolutions or at a meeting of the members. This means that in Nairobi or other parts of Kenya, a Management Company can increase the service charge by passing a special resolution. According to Section 257 of the Companies Act, 2015, this requires a majority vote of at least 75%. Once passed, the Management Company can increase the service charge while ensuring transparency and fairness by following these steps:
Steps to Increase Service Charge in Kenya
- Consultation: The Management Company may consult with professionals to determine the appropriate service charge based on the services provided.
- Justification: A clear justification for the increase should be provided. Factors like inflation, rising maintenance costs, service upgrades, and facility improvements can all be valid reasons for adjusting the service charge.
- Transparency: Maintaining transparency is key. The Management Company should provide property owners with all relevant information, allowing them to ask questions and seek clarifications during the process.
Legal Developments on Service Charges in Kenya
If a Management Company in Nairobi or elsewhere in Kenya neglects its duties or fails to account for service charge funds, property owners and shareholders can seek legal redress in court. It is important to know your legal rights to protect your interests.
How Can a Management Company Recover Service Charges from Defaulters in Kenya?
In cases where some owners refuse to comply with paying service charges, the Management Company has several legal options:
- Issue a Demand Letter: The company can issue a demand letter for payment of all outstanding service charges and any arrears.
- Disconnect Services: The company may disconnect communal services such as water or electricity, deny gate access, and restrict use of facilities like gyms and swimming pools for defaulters.
- Right of Forfeiture: If the owner continues to default, the Management Company can exercise its right of forfeiture, terminate the lease, and take possession of the premises.
- Institute a Civil Suit: The company may file a civil suit in the Commercial Court to recover the unpaid service charges as a debt.
Key Court Cases on Service Charge in Kenya:
- Melisa Awour Odera v Keringet Estates Limited [2021]: The court emphasized the importance of service charges for maintaining communal facilities and stated that service charge payments are essential for the upkeep of the development.
- Debra Limited v Board of Trustees National Social Securities Fund & Another [2017] eKLR: The court ruled that service charge is a debt recoverable through civil action rather than through distress for rent.
Conclusion: Understanding Service Charges in Nairobi and Kenya
Before purchasing or leasing an apartment or office in Nairobi or other parts of Kenya, it is crucial to consult a lawyer to understand the service charge structure, especially if it is not clearly outlined in the lease agreement. If a service charge increase is proposed, seek legal assistance to ensure that the Management Company follows the correct procedures.
For further information or legal assistance on service charge compliance or any other legal issue, feel free to contact us at info@wka.co.ke or visit our website at www.wka.co.ke. You can also reach us at +254 798 03 580, Nairobi Hub: Parklands, Valley View Business Park, 6th Floor, City Park Drive, Off Limuru Road.