Prime
A law that allows you to own an apartment
Condominiums can be owned by companies that are supposed to provide accommodation for their staff. Photo by Faiswal Kasirye.
What you need to know:
Have you ever stayed in an apartment but wished you could buy it? Farahani Mukisa spoke to some experts and they explained how you can own that apartment.
Along time ago, many African communities preferred to live in homesteads for reasons such as security, sharing social amenities and strengthening the family bond, among others.
Such homesteads were characterised by grass-thatched huts spread horizontally on a vast piece of land; and there was vast land at the time.
Although such homesteads are being phased out, one is able to realise its return but in an improved and innovate concept dubbed, the condominium.
Condominium or Condo, though still a new idea in Uganda, experts say is a concept worth adopting and investing in, especially in the town setting, where land is increasingly diminishing.
The condominium law
Under the Condominium Property Act of 2012, a real estate development company can build apartments and sell them as is and give the buyer a title deed for his property the same way you would sale a stand-alone house on a plot of land.
Therefore, it is a form of housing tenure system where part of a piece of real estate usually of an apartment house is individually owned.
In this setting, use of and access to shared facilities, such as hallways, heating system, elevators, and exterior areas are executed under legal rights associated with the individual ownership and controlled by the association of owners that jointly represent ownership of the whole condominium.
What it means
According to Ivan Niyonzima, the proprietor of Property Services Ltd, a condominium is a communal housing setting where the owner of the land erects a storeyed building and subleases the space above his flats for other occupants.
“It is better to buy off an already erected structure as it provides for a uniform layer of structure to avoid risks of the building overlapping due to uncoordinated materials used during construction,” Mr Niyonzima advises.
The condominium concept is a new phenomenon in Uganda, which was introduced through the enaction of the Condominium Property Regulations, in 2002, that was later amended in 2012.
Niyonzima explains that the Condominium Law, on the other hand, is a concept where one owns a title of an apartment without physical ownership of the land.
He says, for instance, if a person planned to construct a storeyed house of four floors, but runs short of funds during the construction process, but the person has been able to complete the ground floor, another person can be sold or leased to start construction at that stage.
“The Law provides the building owner rights to sublease the unfinished top floor of the house so that it does not lie idle. This means, the subleased person also gets full ownership of the space,” Niyonzima explains.
However, he notes that in such cases of fractionated subleasing and construction, the original owner of the building must lay a strong foundation that can uphold the weight of the other flats to be erected on top.
Niyonzima says currently, condominiums are dominated by private sectors because of the huge funds required to invest in the infrastructures.
“It is an expensive venture, and it is the reason why it is not affordable to many Ugandans. Currently, you find that it is a reserve for diplomats and expatriates,” he observes.
Many condominium flats are visibly cropping up especially in the upscale suburbs of Kampala, Wakiso, Entebbe Municipality, Kira Town Council and some parts of Mukono District.
Others have also sprung up in Luzira, Naalya, Namungoona and Lubowa among other places.
The beneficiaries
Entities such as big corporate companies and manufacturing sectors that are by law required to provide accommodation for their staff, can set up condominiums and set agreeable buying off terms.
Such an arrangement, according to the National Social Security Fund website, will be rolled out for its members.
“This can also apply to families with members contributing an agreeable fund pool towards the project, as it is being done in many Arab countries, where family members prefer to stay near each other in a communal setting,” Ivan Niyonzima, the proprietor of Property Services Ltd explains.
In cities such as Addis Ababa, the Ethiopian government rolled out three condominium housing projects, where interested salaried workers get subsidized houses and pay in advance off their salaries in form of a mortgage loan.
Advantages
Ivan Niyonzima, the proprietor of Property Services Ltd, says one could have preferred to live in a given environment such as Kololo or Muyenga, but limited by funds to buy land and construct a stand-alone house. The quick solution, he says, is to buy condominiums. He says for the investors, it provides for a quick sale of the properties and yet with high returns on a small scale property.
He says it is price competitiveness, especially for real estate agencies, provides for shared built-in amenities, and convenient locations and designs and better land utilisation.
Sharing
Under condominium, there are common elements shared by all occupants of a given condominium environment. Under such circumstances, there is a provision for a condominium reserve fund.
Condominium associations must reserve funds for roof replacement, painting and pavement resurfacing (all regardless of cost) as well as for any other item for which the replacement or deferred maintenance cost exceeds an amount that the owners agreed upon.
According to Fred Ddumba, a private mortgage expert, the amount required to be set aside in reserve is computed by a formula that takes the estimated cost of deferred maintenance, or the replacement cost, and divides it by the remaining useful life of the asset.
As an example, he says, “assume the estimated cost to replace the roof of a condominium building is Shs1m and it is also estimated that the roof will have to be replaced in 10 years. The current annual contribution that must be placed in the roof-replacement reserve account is Shs100, 000 per occupant.”
Deposits to reserve accounts must be made in the same installments that valuations are collected. “If the association collects valuations quarterly, then the association board will need to make four deposits (one each quarter) in the amount of Shs25, 000 into the roof-reserve account,” Ddumba explains.
He adds that the primary purpose of establishing and funding reserves is to spread the costs of major expenditures over the lives of the assets to be maintained or replaced. This is done to avoid large annual assessment increases or the need to levy special assessments, which some owners may be unable to afford all at once.
Challenges
According to Niyonzima, condominiums are an expensive venture, which require huge funds. For instance, the average cost of a three bedroom condominium apartment goes for Shs250m to Shs300m in most upscale areas around Kampala.
Dennis Bugaya, the Buganda Land Board legal officer says not everyone has a sense of communally living and due to the closeness of members; problems such as the “five p’s”, pets, parking, personality/privacy, parties, and people are bond to frequently erupt.
Niyonzima also observes that condominiums create flexibility challenges in circumstances that require the condominium to be sold in a limited time, as they generally sell less than single-family houses. But according to Bugaya, all these challenges can be overcome through documenting the guiding principles and stipulating the possible remedies in case of defiance of obligation.
Why the condominium is unpopular
Andrew Mukiibi, the president of the Association of Real Estate Agencies, however, says the venture can also be adopted by the Ugandan government, especially in towns where slums are cropping up at an alarming rate.
Mukiibi recently at a meeting with the Indian Business Forum said many Ugandans have not fully realised or utilised the benefits the condominium law presents to the country, especially in the face of the high population growth in the country, especially in the expanding cosmopolitan cities such as the Greater Kampala Metropolitan Area.
“As a country, we are faced with the challenge of increasing slums that have their associated challenges which are expensive to address.” he said. “Government needs to invest in low-cost condominiums that are affordable to society,” Mukiibi advises.
Ivan Niyonzima, the proprietor of Property Services Ltd, says the concept has remained unpopular due to lack of public sensitisation about the law that has left; many Ugandans in the black over its benefits.
He says Ugandans also have many beliefs on land ownership, especially where someone wants to own land physically while others prefer to live in a spacious environment even when their earning does not allow it.
caution
According to Dennis Bugaya, the Buganda Land Board legal officer, Uganda has many land tenure system that include Freehold systems, Lease system and Mailo land system.
Bugaya says in each of these systems, an individual must observe the terms and conditions that were signed especially for the lease system.
“Under the lease system, if the mother title has an obligation of meeting certain premiums to the leasee, then the law provides that all the condominium holders share obligations,” Bugaya explains.
