Legal_Landscape

A commentary on law and current affairs

Emergency Action Plan for fire in high rise buildings

The fire that broke out on New Year’s Eve at the 60 storey Dubai mixed development high rise called ‘Address Downtown’, is an eye opener for Developers and Management Corporations of condominium properties in Sri Lanka to pay more attention towards the risk of fire and the need to have an emergency action plan for such unexpected situations.

Most developers and managers of high rise buildings in Sri Lanka pay little attention to risks of fire and there are few ( if at all) that have emergency action plans.

I have attached for the information of readers a leaflet issued by the National Fire Protection Association of USA, recommending steps that can be taken in office high rise buildings. These can be used as guidelines by Developers, Managers and occupants of local high rise buildings to develop similar emergency action plans.

Don’t let your dreams go up in smoke – practice fire safety.”  ~Author Unknown

EmergencyActionPlanHighRise

 

January 1, 2016 Posted by | Condominium properties Sri Lanka, Uncategorized | , , , , | 1 Comment

Management of Condominium Properties

Living in a condominium property is an entirely different experience, unlike living in a house in one’s divided and defined block of land. A condominium dweller is sharing walls, ceiling and floor with his or her immediate neighbors as well as the common areas with all the other unit owners living in the same condominium property. Therefore, to maintain harmony and safeguard the rights of each and every unit owner, it is necessary to have a set of rules, otherwise known as “by-laws” binding all unit owners within the sub-divided building. There are few statutory by-laws laid down in the 2nd Schedule of the Apartment Ownership Act No. 45 of 1982, which are, by no means adequate to address the numerous problems that would come up within a ‘mini city’ occupied by several house owners and their families.
Some of the issues that impact on ownership and consequently on the value of a condominium property can be broadly categorized as follows –

1. The absence of proper rules or by-laws for management, maintenance and administration of the condominium property.

2. No Sinking Fund or lack of funds for major capital expenditure for maintenance and renovations of the building.

3. Significant number of unit owners defaulting on service charges owing to the Management Corporation.

4. Disinterested Council Members or failure in the performance of their duties leading to unresolved disputes among unit owners and between unit owners and the Management Corporation.

5. Pending court cases against the Council and its Management Corporation leading to an escalation in costs which are eventually borne by unit owners as higher service charges.

6. Construction defects in a new building not addressed by the Developer and not covered by a limited warranty.

7. Inadequate insurance cover for the building or failure to maintain insurance for fire on the reinstatement value of the building, as required by the Act.

In the real estate market it is often heard that “location” is a prerequisite for determining the value of a property, based not only on the geographical location but also on the proximity to schools, supermarkets, main roads and other conveniences. Though this is true even in the case of condominium properties which attract a higher price based on location, the above mentioned factors can, anyhow, have a significant impact on the value of a condominium property in the long run.

SINKING FUND
A building, unless kept well maintained, its value will depreciate as time goes by. This is why, it is essential for Management Corporations to have adequate cash in the Sinking Fund to attend to renovations and major repairs, which will become necessary when the building starts to age. The importance of the Sinking Fund is stressed in Sec. 33(5) of Act No. 39 of 2003 by making it mandatory for the management corporation to open a separate account to ensure that the funds so deposited shall not be withdrawn without a special resolution or without an ordinary resolution with the concurrence of the Condominium Management Authority.

The Sinking Fund and the healthy financial position of a condominium property will be a significant factor to determine whether the building can maintain its property value in the long term. Similarly, if there are frequent arrears in the collection of service charges with several unit owners defaulting, not only will it impact on major renovations but also hinder the day to day maintenance of the building. Poorly maintained buildings causing an adverse impact on the property value, will consequently depress the value of the condominium unit taken as collateral by financial institutions.

INEFFICIENT COUNCIL AND ARBITRARY CONTROL BY DEVELOPERS
A lethargic, disinterested or weak Council or a Council consisting of members acting for their personal interest is, in most cases, the reason for financial problems in condominium properties. Sometimes, the Developer retains control over the Council with the ulterior motive of making money from the condominium property by appointing himself as the Managing Agent. If there is no transparency in such management and no proper accounts of expenses incurred, such a situation will be just as bad as having unit owners defaulting on their dues to the Management Fund.

