Urgent need for Condominium Owners Association
Today Condo owners have no place to go to get their problems and issues effectively resolved without taking long and undue delays. So they are frustrated and a Condo Owners Association (COA) will be sympathetic to them and look for ways to solve their problems. In short this will become a strong lobby group and the government and condominium industry will also benefit, not only the condominium owners.
A new Condominium Owners Association can look into issues such as increasing maintenance fees, misappropriation of funds, declining value in some condos, limited reserve funds, overpriced contracts, poor representation, poor construction, bad attitudes of Board of Directors towards the owners.
This association must be stewarded by a Board of Directors with a wealth of condominium knowledge and should be considered the industry’s most senior leaders, in condominium practices, investment, financial and real estate. They must be further guided by the strong work of its committees. The association volunteers must be composed of highly educated, dedicated and experienced individuals who strive continuously to increase the “value for Condo Owners” through registration.
An artist’s impression of proposed Altair condo
The Condo Owners Association Mission Statement should read as: “To represent and provide leadership to Condominium Owners with a united voice advocating and fostering quality lifestyle, prosperous and sustainable condo ownership.”
Condo Owners and other stakeholders are deeply concerned about the Condo Act review presently in progress. The Condominium Act Review should be in a 3-stage public engagement process aimed at modernizing the Condominium Act.
In Stage I the public should be asked to bring issues and ideas to the table.
In Stage 2, people with expertise in condominium issues, including condo residents, should review findings from Stage I and must develop a solutions report about how these issues can be resolved.
In Stage 3, discussions and seminars should take place in Colombo and other cities if necessary where there are condominiums. They should provide condo residents a chance to discuss the recommendations from Stage 2.
The government should review the feedback gathered at these discussions and seminars as well as the public’s comments on the Stage 2 solutions report. This feedback and recommendations from Stage 2 should be used to draft a new Condominium Act.Consider these when drafting new Act
Condo Owners are already feeling left out in the cold with the reality of the hard facts dealing with condominiums, Lack of licensing of Property Management Companies and Property Managers, fraud, overpriced contracts, mismanagement, unqualified board members and property managers. Excessive legal fees, no level of dispute legislation have to be addressed without charging excessive fees from unit owners. They could be charged a reasonable monthly fee to set aside by condominium councils only to pay for legal fees required. This can be around Rs. 500 per month per unit and can be reduced if there is a substantial amount accumulated. A self-regulated Condominium Act exposes Condo Owners and buyers to a world of non-enforceable potential corruption and lack of consumer protection.
Condo managers
The new Condo Act should introduce mandatory qualifications for Condominium Managers. Many condominium owners and residents may be more familiar with the terminology “property managers” and “property management office” in their condominium complex. These managers should be mandated to have training or an understanding of the country’s Condo Act, condo declarations, rules and regulations of a condo, by-law and or other important information relating to the finances, building maintenance, operations etc. of a condo corporation.
Board of Directors positions/Implementation of fines for directors
Recommendations – Implement a fine structure for directors who operate the affairs of the Corporation not in compliance with the Condo Act
Number of directors on the board
Recommendation – There should be a mandated five-member Board of Directors for all condominiums.
Reasons – This allows proper discussion and a decision-making process without too much control. It protects the Condo Corporation and owners because there is less chance of dictatorship and non-compliance to the act since it ensures better governance of responsibilities.
Immediate removal of director
Recommendation – If a director is found to be in non–compliance to the Condo Act, Declaration and By-Laws of the Corporation there must be an immediate removal of that director.
Reasons – Self-explanatory, a director has a fiduciary duty to the Corporation and must adhere to all requirements of the above.
Educational condominium operations course
Recommendation – the Ministry of Consumer Services should be implementing a course structure. They should work with the COA to implement these courses. COA will be the only registered non -profit association representing Condo Owners. We do not represent Condo service related trades.
Reasons – To ensure that Directors have some understanding of the operations, declaration and by-law structure of a Condo Corporation. Corporation insurance policies, directors insurance and fines, etc relating to different situations should also be part of the course. We would suggest segments I, II and III provide proper certification and better knowledge.
Licensing of property management firms/ companies
Recommendation – Property Management firms should be licensed and have regulatory policies as prepared by the Ministry of Consumers Services or Better Business Bureau.
Reason – Property Management Firms / Companies are responsible for the actions of the Property Managers they have employed to work at their contracted condominiums. It is not necessary and inappropriate to mandate that Property Managers are licensed when they are only employees of the Property Management Company. It is the company who has the contract as approved by the Board of Directors and accepts full responsibilities of the management operations of the condominium Corporation. Also as noted in the Reserve Fund section; many of these Property Management firms offer direction or have their accounting staff provide recommendations for placement of reserve funds; licensing these firms will protect that situation as well as many other relating to contractual arrangements with other service providers and potential of conflict of interest between the Management firm and other service providers.
