Changes to Condo Act will offer greater protection for residents Condominium concept should not be o

2 January 2014 05:15 am - 0 - {{hitsCtrl.values.hits}}

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By Kirthi Hewamanne
When this concept is oversimplified so much, a distorted impression of it can be given to the buyers. This will be disastrous to condominium owners and to the industry in general. Therefore, this relatively new concept has to be protected and nurtured by having proper regulations and direct participation of the owners on an ongoing basis where it is necessary.

It is imperative that a new act or amendments to the existing act should be introduced for more dynamic forms of condo ownership. It is also important to keep in mind this is a private home ownership method. Therefore, the owners’ interests and their investments have to be protected. Any institution or governing agencies’ prime objective is to serve the owners and protect and nurture this concept.

This will help to boost the housing industry and urban housing in particular. It is advisable the Urban Development Authority (UDA) also oversee the development and maintenance of condo projects. If condominium corporations (complexes) are not properly managed, they will end up dilapidated slums in prime residential areas.

Since of late, the UDA is playing a major role in developing the urban areas and providing housing and recreational facilities to people living in cities. This development can be seen clearly in the city of Colombo and its outskirts. This will soon spread to provincial capitals such as Jaffna, Kandy, Galle, Matara and eventually to Hambantota.

There is an overwhelming consensus that condominium managers be qualified and licenced to carry out their significant responsibilities. Majority of the city dwellers in Colombo will be living in condominiums very soon. In major cities in the world, the great majority of residents are already living in condominiums. The quality of life of these residents depends to a great degree on qualified, well-trained condominium managers.

Even though many managers are responsible for buildings worth tens or hundreds of millions of rupees, with matching operating budgets, they are not required to have training or an understanding according to the current Condominium Act. The government should consider introducing mandatory qualifications for condo managers as part of a wider review of condo legislation. The new condominium act should govern the ownership of both residential and non-residential condominiums in the country.

Governance (general)

There should be qualified condominium managers who can assess maintenance requirements of elevators, plumbing, heating and cooling systems, generators, fire safety equipment.
Needs more ‘accountability’ with consequences for boards, managers, owners, lawyers and builders who refuse to follow the act.
The new act should have ‘oversight’ with legal teeth, ‘effective enforcement’ of act, rules and by-laws. It should not be self-regulated: self-regulation has failed.
A condo review board or ombudsman office or condo office is necessary.
At least once in five years there should be a maintenance audit conducted.

Formation of special ‘condo office’
This can come under the Consumer Affairs Ministry or UDA or an independent condominium authority with legal powers.

This office would:

Clarify and standardize insurance by-laws and regulations. No one understands them.
Provide templates for standardized by-laws.
Be legally empowered to resolve disputes, including disputes with managers, boards and builders.
Be legally empowered to enforce the act in all its aspects and impose penalties on individuals responsible.
Disseminate information about the Condominium Act to owners, directors, managers, lawyers and builders.
Respond to enquiries from owners, boards and managers promptly.
Have the power to levy fines against owners, individual board members, managers, lawyers and builders as per the act.
Provide templates for a standardized declaration for various types of condominiums.
Provide templates for Status Certificates
Be empowered to suggest changes in the contents of the education given to directors and managers that would strengthen condo governance and the consumer rights of condo owners.
Be supported by a monthly fee per unit (e.g., US $ 3 – Rs.100/month) paid by owners for each unit owned.
Be staffed by persons who are well versed in the Condominium Act and have experience as condo owners but are neither political appointees nor members of the various condominium industries, to avoid conflicts of interest.
Have regular access to legal experts, accountants and engineers, as necessary.
The complaints have to be resolved within a 30-day period or less.
Most condo buyers (foreigners or Sri Lankans) who buy luxury or semi-luxury condominiums find it easier to communicate in the English language. Therefore, the staff of the special condo office should be able to communicate verbally and in writing in English.

Condominium Act should be divided into several parts

Development of condominium corporations
Types of developments permitted
Sales of condominium units
Governance of condominiums and ownership of a condominium

What is a condominium corporation?
A condominium corporation is a method of property ownership. It is created solely to manage the affairs of the condominium corporation. It is registered as a non-profit-making company and only the unit owners are shareholders. A condominium’s affairs should be regulated by the new Condominium Act and its documents known as the declaration, description, by-laws and rules.

Declaration: The declaration is the equivalent of the constitution of the corporation. It outlines the division of ownership within the corporation by identifying the units, the common elements and the exclusive use of common elements, if any. It also sets out the percentages of ownership each unit has in the property and the percentage that each unit contributes to the monthly common expenses.