Many of the problems that are currently faced by condominium dwellers arise over the management of the condominium property, in other words, “management of common elements”. This is an area which has not been adequately addressed in the Apartment Ownership Act leaving room for Developers to continue to operate the building as if the ownership of common elements are vested in them.

Some of the common problems faced by unit owners due to Developers continuing to control and manage the common elements –
i. Use of common areas for their private purposes, (i.e. as office space, storage space or in certain instances, to construct apartments carved out of common areas in the basement)

ii. Use of parking space for their own private commercial operations.

iii. Collecting service charge/maintenance fees from owners of other units but not in respect of the units which are unsold and remains the property of the Developer.

iv. Failure to release to unit owners a budget depicting the proposed income and expenditure relating to the management of the common elements and the Service charge per share value based on such budget. It is not uncommon for Developers to decide on the Service Charge according to their preferences and to credit such sums collected to their own bank accounts, whereas the Act specifically refers to the need to create a Management Fund for day to day operations and a Sinking Fund for capital expenses.

These type of problems are also prevalent in Councils which have members with conflicts of interests, whose main objective in being a member of the Council is to serve their personal interests while holding the reins of governance.

CONSTRUCTION DEFECTS
Construction defects have become a nightmare for some prospective buyers of condominiums. Unscrupulous Developers find ways and means to hide defects till the units are sold. It is rare for a buyer to detect construction defects unless he or she has a background in civil engineering or a specialized knowledge in building works. Even though buyers pay a hefty price to purchase a condominium, they fail to understand that the complex nature of condominium construction and shared ownership of common elements, makes it absolutely essential that they get the opinion of a civil engineer or a knowledgeable person to check the condominium unit and the common areas as a prerequisite before parting with millions of Rupees as sale price.

There have been instances of Developers failing to install heat proof insulation on the roof slab causing excessive heat building up in units immediately below the roof slab when these are kept closed for long periods of time. Sometimes the waterproofing of the roof slab is inadequate causing mildew on the ceiling of units immediately below. Leaks in plumbing within a unit have caused excessive damage in units below. A history of such defects in a condominium property, will invariably depress its property value even if it is located in a good residential area.

INSURANCE
Insurance of condominium properties is not a topic much talked about. Yet, it is one of the key elements that determine how safe it is too live in a condominium property. When a Developer assures a prospective buyer that he has got an insurance cover for the building, it is imperative that one finds out the exact details of the insurance; i.e. the nature of the insurance, whether it is only fire insurance or fire insurance and public liability, which is necessary since the Management Corporation can be sued for injuries that take place in the common areas of the condominium property.

In the case of fire insurance, the Act provides that the building should be insured to the reinstatement value of the property. It is necessary to find out whether the insurance cover obtained refers to an empty unit or whether it covers certain fixtures and fittings given by the Developer at the time of sale. If these are not included the unit owner should have these covered under his or her own personal fire insurance cover.

–  An extract of a lecture delivered by Ajithaa Edirimane at the Workshop on Development and Management of Real Estate conducted by the Institute of Real Estate and Valuation at the University of Sri Jayawardenapura on 12th December 2015

December 13, 2015 Posted by | Condominium properties Sri Lanka, Land & Properties, sri lanka, Uncategorized | , , , | Leave a comment

What ails the condominium industry in Sri Lanka?

WHAT AILS THE CONDOMINIUM INDUSTRY IN SRI LANKA?
By Ajithaa Edirimane

Is condominium living really the ‘dream’ or is it a ‘nightmare’? Are prospective buyers aware of the restrictive nature of condominium living and rules that need to be complied with as a co-owner of common property? Are buyers dealing with honest developers who are transparent in their dealings? Are the problems of condominium dwellers addressed efficiently by the regulator? Is the current law adequate to address the problems of the condominium industry?

