One of the series of lectures of the Post Attorney Diploma in Conveyancing and Real Property Rights conducted by the Institute of Advanced Legal Studies affiliated to the Sri Lanka Law College (2019 - 2020)

1. CONDOMINIUM PROPERTY LAW – Lecture IV
For the Post Attorney Diploma in “Conveyancing and Real Property Rights”
conducted by the Institute of Advanced Legal Studies affiliated to the Sri Lanka Law College (2019 – 2020)
- Presented by Ajithaa Edirimane, LLB (Colombo) MLB (Hamburg)
Attorney-at-Law & Notary Public

2. Financial issues having an impact
on Management Corporations

3. RIGHTS OF A UNIT OWNER
To attend and vote at meetings / take decisions
regarding condominium property –VOTE AT
MEETINGS
To enjoy quiet possession of the unit and co-owned
common elements – subject to compliance with
By-Laws
To enjoy the amenities and facilities provided within the
condominium property – subject to additional payment (if
required under By-laws)

4. MANAGEMENT OF CO-OWNED COMMON ELEMENTS &
CONTRIBUTIONS
- MANAGEMENT FUND
 Income of the Management Corporation : (Sec. 33 (1) of Act No. 39 of 2003
 Contributions levied and collected from unit owners based on the share values assigned to a unit.
 Fines, interests, penal charges, re-connection charges, etc.
 Proceeds from the disposal of any movable property
 Moneys received by way of loans, donations, gifts, grants, etc
 - credited to the Management Fund
 Invest moneys of the Management fund in a licensed commercial bank, Treasury Bills or
in the HDFC. If not, requires unanimous resolution or ordinary resolution and approval of
the CMA – Sec.33(3)
 - moneys debited from the Management Fund are all expenses related to the management
and maintenance of the condominium property.
 The Council can determine the amount of Contributions to be levied from each unit owner –
based on the Budgeted expenses for the period and by ascertaining the amount per share
value.
 The council can also determine the penal charges for late payment, re-connection charges of water
& electricity, etc.

5.  Part of the Management Fund (excess money) is transferred to a
Sinking Fund for emergency expenses of any major repairs to the
common elements or for any other similar obligation and major
renovations of the Condominium Property.
 The amount to be so transferred or set aside in a sinking fund is decided at
a general meeting from time to time.
 Withdrawal of funds from the Sinking Fund requires a special
resolution or an ordinary resolution with the approval of the CMA –
Sec. 33(5)
- SINKING FUND

6.  MC has the power to contract with the National Water Supply and Drainage Board, the Ceylon
Electricity Board and any local authority or other authority or any other licensee for the supply of water,
electricity and other utilities for all condominium units of the building and to provide such services to all
owners of the condominium units on recovery of service charges and monthly charges for such consumption.
 Arrears of Utility Payments (In terms of Sec.34 of Act No. 39 of 2003) -
 MC has power to disconnect the supply of services such as water, electricity and other utilities if the unit
owner fails to pay any of the amounts demanded by the Corporation. The Corporation shall not proceed to
disconnect such supply unless –

 a resolution is specially passed approving the discontinuance of the service; and

 fourteen (14) days notice of the intended discontinuance along with the copy of the resolution so passed
is sent by registered mail to the owner of the particular condominium unit.
- PROVISION OF ELECTRICITY AND WATER SERVICES

7.  MC has power to levy a monthly contribution on the owners of all the
condominium units in proportion to the share values of their respective
condominium units and to recover such contribution from the owners of
all condominium units. (Sec. 20H of Act No. 45 of 1982 amended by Sec.
33 of Act No. 39 of 2003)
Recovery of Contributions (Sec. 20J of Act No. 45 of 1982)
 Where any contribution has been levied under Sec. 20(H)3 and such
contribution or amount remains unpaid on the expiry of fourteen (14) days
after the Corporation has sent a written demand for the contribution or
amount including any interest due thereon (if any) shall constitute a first
charge on the unit in favour of the management corporation.
 The Corporation shall, subject to the provisions of Sec.20J (3) of Act
No. 45 of 1982, have the power of sale and all other powers relating
or incidental thereto as if the Corporation was a registered mortgagee.
- COLLECTING CONTRIBUTIONS AND RECOVERY OF
ARREARS

8.  Sec.20J (3) – procedure of recovery of contributions
 Pass a Special Resolution at a general meeting for the sale of the unit
 A notice of the intended sale has to be published once in one or more daily
newspapers.
 During the period of 6 weeks after the date of such publication, the unit owner in
arrears has not made any payment of such contribution or the cost of publication
and any incidental charges
 There is no legal action pending in court to restrain the management corporation
from going ahead with the sale.
 Where a transfer has taken place thereafter, such transfer shall be accepted by the
Registrar only if a certified true copy of the Resolution with the seal of the MC
attested by 2 council members is submitted with a copy of the published notice and
a Statutory Declaration by 2 Council Members that arrears had not been paid and
that there is no pending action in court restraining the sale.
- COLLECTING CONTRIBUTIONS AND RECOVERY OF ARREARS (CONT.)

