Legal_Landscape

A commentary on law and current affairs

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

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

Condominiums in Sri Lanka

Book : Understanding the concept of Condominiums

CONDOMINIUM_Book_cover.doc

Author: Ajithaa Edirimane
Publisher: [Colombo : Ajithaa Edirimane], 2006.
Edition/Format: Book : English : 1st ed
ISBN: 9559985205 9789559985204
OCLC Number: 80914113
Description: ix, 201 p. ; 22 cm.

Finding libraries that hold this item…

Library Held formats
1. Harvard University, Law School, Library

Cambridge, MA 02138 United States

Book Harvard University, Law School, Library
2. Columbia University Law School, Diamond Library

New York, NY 10027 United States

Book Columbia University Law School, Diamond Library
3. Cornell University

Ithaca, NY 14850 United States

Book Cornell University
4. LIBRARY OF CONGRESS ; CRS

Washington, DC 20540 United States

Book LIBRARY OF CONGRESS ; CRS
5. University of Chicago

Chicago, IL 60637 United States

Book University of Chicago
6. University of Iowa, Law Library

Iowa City, IA 52242 United States

Book University of Iowa, Law Library
Haus Unter den Linden

Staatsbibliothek zu Berlin
Unter den Linden 8
D-10117 Berlin, Germany

http://www.gbv.de/dms/spk/sbb/recht/toc/578166933.pdf [Inhaltsverzeichnis; 2008-12-18]

AVAILABLE IN SRI LANKA –

Vijitha Yapa Bookshops, 99, S de S Jayasinghe Mawatha, Kohuwala, Sri Lanka

http://www.vijithayapa.com/pdesc.php?id=23723

Tel: +94 11 2810714

December 5, 2009 Posted by | Land & Properties | , , , , , , | Leave a comment