Laws governing condominium properties require more teeth
In one particular condominium property there are complaints from unit owners of serious defects in construction, with floor tiles coming off and cracks appearing on the external wall. The council does not have the funds to attend to repairs and blames the developer for the defects. The developer is not unduly concerned since title deeds were issued to all unit owners. In another mixed development condominium property, the unit owners are prohibited from using the main entrance as the developer has leased part of the common areas and the main entrance to a third party, in spite of having no right or authority to do so.

Legality of the agreements
A common practice of developers in pre-selling units is to offer a section of the building depicted as an apartment on a rough sketch and collect advance payments for the so-called ‘condominiums’ more often priced as high as Rs. 20 million. These are merely illustrations seen only on paper and are not legally divided and defined condominiums registered at a Land Registry or at a Title Registry. Such sales agreements are mostly one sided benefitting the developer. The prospective buyer, yearning to acquire one of the beautiful apartments illustrated on a glossy brochure, accepts the terms offered by the developer not wanting to risk losing the apartment.

The Apartment Ownership Law does not have provisions to safeguard the interests of unwary buyers in similar situations. Neither does the law impose mandatory obligations on developers to disclose issues which impact on the prospective buyer’s ownership, such as; the developer’s background, funding for the project, estimated date of completion, whether the project will be expanded with additional units added to the project, the rights of unit owners if expansion takes place, etc. Many are the instances when unsuspecting buyers have got caught to developers who have defrauded buyers more than once and continue to do so with impunity.

On the other hand, the law does not make it easy for developers to implement major multi-storey projects, whether it is mixed development or residential, due to the cumbersome registration process. Sri Lanka has a unique registration system, where a developer is compelled to register a subdivided building at least twice to bring it into the ambit of the law — firstly, to enable pre-sales of units, registration as a Provisional Condominium Property; secondly, upon completion of construction and issuance of the Certificate of Conformity, registration of the subdivided building as a completed Condominium Property. Not only is this procedure cumbersome, it is also costly when a single registration should be adequate. Consequently, a majority of developers refrain from registering the Provisional Condominium Property. Pre-sales of units thus take place without referring to a registered plan and without a legally recognised subject matter. Even banks tend to disregard this important requirement and register tripartite agreements on the main land on which the building is constructed, encumbering all units of the subdivided building in the process.

Regulations and regulator
That there are no regulations to aid the implementation of the law has made matters worse. The Common Amenities Board (Amendment) Act No. 24 of 2003 vested series of powers on the Condominium Management Authority (CMA) to cover condominium properties under Sec. 5(a) to 5(o), but without regulations to enable the implementation of the said powers.
Another grey area, which necessarily should be clarified by regulations, is the procedure to be followed when changes take place within a registered condominium property. Sometimes unit owners wish to expand a common area or amalgamate two units as one. When such changes are contemplated and an application is made to the municipal authority for approval, the practice is to insist on a costly revised Building Plan of the entire condominium property, when a revised condominium plan with details of the area to be changed should suffice, especially since the subdivided building has already been registered as a condominium property and the changes are within the foot print of the constructed and completed condominium property. It is the duty of the CMA as the Regulator to take an informed decision on these matters and simplify the procedure by gazetting relevant regulations.

If the law is silent on the procedural matters, the regulations should fill the void. That has happened neither under the Common Amenities Board (Amendment) Act No. 24 of 2003 nor under the Apartment Ownership Law No. 11 of 1973 and its amendments. The CMA gives its own interpretations to the law, which is not a function of the regulator nor is it provided under the statute.

Conclusion
The condominium industry is no longer in its infancy. The principle enactment came into being in 1973 with two important amendments in 1982 and 2003. But there are still many areas that the law has not addressed. Added to that, no regulations have been issued to date to implement the provisions of the law which have not only caused confusion to unit owners but also made the task of the regulator difficult.
In the meantime, we see a boom in condominium properties, with many developers taking up construction of new subdivided buildings. Similarly, owners of both small and large multi storey buildings are converting them to condominium properties without being fully aware of legal implications. Revising the law, introducing regulations and making the regulator effective with training for its staff, are all crucial for condominium properties to be a good investment option as well as to make them risk free and safe for prospective buyers.