The declaration will also indicate which costs will be the responsibility of the corporation and paid for by the owner’s contributions to the monthly common expenses. The description is a detailed plan of the boundaries, layout and location of the units, common elements and exclusive use of common elements in the condominium.
By-laws: The by-laws of the corporation indicate how the corporation will be organised. They deal with matters such as the board of directors, officers of the corporation, conduct of meetings, collection of common expenses, occupancy standards, insurance deductibles and other matters as permitted by the Condominium Act.

These by-laws are made by the board of directors and approved by the unit owners. There are also rules of the corporation which regulate the owners’ day-to-day living environment.

Rules: The board of directors makes the rules. The owners are required to receive notice of the rules and have a right of veto and can amend or repeal them. The initial condominium documents, the declaration, description, by-laws and rules are prepared by the developer.

The primary purpose of the condominium corporation is to manage the condominium property. The Condominium Act provides standards regarding the keeping of records and the conduct of business. The act and the by-laws outline in greater detail procedures to be followed by the corporation, including the calling, holding and conduct of general and special meetings, as well as the election, removal and replacement of directors.

Owners and residents are required to comply with the documents which govern a condominium corporation. The corporation or individual owners may enforce the act, declaration, by-laws or rules either through mediation and/or arbitration or in some circumstances by going to court.

The act also provides, through an oppression remedy, the right to apply to a court where an owner believes that his or her rights have been unfairly affected by the conduct of either the board of directors or other unit owners.

How to evaluate a condominium you want to purchase?
People: If people are already living here, talk to some of them. They can fill you in on the quality of construction, how well the condominium is managed and what problems they have encountered, if any. Evaluate whether they are the kind of people you will like as neighbours and whether condominium living is right for you and your family. Evaluating a condominium that is just getting started is more difficult.

Neighbourhood: Consider whether the neighbourhood seems to be growing into a pleasant residential area or whether there are indications that commercial or industrial buildings are coming up. The type of neighbourhood will affect the resale value of your unit.

Builder: Check out the builder. Talk to unit owners in other condominiums built by the same builder. Check if the project is registered under the warranty programme. Ask what steps have been taken to soundproof walls and floors between living units. Inadequate sound control can be a major headache, particularly in a multi-family dwelling. Ask if the project is only for residential use or whether it is a mixed-use project. Check the water pressure of upper floors, fire safety equipment and fire drills conducted on regular basis.

Public relations officer: Appoint an insurance trustee and also a public relations officer to assess the residents’ needs. Benefits of bulk buying, group travel, group medical and dental facilities available, recreation facilities also should be looked in to by the public relations officer of the complex.

Developer: “Buyer Beware.” If you are buying from a developer, how do I know what to look for in all these documents? Unless you are a lawyer, familiar with condominium purchase and sale documents and with condominium corporations, the language of these documents can be very confusing. If the salesperson or developer suggests that condominium units are available only to certain groups of people (e.g. pensioners, or adults only, etc.) be wary. Such a guarantee may not be valid.

Statements: Any specific requirements you may have with respect to the way the unit or common elements should be completed or any other issues which are important to you should be set out in the agreement of purchase and sale. Be wary of statements made by sales representatives. If the issue is important to you make sure that the provision is included in the agreement of purchase and sale.

Never rely on verbal statements. You have a responsibility to read through these materials and make sure you understand just what it is you are buying and how being in a condominium will impact the way you live.

Documents: Remember the agreement of purchase and sale was prepared by the developer’s lawyer. Condominium living is not the same as living in a single-family home. There are documents, which will govern what you can and cannot do when you live in the condominium.

You must be familiar with these documents and accept the limitations they may impose. Once you have reviewed these documents, you should bring them to your lawyer for review.

It is imperative that you tell your lawyer any points of particular importance to you and discuss with your lawyer any conditions in the documents that might affect your lifestyle. Don’t expect your lawyer to read your mind!

When you purchase a new condominium from a developer you must be given a disclosure statement. This is the package of documents a developer prepares and gives to a buyer when he or she signs the agreement of purchase and sale.

Cooling-off period: Once you receive the disclosure statement and an accepted agreement of purchase and sale for the purchase of a new unit from a developer, the act must provide you with a 10-day cooling-off period. This allows you to terminate the agreement without cause and receive your deposit back if you rescind the agreement in writing within the 10-day period.

Once the 10-day cooling-off period has expired, you are bound by the terms of the contract and must complete the purchase according to those terms. Under the Condominium Act any changes that you want must be made before you sign the agreement or within 10-days of signing it. This provision does not apply to a resale condominium unit.

(To be continued)
(Kirthi Hewamanne, a graduate of the University of Ceylon, Peradeniya, is an award-winning realtor with wide experience in all aspects of real estate, including specialized knowledge of the condominium concept. He held membership in the Canadian Real Estate Association, Ontario Real Estate Association, London St. Thomas Real Estate Board Ontario and was a member of the Realtor Political Action Committee Canada. He can be
contacted at kirtionebiz@gmail.com)

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