The Condominium Act provides much better protection for buyers and brings changes to condominium management regulations
Sorachon Boonsong and Rachoj Tawintermsup
The Condominium Act BE 2551 (2008), which came into force in July, has brought many significant changes to the law governing condominiums. While the more stringent measures to protect consumers are welcomed, it has left developers with a lot of homework to do.
With many amendments made to internal condominium management regulations, it is paramount that all parties take note, gear up, and embrace the changes.
The introduction of the standard sale and purchase agreement (SPA) for a condominium unit is a prime example of the new consumer-orientated changes. In the past, although subject to the Consumer Protection Act, SPAs were not strictly regulated. The terms and conditions were, therefore, generally dictated by each developer.
For the sake of consistency, all developers must now use the standard agreement prescribed by the Interior Ministry. Any part of an agreement that is not in line with the standard form, and not beneficial to the buyer, is not only unenforceable, but the developer may even face criminal charges, potentially resulting in hefty fines. This tips the balance very much in favour of buyers.
However, this standard agreement is still the subject of an ongoing debate. Due to almost non-existent protection for the seller, vague language and lack of detail in many parts, its application is commercially impossible. The challenge for developers is how to add other terms and conditions on top of the standard agreement, in ways that do not conflict with the law.
At this point, due to the novelty of the new Act, and the lack of precedents from the authority's standpoint, there is no clear guidance as to which methods can be used, or what additional terms and conditions are deemed acceptable for incorporation into condominium SPAs. It seems clear that the authority will have to step up and resolve this confusion in the near future, whether by prescribing a new and improved form, or giving clear guidelines as to what may be incorporated into the standard agreement, and how.
To further protect buyers, condominium advertisements are now also strictly regulated. The advertising material must correspond to the facts listed in the condominium registration documents. Advertising material is also now considered part of the terms and conditions of the condominium SPA. Failure to provide the items presented in an advertisement may constitute a breach of agreement. In addition, the new Act clearly states that if advertising material is contradictory to, or inconsistent with the details in the relevant condominium SPA, it will be interpreted in a way that benefits the buyer.
As a result, developers have to review their marketing schemes and materials, and ensure that, among other things, computer-generated images of condominium features are not "too good to be true".
Nonetheless, to avoid legal complications, prospective buyers are still encouraged to research whether the details contained in an advertisement actually match reality, before purchasing the property.
Another potentially troublesome issue for developers is that no commercial activity can be conducted in a condominium, except in the spaces clearly specified on the plan submitted during condominium registration. This is a concern, especially for projects that allocate some part of the condominium for use as a hotel or office. Although there has not been any direct prohibition of this kind of commercial use, some authorities are of the view that it is not to the benefit and enjoyment of condominium residents. As such, it may be seen as conflicting with the underlying purpose of the condominium law. Further clarification is needed.
Another area where there are notable changes in the regulations is in condominium management. Firstly, the ownership ratio in a condominium's common property, which represents each owner's voting power, is no longer calculated based on unit price ratio, but on unit space ratio. This means that those with expensive penthouses will no longer have more voting power than those with ordinary rooms of the same size. However, this change only applies to new condominiums that are yet to be registered. To enhance the transparency and efficiency of management, it is now mandatory for the co-owners' representatives committee, in the form of a condominium juristic person, to produce annual reports akin to those required from publicly listed companies. Details such as balance sheets, expenses and auditor's reports must be presented at the annual general meeting for approval. While this may already be common practice, spelling out such requirements should provide broad protection of owners' interests and minimise potential disputes.
The new law expressly gives a group of co-owners the right to call for an extraordinary meeting, to ensure that owners have the means to address certain problems in a timely fashion. In the past, an extraordinary meeting could only be called if a condominium made it so available in its Articles of Association (AoA).
There are many other significant changes to the internal management regulations generally contained in the AoA. These include, among other things, rules and procedures relating to co-owners' meetings, voting and the responsibilities of the condominium juristic person and the responsible personnel.
Consequently, condominiums that are already registered will have to revise their AoA, through the approval of a co-owners' resolution, which will be the responsibility of the condominium juristic person.
Meanwhile, developers who have not registered their condominiums must take these changes into consideration when drafting their AoA.
As illustrated, there are a number of new regulations in place that owners, buyers, sellers and developers must all take into account. Buyers should be aware of their rights when purchasing a condominium unit, while developers and condominium managements should be aware of their extended responsibilities.
Sorachon Boonsong is a partner, and
Rachoj Tawintermsup a lawyer, at the law firm of Baker and McKenzie.
Prev
1
2
3
4
5
6
7
8
Next
