Developer Obligation in Housing & Condominium Developments

Developer Obligation in Housing & Condominium Developments        

Over the last month or so I have been inundated with complaints from co-owners of houses and condos in numerous projects. They have had major problems with the projects since the rain and flooding. Since this has occurred I thought it necessary to look into the facts of who is responsible for the repairs and actions of such damages.

Whether a housing or condominium development, there is a procedure to follow whereby the developer of any project has to comply to so that the co-owners of the property they are constructing have the right and option to take possession of the common areas and effectively the on-going operations of the project.

A developer is obligated to comply with these standards and provide the facilities that they have proposed when they obtained their developers license. To obtain the license the developer then has to hand over a ‘bond’ or guarantee to the government to make sure they comply to these standards. Once the developer has sold a minimum of 80% of their development, they are required to contact all co-owners, with a request to form a co-owner residents committee.

Once a committee has been agreed by the co-owners, the developer is required to form a Thai registered company to take possession of the common areas of the project, being roads, communal swimming pool, corridors, etc. This company is formed and paid for using the bond that is supposed to be paid back to the co-owners once the government has agreed the project complies with the regulations and standards the developer agreed to produce within the project (this bond shouldn’t be mistaken for the sinking fund).

Once the company is formed, the co-owners take possession of that company and the company’s bank account, which in it has been deposited the balance of the bond and any sinking funds that have been paid at the time of purchase by co-owners.  Then only at this time are the developers free of any liability from the development.

Over the last few weeks we have seen many cases of underground car parks in hotels and condominiums flooding, roofs leaking and causing damage to co-owners property. Is the developer responsible? If the developer of the project has informed the co-owners that he wishes to handover the common areas, and they have specified at time frame in which this is to be completed, they have effectively wavered their rights and responsibilities to the upkeep and maintenance of the project if the co-owners haven’t taken up the opportunity to do so. At the same time of the developer asking as such to hand over the project, it is the co-owners responsibility to make sure any or all outstanding maintenance issues with the project to be corrected before such hand over can take place.

If the common area is still the responsibility of the developer then yes, they are liable and should cover all damages. In most cases any damage caused to property maybe covered by the project insurance, but if the damage is caused within the boundaries of the co-owners own property it is their responsibility.

It all becomes a ‘grey area’ and can be argued who is responsible for any damaged in such natural disasters. In the perfect world the developer should be looking to complete the project to the standards and specifications they have advertised, then hand over ownership of common areas, reimburse the bonds and sinking funds and allow the co-owners to take responsibility of the project.  This isn’t always the case and we don’t live in a perfect world.

If the developer has completed their obligations and conformed to the above process and handed over to co-owners then there should be insurance premiums in place to cover such natural disasters as flooding and leaks. All co-owners should have their own insurance coverage for personal property.

The worst thing co-owners can do is to start using sinking funds to cover such major issues. A sinking fund can disappear very quickly if used inadequately, and believe me, it will be even harder to replenish the sinking fund as it becomes difficult to get co-owners to pay and agree to this equally. The laws of condominium and housing projects that exist make it very hard to get all parties to agree to have money reimbursed to such funds with voting rights and the required number of votes.

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