(The writer is an Attorney-at-Law)
http://www.sundaytimes.lk/150308/sunday-times-2/what-ails-the-condominium-industry-in-sri-lanka-139147.html

This is an article which was published in the Sunday Times in March 2015)

April 23, 2015 Posted by | Condominium properties Sri Lanka | , , , , | 2 Comments

Resumption of Dual Citizenship

The Department of Immigration and Emigration of Sri Lanka has resumed the granting of dual citizenship. This is a benefit looked forward to by many former Sri Lankans who acquired foreign citizenship and thereby lost Sri Lankan citizenship. Please refer the website of the Department of Immigration and Emigration (link given below) for details and application forms.

http://www.immigration.gov.lk/web/index.php?option=com_content&view=article&id=299&Itemid=214&lang=en

The recently implemented law on land acquisitions (i.e. Land (Restrictions on Alienation) Act No. 38 of 2014 ) prohibits the acquisition of immovable properties by foreign citizens. Exemptions are given in Sec. 3 of the said Act. The restriction will not apply for those foreign citizens who have obtained dual citizenship. The effective date of operation of the Act is 1st January 2013.

Regarding condominium properties, the above mentioned restriction will not apply to foreign citizens who acquire condominium units above the 4th floor of a building (excluding the floors containing common elements), provided the entire sale price is paid upfront by foreign remittance prior to the execution of the Deed of Transfer.

March 24, 2015 Posted by | Condominium properties Sri Lanka | , , , , , , | Leave a comment

Focusing on the issue of Title in Condominium Properties

Presentation at the International Public Seminar titled
“Property Development & Real Estate Investment in Sri Lanka”
held at the BMICH, Colombo on 25 April 2014
organized by the Institute of Valuers of Sri Lanka

 

 

FOCUSING ON THE ISSUE OF TITLE IN CONDOMINIUM PROPERTIES

Condominium properties or multi storey buildings are an important feature of Real Property development. Especially in urban areas where land is limited with inadequate housing for the increasing population, multi storey buildings subdivided as condominiums have been the solution for urban housing. In an emerging economy, condominium living can be an attractive housing option if issues of concern faced by buyers can be minimized.
The main issues of concern are connected to the following areas:
1. Title of the condominium unit & registration of the condominium property.
2. Administration, maintenance and management of the condominium property.

Introduction – concept of ‘condominiums’
In Sri Lanka, Roman Dutch Law applies to Real Property. In terms of the principle supeficies solo cedit, which literally means – ‘anything attached to land goes with the land’ – the owner of a land would own anything built upon it. Thus we have a ‘vertical ownership’ over land from the deepest bowels of the earth to the heavens above.
The vertical ownership related to land was amended by statute, initially by the Condominium Property Act No. 12 of 1970 which was repealed and replaced by Apartment Ownership Law No. 11 of 1973. The said statute created a new concept of ownership of Real Property, that is, ownership of horizontal layers of a building. The important requirement for such ownership to come into existence is the registration of the subdivided building under the provisions of the statute.
The legislation which created this new concept of Real Property can be listed as follows –
• Condominium Property Act No. 12 of 1970 (repealed)
• The Apartment Ownership Law No. 11 of 1973 (Principle enactment) This Act was subsequently amended by the following statutes:
• Apartment Ownership (Amendment) Act No. 45 of 1982
• Apartment Ownership (Special Provisions) Act No. 4 of 1999 & Apartment Ownership (Special Provisions) Act No. 27 of 2002
• Apartment Ownership (Amendment) Act No. 39 of 2003

Dual ownership
Registration of a subdivided building as shown on a plan of subdivision (i.e. provisional condominium plan, semi-condominium plan or a condominium plan) according to the Apartment Ownership Act leads to the creation of several apartments or units depicted in the plan as separate ‘freehold property’. Each such unit referred to as a “condominium” is located within a building of more than one storey, enabling individual ownership of the unit designed for independent use (which can be divided into one of more rooms) with direct exit to a road or to a common area leading to a road.

