Sales Of Pre Construction Condominiums

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This slide presentation addresses important issues of concern for buyers and sellers of condominium properties in Sri Lanka

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Sales Of Pre Construction Condominiums

  1. 1. CONDOMINIUM SALES in Sri Lanka Some issues of concern for Buyers and Sellers of pre-construction condominium properties by Ajithaa Edirimane LLB (Colombo) MLB (Hamburg) Attorney-at-Law & Notary Public
  2. 2. Pre construction Condominiums (Condominiums sold Off the Plan) Prior to registration of Provisional Condominium Property After registration of Provisional Condominium Property
  3. 3. PRE-CONSTUCTION CONDOMINIUMS Prior to registration of Provisional Condominium Property From the perspective of Buyers <ul><li>How to recover an advance if project is not completed on scheduled date? </li></ul><ul><li>Ideally, execute a Reservation Agreement with Developer and deposit advance with a neutral third party as an Escrow Agent (who may be the third party to the Agreement) </li></ul><ul><li>Request the inclusion of a provision giving right of termination. </li></ul><ul><li>- The third party can be the lender / bank or provider of funds to the prospective purchaser. </li></ul>
  4. 4. <ul><li>PRE-CONSTUCTION CONDOMINIUMS After registration of Provisional Condominium Property </li></ul><ul><li>Is the project registered? </li></ul><ul><li>Request for copy of the registered Provisional Deed of Declaration. </li></ul><ul><li>Will the project have the basic amenities? </li></ul><ul><li>Insist on full disclosure of all important matters (i.e completion date, amenities provided, common areas) and request for copy of Provisional Condominium Plan </li></ul>
  5. 5. <ul><li>Can an advance be recovered if project is not completed? </li></ul><ul><li>Enter into a Notary attested Sales Agreement. Ideally deposit should be placed with neutral Escrow Agent till sufficient completion of the project (Agreement should be registered) </li></ul><ul><li>Is the condominium unit of the size and description given in promotional documents? – </li></ul><ul><li>Check copy of registered Deed of Declaration and connected Plan of subdivision for the allocated area and description. </li></ul>
  6. 6. <ul><li>When will the condominium project be completed? – </li></ul><ul><li>Tentative date to be given by Developer and inserted in Sales Agreement. (Note: Sales Agreement gives the terms of sale and it is NOT a Deed of Transfer. A Deed of Transfer can be executed only when the condominium property is registered as a ‘subdivided property’ at the Title / Land Registry) </li></ul><ul><li>How can a prospective purchaser check on the progress? – </li></ul><ul><li>Sec.9© of the Common Amenities Board Act No. 24 of 2003 makes it mandatory for Developers to file Progress Reports with the Condominium Management Authority. </li></ul>
  7. 7. PRE-CONSTUCTION CONDOMINUIMS Prior to registration of Provisional Condominium Property From the perspective of Seller / Developer : <ul><li>Securing buyers for condominiums through pre-selling - </li></ul><ul><li>Pre-selling of condominiums require compliance with Sec.4 of Act No. 39 of 2003 (i.e. if a sale occurs ‘off the plan’ before completion, project should be registered within 18 months of such agreement to sell or within 3 months of completion of project) </li></ul>
  8. 8. <ul><li>How to get necessary approvals, including Condominium Management Authority (CMA) Certificate as early as possible? </li></ul><ul><li>- Forward to the CMA for approval the Provisional Condominium Plan (Sec. 3 (a) (b) & © of Act No. 39 of 2003) </li></ul><ul><li>- Ensure requirements as to Common Elements as stipulated in the Apartment Ownership Act, are met. (Sec. 26 of Act No. 11 of 1973 as amended) </li></ul><ul><li>- Cooperate with the Authorities to obtain all clearances. At the same time, inform them of the scheduled dates of completion to honor commitments to buyers. </li></ul><ul><li>Does the Contractor’s Warranty period correspond with the Warranty given by the Developer to prospective unit owners for their individual condominiums? </li></ul><ul><li>Ideally Contractor’s Warranty period should extend beyond one year in multi-storey buildings. </li></ul><ul><li>If not, obtain adequate Insurance Cover to be effective as soon as the Contractor’s Warranty on the building expires. </li></ul>
  9. 9. <ul><li>Are Buyers honoring commitments under Sales Agreements (i.e. payment of installments)? – </li></ul><ul><li>Monitor Sales Agreements and enforce conditions, if necessary. This is possible only if the Developer has not breached any provisions of the applicable law (i.e. Registering the provisional condominium property, issuing proper receipts for payments, etc.) . </li></ul><ul><li>Will the condominium units be completed on the scheduled dates? – </li></ul><ul><li>Monitor Agreement with Contractor and claim from Performance Bond if necessary. </li></ul><ul><li>Who is liable for risks? </li></ul><ul><li>Ensure all risks are covered during construction stage under Contractor’s Insurance Cover. Once the project is taken over and after the expiration of the Warranty Period, risks are borne by the Developer. </li></ul>

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