Further Reading:
Condominium Woes
Several discussions on local Internet mailing lists last month focussed on dramatic failures of condominiums in Pattaya (notably that units had been delivered without title and then sold again by the developer, with bank finance, and said units were now being repossessed by the banks despite the first "owner" have paid in full in cash) and defaults by a condominium management company in Phuket (as reported on page 5 of this issue of the Gazette). The difficulties that "owners" were having getting what they paid for was broadly perceived to mean that there was a lack of consumer protection. Several of those correspondents have asked me for my comments.
First of all it is perhaps appropriate to say that these two examples are the exception rather than the rule and that most local developers are honest and well intentioned. However the long running oversupply position in many condominium, commercial and office buildings is and will continue to put strains on developers and managers of such property and more than the usual precautionary measures by both prospective purchasers and current owners of condominiums is, in order.
There are basic steps that should be taken in any purchase anywhere
in the world, such as making sure that when you make payment, that you
also receive "title". Possession of the unit and it’s
key means little is someone else holds the paper and this is mortgaged
to a bank holding a prior claim. A contract of sale will give you a
claim against the vendor/developer, but if he is a rouge or bankrupt,
there is remarkably little that courts can do to recover your investment
if you don’t hold "title". A simple background check
of the developer and a review of the sales history of the project are
also in order. It sound basic, but the stories from Pattaya suggest
that some still need reminding of such basic issues.
Lets move on a step, you have purchased an attractive apartment, you have secured good clear title to your condominium. No one can take it from you. Correct. So far. You own your unit irrevocably, but you also own (and have a commitment too) to a shared part of the property (the Common Property) that will in many cases be a critical and integral part of your total investment. What use is your condo without the elevator that lets you reach it?
The condominium code clearly lays out the rights and obligations of all owners in a condominium and their voting rights in determining operation, management and maintenance of the property. This is all incorporated into the juristic person of the Condominium Company.
This is an organization very similar in structure to any other corporation save that the "shareholders" are the "title" owners of the condominium units rather than stocks or shares. The Condominium Company has to keep it’s own independent financial accounts, these together with operation budgets have to be presented to it’s owners for approval at general meeting at least once a year. Owners committees (equivalent to board of directors) have to be elected and they determine policy that is implemented by a Condominium Manager (also appointed by majority vote of owners).
Managers can of course be good and bad. As often as not (because initially no one else is really in a position to organize it) the first manager of a condominium is by default the developer himself or an appointment of the developer. That appointment may work out well, it may not. What is important is that owners individually and jointly monitor the performance of the manager and their Condominium Company to see that it is serving their needs as they would wish it, that sensible budgets and condominium fees are being set, that such fees are being collected and such budgets being correctly implemented.
If your manager is doing a good and professional job and delivering thorough reports and accounting, all is well and good. If not it’s time for owners to consider getting more directly involved (as is their clear right) and if requests for action and negotiations fail, to directly take control of their own management. This in the final essence is the intent and purpose of the Condominium Act, that owners should have this right of self determinism. Several condominium owners in buildings in Phuket have organized themselves to establish active owners committees and taken over the management of their own buildings - and generally this has been a good move for those for those involved and for the property as a whole.
In buildings in which sales have been poor and the developer is still the majority owner, taking action can be much more difficult. As a prospective buyer it may be wise to avoid such properties. As a current (minority) owner, all is not without hope. Your developer/manager still has legal obligations as prescribed in the condominium codes and if they are being abused it is well advised that minority owners group together to take action to see that their rights are observed. This is admittedly difficult and time consuming and will probably require professional legal assistance, but efforts expended to rectify a deteriorating situation now could save much greater hardships in the future. It’s a long walk to the eighteenth floor.