A condominium unit owner would also have joint ownership of the Common Elements (i.e. all areas which do not form part of any condominium unit in a Condominium Property and which are described as Common Elements in a Plan of subdivision). The joint ownership is based on the ‘Share Values’ assigned to each unit. Currently, the Act does not indicate how share values are to be assigned to units, except providing in Sec. 13(3) of Act No. 39 of 2003 that share values are assigned according to the ‘use of the said condominium, whether residential or commercial, as the case may be’. This definition is not clear and does not indicate whether there should be a higher share value for commercial condominium units or vice versa. Though this appears to be an area where comparably less attention had been given by the drafters of the law, it is however, a feature which can make a significant impact for condominium dwellers as share values determine the amount of service charges that should be paid by individual unit owners, their respective voting rights at meetings of the Management Corporation and also the allocation of residual property in the event of a destruction of the subdivided building.

Another interesting feature is the creation of a Management Corporation with all unit owners as ‘Members’ of the said corporation upon the registration of the subdivided building as a condominium property. It has a Constitution and By-laws and can sue and be sued like any other corporate body. This concept, with the individual ownership of the condominium unit, joint ownership of common elements and membership of Management Corporation has sometimes been referred to as a ‘three fold unity’ of condominium properties. One entitlement cannot exist or be considered separately from another, as a unit owner will automatically be entitled to all three elements. Having thus briefly considered the concept of ‘condominium properties’ we can now explore the issues that concern buyers and sellers of this type of Real Properties.

1. Title to the condominium unit and registration of the condominium property –
A major issue that confronts condominium buyers is the ‘title’ to the condominium unit. This is linked to the existence of the ‘subject matter’ in a Real Property transaction.

The ‘subject matter of sale’ is an important element in the sale of a property. In the absence of a subject matter there cannot be a legally binding transfer, even if there is unanimity between parties to the transaction. Thus in a sale of immovable property, the subject matter of the transaction should be in existence for title to pass to a buyer upon payment of valuable consideration. If one enters into a sales agreement for the sale of land X without knowing that there is no such block of land in existence or indicated in a survey plan, then the sales agreement will be void due to the absence of the ‘subject matter’.

A condominium property comes into existence with the registration of the Deed of Declaration along with the Condominium Plan describing the individual condominium units and the common elements of the building, duly executed under the hand of the owner/s of the land, attested by a Notary. The Deed of Declaration embodies a vast amount of information as contained in a number of documents attached to the Declaration, the principle one of the said documents is the plan of subdivision. This is referred to as a ‘Condominium Plan’ in respect of a completed building, a ‘Semi Condominium Plan’ in respect of a partially constructed building and a ‘Provisional Condominium Plan’, in the case of a building which is yet to be constructed.

Only upon the registration of the Deed of Declaration and the corresponding plan of subdivision dividing the building into separate units, will such condominium units be considered separate from the land to which the building is attached to and constitute immovable property that can be the subject matter in a condominium property transaction. Therefore, title cannot pass to a buyer of a condominium unit unless and until the subdivided building has been registered in terms of the Apartment Ownership Act giving recognition to condominium units reflected in the plan of subdivision as individual immovable property.

Deeds can be executed relating to segments of a building which have not been registered as a subdivided unit. But in the absence of registration of the same as subdivided freehold units, title that vests with the transferee will only be a co-ownership of the building. In Mallika Fernando vs Nagesh Fernando (C.A. 979/79 DC Colombo 16894/L : March 26, 2001) it was held that non registration of a condominium property will not invalidate a legally binding Deed of conveyance under which sections of a building had been gifted to different parties. In this case, the plaintiff and defendant had both signed and accepted a Deed of Gift of the Donor whereby sections of a building, which were not properly subdivided under a registered condominium plan, had been gifted to the donees. They were thus considered to be co-owners of the building and not as owners of individual units.