All condominiums must have a standardized declaration
Recommendation – To create a standardized declaration to protect the interest of the Corporation and written in everyday language for Condo Owners to understand.
Reason – All condominiums should have a standardized declaration written in every language for the general public to read. This would prevent the Boards from changing the declaration at will. Although the Condo Act stipulates requirements to change a declaration; it is self-governing and in complete control of the Board of Directors. Proxies could be altered to achieve the votes required for the change considering that proxies are not monitored or held by a third party. A standardized declaration would prevent this from happening and allows Condo Owners, Lawyers and the general public the ability to familiarize themselves with the declaration in effect for all Condominiums across the country without confusion.
Corporation documentation: Requests from owners
Recommendation – Implement specific guidelines for Board of Directors to follow when an owner is requesting Corporation documentation.
Reasons – The Board of Directors has full control of the Corporation Documentation and can withhold the same from owners although they have requested a copy of the same. The owners have no options to obtain these documents other than to hire a lawyer for representation costing them unnecessary expenses.
Compliance with declaration
Recommendation – Non-compliance with the declaration relating to renovations, alterations, key lock changes and installations and having this work done without the Board of Directors consent.
Reasons : There are problematic issues which are not being recognized by the Courts and Condo Corporations have to spend unaccounted for Corporation funds to hire lawyers, go to court and still risk winning the case because the declarations are ambiguous and the Courts may not rule in favour of the Corporation. Case studies in favour of the Corporations sometimes assist the final judgment, but the Corporations should not be subjected to the time, energy and cost associated with trying to enforce their declaration.
Recommendation – Full costs for legal fees and court proceedings should be enforced on the declaration to prevent the above non-compliance issues and the Corporation can lien the unit in the event that these costs are not paid.
Reasons – Condo Owners will be reluctant to participate in non-compliance issues if they are held responsible for full payment of costs relating to enforcement of the declaration. Short term rentals as noted in many declarations in particular newer buildngs .
Recommendation – A standardized declaration would enforce the minimum time period for short term rentals and prevent the Builders, Lawyers and Directors from shortening the period.
Reason – There is no governance or mandate on the time limits for short term rentals noted on the declarations. This affects the Corporation creating a transient community resulting in the potential for more security and safety concerns. It also affects our tourism and hotel industry because investors are purchasing these units and advertising 2-3 day stays across the Internet to attract tourists.
Balconies – Ensure responsibility with Corporation
Recommendation – To ensure that balconies are noted on a standard declaration as part of the exterior building of the Corporation and not the responsibility of the owner.
Reason – There are some buildings where the responsibility of repair etc. to a balcony rests on the shoulders of the owners as stated in their declaration. New owners buying into these building will have the reserve fund and status review by their lawyers their reserve funds study is based on requirements and responsibilities as per the declarations and the excessive costs of balcony repairs / replacements is expensive for Condo owners. They must always be part of the Corporation expense so reserve funds can be used if they require repair / refurbishment etc.
Dispute resolution
Recommendation – Establish a dispute resolution for Condo Owners having difficulty with their Board of Directors.
Many Condominium owners have complained that they have no place to go to get their problems resolved according to the present Condominium Act. Many knowledgeable people believe that a section of the UDA or the Consumer Protection Authority will do a responsible job in helping the Condominium Owners. If the UDA or the Consumer Protection Authority can have a separate unit with trained, qualified staff, it’s going to be a great consolation for Unit Owners who are helpless now.
Reasons – We have a Catch 22 situation when it comes to Board of Directors and Property Managers or Property Management Firms. There is a huge misunderstanding within the Condo Community. Owners who have a dispute with Property Management must then go to their Board of Directors because the Property Managers are only employees of the Property Management Firm who is on contract by the Board of Directors for the Corporation. If there is a dispute the Board of Directors are responsible to address the dispute but if they like the Property Manager or Property Management Firm they side with them and ignore the Condo Owner. On another note:unfortunately many Board of Directors depend on the Property Managers advice and recommendations because they may not be informed or educated to the requirements / operations of a Condominium Corporation so they leave too much power in the hands of the Property Managers and or Property Management Firms. In conclusion it’s absolutely necessary to have a Condominium Owners Association in Sri Lanka to protect the investment of the owners and their lifestyle. This will be a great benefit to the industry as a whole.
(The writer 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)