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D. L. & F. De Saram | Sri Lanka

Applicability of the Condominium Management Authority Law, Apartment Ownership Law and Land (Restrictions on Alienation) Act within the area of authority of the Colombo Port City

The Colombo Port City Economic Commission Act No.11 of 2021 (“Port City Act”) makes provision for the establishment of:

  • a Special Economic Zone to be called “The Colombo Port City Special Economic Zone” (“Colombo Port City”) within which there is ease of doing business that will attract new investments primarily to facilitate the diversification of the service economy, to promote the inflow of foreign exchange into the Colombo Port City and to generate new employment opportunities.
  • a Commission called the Colombo Port City Economic Commission (“Commission”) which shall be entrusted with the administration, regulation and control of all matters connected with businesses and other operations in and from the Area of Authority (as demarcated in the Port City Act) of the Colombo Port City.

The Port City Act sets out the legal framework for the administration and management of the Colombo Port City. In this Article, we aim to provide an overview of the applicability of the Condominium Management Authority Law, Apartment Ownership Law and Land (Restrictions on Alienation) Act within the Area of Authority of the Colombo Port City.

Land ownership within the Colombo Port City

From and after the date of commencement of the Port City Act, all land comprising the Area of Authority of the Colombo Port City shall be vested with the Commission. On the coming into operation of the Port City Act, the President may issue a Land Grant under the Crown Lands Ordinance in the name of the Commission, in respect of all land comprising the Area of Authority of the Colombo Port City.  

Applicability of the Condominium Management Authority Law and Apartment Ownership Law within the Area of Authority of the Colombo Port City

From and after the date of commencement of the Port City Act, the Condominium Management Authority Law and the Apartment Ownership Law shall, for the purpose of the effective implementation of the provisions of the Port City Act, have effect within the Area of Authority of the Colombo Port City.

The regulations made under the Condominium Management Authority Law or the Apartment Ownership Law and which are in force on the date of commencement of the Port City Act, shall also be operative within the Area of Authority of the Colombo Port City until regulations are made under the Port City Act. Provided however, with the coming into operation of the regulations made under the Port City Act, if there is a conflict between the regulations passed under the Condominium Management Authority Law or the Apartment Ownership Law with any regulations passed under the Port City Act, then the regulations made under the Port City Act shall prevail.

From and after the date of commencement of this Act, the Commission shall, in any instance where the Condominium Management Authority Law and the Apartment Ownership Law are applicable within the Area of Authority of the Colombo Port City, mutatis mutandis, exercise, perform and discharge all or any of the powers, duties and functions vested in or assigned to the Condominium Management Authority, in like manner as though a reference in the aforesaid Condominium Management Authority Law and the said Apartment Ownership Law –

  • to the “Condominium Management Authority”, were a reference to the Commission and
  • to the “Minister”, were a reference to the “President or in the event that the subject of the Colombo Port City is assigned to a Minister, to such Minister to whom the subject of Colombo Port City has been assigned”

In the exercise, performance and discharge of its powers, duties and functions, the Commission shall obtain the concurrence of the Condominium Management Authority, to the extent specifically provided for in the Port City Act. The Condominium Management Authority shall, as a matter of priority in the circumstances, communicate its decision to the Commission.

To ensure that the construction of condominium properties within the Area of Authority of the Colombo Port City is carried out in an expeditious manner, the Commission may require the Condominium Management Authority to operate an office within the Area of Authority of the Colombo Port City. The Condominium Management Authority shall ensure that such office is managed by officers of sufficient seniority and authority to ensure expeditious implementation of the provisions of the Condominium Management Authority Law and the Apartment Ownership Law.

In furtherance of national interest or in advancement of the national economy, the Commission has the power to:

  • lease or transfer on freehold basis, condominium parcels standing on Government Marketable Land situated within the Area of Authority of the Colombo Port City and vested in the Commission, together with the respective investor or developer, as the case may be
  • lease or transfer on freehold basis, condominium parcels standing on Project Company Marketable Land situated within the Area of Authority of the Colombo Port City and vested in the Commission in terms of this Act, together with the Project Company which holds Master Leases relating thereto

The Commission has the power to delegate or assign to the Estate Manager such functions that relate to the subjects of condominium management and apartment ownership.

Applicability of the Land (Restrictions on Alienation) Act within the Area of Authority of the Colombo Port City.

The Land (Restrictions on Alienation) Act No.38 of 2014 (“the LRA Act”), prohibits the transfer of title of land in Sri Lanka to the following persons / entities:

  • a foreigner
  • a company incorporated in Sri Lanka, with direct or indirect foreign shareholding of 50% or more (save and except a listed company with a foreign shareholding of 50% or more with effect from 1 April 2018)
  • a foreign company

Foreigners, foreign companies and companies incorporated in Sri Lanka with direct or indirect foreign shareholding of 50% or more are however permitted to enter into lease agreements for a period not exceeding 99 years.

Subject to such restrictions contained in the LRA Act, the Port City Act and other applicable written laws, the Commission may:

  • lease Government Marketable Land situated within the Area of Authority of the Colombo Port City and vested in the Commission
  • lease, Project Company Marketable Land situated within the Area of Authority of the Colombo Port City and vested in the Commission, jointly with the Project Company which holds Master Leases relating thereto
  • lease or transfer on freehold basis, condominium parcels standing on Government Marketable Land situated within the Area of Authority of the Colombo Port City and vested in the Commission, jointly with the respective investor or developer, as the case may be
  • lease or transfer on freehold basis, condominium parcels standing on Project Company Marketable Land situated within the Area of Authority of the Colombo Port City and vested in the Commission, jointly with the Project Company which holds Master Leases relating thereto, to any person, and payment therefor shall be made in any designated foreign currency, other than Sri Lanka Rupees.

Notwithstanding the above, the Commission may lease Government Marketable Land or Project Company Marketable Land, or lease or transfer on freehold basis any condominium parcel standing on either Government Marketable Land or Project Company Marketable Land, to any person or company, to whom the restrictions specified in the LRA Act do not apply, in Sri Lanka Rupees, in accordance with such terms and conditions as may be determined by the Commission. Provided however that, if such person or company to whom the restrictions specified in the LRA Act do not apply and who has made payment in Sri Lanka Rupees, and who, within a period of five years from the date of the respective transaction paid for in Sri Lanka Rupees, in turn transfers, leases or rents such property to a third party on payment made in any designated foreign currency other than Sri Lanka Rupees, shall be required to remit the sum so received in a designated foreign currency other than Sri Lanka Rupees, to a Resident Foreign Currency Account operated and maintained in Sri Lanka outside the Area of Authority of the Colombo Port City.

Any person or company, to whom the restrictions specified in the LRA Act does not apply, and who has leased land as permitted in the manner mentioned above, may along with an investor or a consortium of investors, apply to engage in business in and from the Area of Authority of the Colombo Port City in any designated foreign currency other than in Sri Lanka Rupees, on the basis that the value of the land so leased forms part of such investment.

Written by:

Hansi Abayaratne

hansi(et)desaram.com

+9411-2695782

Article from – TRENDS Real Estate No 9

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