Consequences of acquiring unregistered ‘condominium units’:
Let us consider a situation where a conditional sale of a ‘condominium unit’ takes place with a mere reference to the unit in the Sales Agreement, which incidentally, is not a title deed. This is the general practice of Property Developers in Sri Lanka if there are impediments or delays to the registration of the Deed of Declaration and Plan of subdivision. In order to comply with Sec. 2 of the Prevention of Frauds Ordinance, which requires a sale of immovable property to be in writing and signed in the presence of a licensed Notary and two or more witnesses, the Sales Agreement attested by a Notary is thus registered under the main land upon which the building is constructed. The consequences of this registration can be given as follows:

i. It does not result in a transfer of title but remains a conditional sale as it is merely an ‘agreement’ between parties. Therefore, the prospective purchaser will not acquire ownership of his / her condominium unit even if he/she has paid the sale price in full.

ii. In the event the project fails, recovery of payments made by the prospective purchaser will be difficult as the land upon which the sale transaction is registered would be mortgaged to financiers as collateral.

iii. In the event the building is destroyed or damaged, the insurance proceeds will be released to the owner of the land or to the financiers to whom the property is mortgaged and the prospective purchaser/s of the building under Sales Agreements will have no right or title to claim compensation.

iv. In the absence of registration, the prospective purchasers occupying units within the building will not constitute a body corporate referred to as a Management Corporation that normally comes into existence upon the registration of the condominium property. The prospective purchasers hold no right or authority over the common elements of the building and accordingly, are not entitled to an undivided portion of the common elements due to the absence of valid title to a condominium unit within the building. On the other hand, this is also disadvantages to the Developer or the Owner of the building as he has no statutory right or authority to charge fees for the use of the maintenance of common areas without the sanction and approval of the occupants of the building in the absence of a legally constituted body corporate, similar to a Management Corporation.

It has come to light that many occupants of condominium units of completed projects have only a Sales Agreement even after one year of occupation preventing them from claiming ownership over the condominium unit for which millions of Rupees have been paid as full settlement of the sale price. In most cases, the prospective buyers have been compelled to pay the full sales price, under the threat of losing their condominium unit if the installments are not paid on the due dates. The full amount is thus paid benefiting the Developer/ Vendor, whilst the prospective purchaser gets only a possessory right over his/ her unit. It needs to be mentioned here that the Apartment Ownership Act No. 39 of 2003 has addressed this type of issues and has made it mandatory for the Developer/ Vendor to transfer title of the property as stipulated in Sec. 3(2) of the said Act.

Sec. 3(2) compels the Developer or the owner of a land upon which there is a completed building capable of being subdivided, to register the property as a subdivided property if he has entered into a transaction to sell any part of the said building as a subdivided unit. The application for registration should be submitted within 18 months from the date of the first sales agreement or within 3 months of completion of the building, whichever occurs first. In the event, the sale occurs after the completion of the building, the application for registration should be submitted within 6 months from the date of completion of the building. Any person who contravenes the provisions of the Act is guilty of an offence under Sec. 3(2) and 3(3) of the Act and is liable on conviction after summary trial before a Magistrate to a fine not exceeding Rs.50,000/- and a further fine of Rs.1000/- per day for each day the offence continues to be committed. Considering that no attempts have been made by many occupiers in condominium properties who are yet to receive their title deeds to take action in terms of Sec.3(2), it is apparent that there is still a lack of awareness among condominium dwellers as to their rights both prior to and after the purchase of a condominium.

The Apartment Ownership Law has not stipulated criteria to be fulfilled by Developers who engage in pre-selling. It can be said that the lacuna in the law as well as the ignorance of prospective purchasers have paved the way for unscrupulous Developers to exploit this situation to their advantage. It is common to see pre-selling of condominiums even without obtaining vital regulatory clearances. Some are never registered as the Developers who are also the owners of the land, have left the country. An amendment to the Act should impose conditions to be observed by Developers prior to pre-selling of units, such as Disclosures relating to important conditions stipulated in Sales Agreements, deposit of advance payments in Escrow Accounts till the building is completed up to a certain minimum level, rights of termination of a Sales Agreement and refund of funds, proposed project completion date, facilities provided to unit owners, proposed by-laws of the condominium property, etc., Without such transparency in multistory property development projects, there will be many innocent purchasers who would repent after parting with their hard earned money.

