PROBLEMS ARISING FROM CONDOMINIUM COMMON AREA FEES

In general, foreigners cannot own land in Thailand unless they are permitted to do so under special laws, which are rarely used. However, under Thai law, foreigners can purchase condominium units up to 49% of the total area of all units in a condominium block.

In a condominium block, all unit owners are jointly responsible for common area fees, which are individually calculated in proportion to the area of each condominium unit.

The collection of condominium unit common area fees is a serious problem for various condominium juristic persons as many unit owners fail to pay their allocated fees in full and on time.

The common area fee covers general management expenses such as fees for security services, cleaning services and lift maintenance, electricity for common property walkways and common property repairs. Electricity and water expenses are also payable by each unit owner because such expenses are incurred by each unit.

According to the Condominium Act of 2008, the registration of juristic acts relating to condominium units requires debt-free certificates, which show that such condominium units are free of debt, meaning that no common area fee is in arrears. Such certificates are issued by the condominium juristic person, so that land officers will effect the condominium registration for the purchaser.

A problem may arise when condominium unit owners are sued for damages in civil cases. Most cases involve unit owners who obtain loans from banks to pay for the condominium units, but who later cannot make the repayment. They are then sued and the courts render judgment for the banks to recover their debts. Consequently, the condominium units are seized and sold by auction.

The problem arises when previous unit owners have failed to pay common area fees. Persons who purchase by auction cannot effect the transfer registration of the condominium units because the respective condominium juristic persons will not issue debt-free certificates unless the common area fees are paid first. As a result, people are reluctant to bid for condominium units in an auction. Thus, seized units are blocked in the system and cannot be sold by auction.

This problem also includes cases where unit owners are sued in other types of civil cases, and their condominium units are seized for sale by auction.

To resolve such problems, the Legal Execution Department proposes amending the Civil Procedure Code so that when condominium units are sold by auction the proceeds from the sale must be initially used to pay the common area fees. The remaining balance will be paid to the creditors. This method will remove obstacles to ownership transfer of the units to the winning bidders of auctions.

At present, the proposed amendment is merely a draft bill and is subject to further amendments. For example, an officer of the Legal Execution Department must first inform the condominium juristic person of any such condominium sale by auction, who will then report the amount of any outstanding common area fees, interest or other penalties and also the applied rates of the common area fee to the department within 30 days. Consequently, common area fees that will be incurred in the future can be prior calculated, especially in cases where several auctions must be held until a condominium unit is sold.

If a condominium juristic person fails to inform the department within a 30-day period, an auction winner can still effect the ownership transfer registration without needing the debt-free certificate.

If the National Legislative Assembly enacts this law, it will help resolve the problem of purchasing by auction condominium units that have common area fee payments in arrears. However, it may reduce the discipline of some condominium unit owners to pay the common area fee. Overall, comparing the proposed new system with the existing one, it should prove useful to the condominium business, particularly those parties involved in the legal administration of seized condominium units.