9. RIGHT TO REQUEST COUNCIL TO ISSUE A CERTIFICATE IN A RE-
SALE CONDOMINIUM
 A prospective buyer can insist from the current owner for a Certificate issued by
the MC under Sec. 20 (H)(4) of Act No. 39 of 2003 stating:
 (a) the amount determined as Contribution to be levied from the owner of unit
 (b) the time and manner of payment of Contribution
 (c ) the extent to which such Contribution has been paid (i.e. whether any
outstanding payments are due to be collected)
 (d) the amount recoverable by the Management Corporation in respect of the unit
for repairs in respect of the said unit or Common Elements, which is due and
recoverable from the above unit owner in terms of Sec. 20 (c)
 (e) The sums standing to the credit of the Management Fund
 (f) whether the Management Corporation has incurred any expenditure or is about
to incur such expenditure and if so, the estimated amount of the said expenditure
or the general nature of such repairs, etc.

10. Important duties of the Council –
 Getting adequate Insurance Cover :
 Fire Insurance for the building
 Public Liability Insurance for the Common Elements and common facilities
 Collecting Contributions including payments for CEB, Water Board and any local
authority as licensee. (sec. 34 of Act No. 39 of 2003)
 Ensuring that there is a contingency plan for emergencies, training staff, conducting
fire drills, etc. educating unit owners.
 Taking prompt action when an emergency occurs or when an injury or an accident is
reported within the building including following the proper method in making a claim.

11. IMPORTANCE OF ADEQUATE INSURANCE COVER
1. Management Corporation has an insurable interest in the
Condominium property equivalent to the replacement value of the
building
Potential Risks
 Fire
 Water leaks and defecting plumbing
 Damages caused by adjoining unit owner
 Injuries to unit owners / visitors while using the Common Elements – Public Liability
Insurance cover
2. Insurance cover for fixtures and fittings within an the unit owner’s
apartment

12.  Insurance for potential risks –
 Fire (i.e. defective wiring of the building, fire inside a unit due
to unit owner’s negligence) – Check whether a Fire
Insurance is in place.
 Poor workmanship (i.e. leaking taps, water seeping through
defective constructions, water leakages in bathrooms) – A
review by Structural / Civil Engineer and check whether a
Contractor’s All Risks Insurance covers such defects up to
Limitation of Liability Period. Once that period is over, the MC
should have adequate insurance cover for potential risks.
 Damages caused by adjoining unit owner (i.e. damages from
construction work carried out in the apartment, water
seepage, etc.) – Does the By-laws require unit owner’s to
obtain Contractor’s Insurance before repairs to units.
 Injuries to unit owners / visitors while using the Common
Elements (i.e. slippery floors, injuries or even death while
using common facilities) – Does the Management
Corporation have Public Liability insurance to address such
risks. If not claims against MC will be an additional burden on
unit owners resulting in higher Contribution.

13.  Sec. 3 of the Inland Revenue Act No. 12 of 2004 has exempted
Management Corporations from income tax on its profits and income
arising from the ordinary course of business.
 This exemption has not been extended after 1st April 2018 and
hence if there is an assessable income such income will be liable for
tax at the appropriate tax rate.
 Investment income, such as the interest income of monies deposited in
Fixed Deposits for example, are liable for income tax.
 Property Rates are assessed by the relevant municipal council in
terms of the applicable law and are levied:
 on the Management Corporation for the Common Elements of the
condominium or semi-condominium Property; and
 on the condominium unit owner in respect of the condominium unit.
TAXES AND PROPERTY RATES

14.  The financial reporting of Management Corporations are done on the
basis of Revenue and Expenditure Statements with the financial year
ending on 31st March, 30th June or 31st December, as decided by its
Council.
 The financial year, if different from the statutory financial year ending on
31st March, should be approved by the Inland Revenue under a
Direction to that effect addressed to the Council.
 Financial Statements submitted for consideration at annual general
meetings contain the year end Revenue & Expenditure Accounts
and the Balance Sheet compared with the budgeted figures of the
respective period.
FINANCIAL REPORTING OF MANAGEMENT CORPORATIONS