Another statutory requirement for the proper transfer of title is the need to register all condominium units under the Registration of Title Act No. 21 of 1998, (RTA) if the building is constructed in a Province or Administrative District where the said Registration of Title Act is enforced. (i.e. Sec. 44 and 45 of the Apartment Ownership Act No. 39 of 2003). By Gazette No. 1508/20 dated 1 August 2007, application of the RTA was extended to all provinces except the North and the East. Therefore, in terms of Sec. 44 and 45, currently there is a mandatory requirement to register all condominium properties under the RTA (except in the North and East). But since Title Registries are yet to be established in all areas to which the Gazette Notice applies, the statutory provision requiring registration of subdivided buildings under the RTA has now become a pointless mandatory requirement in Districts where there are no Title Registries. (e.g. Colombo). One could therefore question the validity of registration of a subdivided building solely under the Registration of Documents Ordinance considering the above mentioned application of Gazette No.1508/20.

2. Administration, maintenance and management of the condominium property
Many of the problems that are currently faced by condominium dwellers arise over the management of the condominium property, in other words, “management of common elements”. This is an area which has not been adequately addressed in the Apartment Ownership Act leaving room for Developers to continue to operate the building as if the ownership of common elements are vested in them.
Some of the common problems faced by unit owners due to Developers continuing to control and manage the common elements –

i. Use of common areas by Developers for their private purposes, (i.e. as office space, storage space or in certain instances, to construct apartments carved out of common areas in the basement)

ii. Use of parking space for their own private commercial operations.

iii. Collecting service charge/maintenance fees from owners of other units but not in respect of the units which are unsold and remains the property of the Developer.

iv. Failure to release to unit owners a budget depicting the proposed income and expenditure relating to the management of the common elements and the Service charge per share value based on such budget. It is not uncommon for Developers to decide on the Service Charge according to their preferences and to credit such sums collected to their own bank accounts, whereas the Act specifically refers to the need to create a Management Fund for day to day operations and a Sinking Fund for capital expenses.

Freehold title of unit and joint ownership of common elements should be assessed as ‘one entity’ –
As pointed out earlier, when one purchases a condominium property, it is not only the freehold ownership of the subdivided unit that one acquires but also the joint ownership of the common elements of the entire property. The freehold title of the unit along with the common rights over the jointly owned common elements should therefore be assessed as ‘one entity’. Not only are some Developers ignorant of that fact, but owners of condominium units are also in general, unaware of the extent of their ownership. This situation is exploited by Developers who, even after selling all the units, continue to have a hold over the condominium property by controlling the management of common elements and in certain instances, even crediting the service charge / maintenance fee to their own private accounts.

There are currently several registered condominium properties which do not have an operational or fully functioning Management Corporation, though it comes in to existence with the registration of the subdivided building. Since Sec. 27(3) of Act No. 39 of 2003, provides that the Condominium Management Authority (CMA) shall convene the 1st AGM, some Developers intentionally continue with the management of the common elements blaming the statutory body for its failure to convene the AGM. In my view, the holding of the 1st AGM and the appointment of the Council is an internal matter to be handled by the members of the Management Corporation. The Act needs to be amended to make it mandatory for the Management Corporation (and/or the Developer who holds all the units immediately upon the creation of the MC) to convene the 1st AGM within 3 months of its establishment. A failure of this important requirement should be a punishable offence.

The concept of ‘time share’ for investment in condominium properties –
Time share condominiums are generally used for vacation purposes by retirees and semi-retirees who wish to regularly visit a particular country or place for a short period during a certain time of the year. This is a method adopted in recent times in developed countries where there are applicable laws to address the issue of ownership, limited property rights and liabilities for maintenance fees as applicable to ‘time share’ condominiums.

In Sri Lanka, there are no specific provisions in the Apartment Ownership Law and its amendments addressing the ‘time share’ aspect of ownership of condominiums. Under such circumstances, in the absence of statutory provisions, a Developer embarking on a condominium project to offer potential purchasers a unit on a ‘time share’ basis, would have to necessarily work within the prevailing statutory and legal provisions to ensure that the project achieves its desired goals.

For example, to grant several unit owners limited rights of ownership of a unit (either the same or a different one in the condominium property), all unit owners should only be co-owners of an undivided share of the entirety of the units. A unit owner who has an absolute freehold title can prevent others from using his unit during his absence. On the other hand, if all are merely co-owners of an undivided share of the condominium property, by entering into an agreement they can decide on the manner in which a unit can be used by each person, the time and duration of use and the share of maintenance fees that should be taken up by each individual co-owner. Accordingly, the title deeds issued to a ‘time share’ owner would reflect his entitlement to the condominium property as a ‘co-owner’ of a specific undivided percentage of all the units described in the Schedule of the Deed and the Rules subject to which his co-ownership rights can be exercised. For the ‘time share’ concept to succeed in Sri Lanka, there should also be a fully operational Council of the Management Corporation consisting of representatives of the ‘time share’ owners or a Managing Agent who would be answerable to the Council. When the law is silent, Developers need to be guided by proper legal advice when adopting new concepts such as ‘time share’ ownership.

In developed countries, there are stringent laws to safeguard the rights of apartment owners which evolve over time addressing new issues as they come up. This is lacking in our country as Act No. 39 of 2003, being the last amendment, is woefully inadequate to address problems of modern times.

Ajithaa Edirimane LLB (Colombo) MLB (Hamburg),
Attorney-at-Law & Notary Public

April 25, 2014 Posted by | Condominium properties Sri Lanka, Land & Properties, Law & Governance, Property Title | , , , , , , , , | 2 Comments

Protect your property from land scams

PROTECT YOUR PROPERTY FROM LAND SCAMS

This slide presentation highlights the emerging problem of land scams in Sri Lanka. It draws attention of buyers, owners, notaries and authorities to what should be done to stop land scams and gives tips to safeguard the rights of buyers and owners of properties.

March 20, 2014 Posted by | Land & Properties, land fraud, Law & Governance, sri lanka | , , , , , , , , , , | 4 Comments

Condominium Properties in Sri Lanka – Slide presentation with more examples..

Condominium Properties in Sri Lanka – Issues of concern for buyers and sellers  – This slide presentation is from the lecture given at the Real Estate Conference organized by the Centre for Banking Studies of the Central Bank of Sri Lanka, Urban Development Authority and the Institute of Real Estate and Valuers, held on 6 & 7 October 2011 in Colombo.

 

November 12, 2011 Posted by | Condominium properties Sri Lanka, Land & Properties, Law & Governance, sri lanka | 2 Comments

Tips for buyers of Condominium housing units

Before you contemplate buying a condominium housing unit, it is advisable to check from the Developer whether:

A – the building has been registered as a subdivided condominium property.

B – If its a residential condominium property, whether each housing unit is allocated one permanent car parking space ( UDA Regulations stipulate that flats / housing units of 75 – 200 sq.m. should be allocated 1 car parking space. Please refer http://www.uda.lk/reg/parking_requirements.htm for more information )

C – the building has adequate common areas for residents’ use, such as an office room for the Management Corporation, a common hall or meeting place for the residents and other common facilities as promised by the Developer in marketing brochures. It is relevant to mention here that the Developer cannot lease or assign the use of common areas to any third party without the specific consent of the condominium unit owners.

June 25, 2011 Posted by | Condominium properties Sri Lanka | Leave a comment

Intellectual Property for Legal Practitioners

This is a workshop on Intellectual Property scheduled to be held in Colombo, Sri Lanka from 9 – 11, February 2011. Click Slide share to view details of this post.

January 25, 2011 Posted by | Intellectual Property | Leave a comment

Intellectual Property Rights – Are they an asset to your company?

I have come across an interesting slide presentation released to the public by Dr. C. May, Member of the German Patent and Trade Mark Office, which I would like to share with my readers. Slides 1 – 40 in particular refer to the main areas of Intellectual Property with illustrations making it easy to comprehend how trade marks, copyrights, industrial designs and patents apply in commerce.

Here is the link –

July 19, 2010 Posted by | Intellectual Property | , , , , | Leave a comment

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