‘Un-real’ Estate: Colombo’s Faulty Tower Rip-off
By Sulochana Ramiah Mohan
After the bloody 30-year conflict came to a close in 2009, Sri Lanka was ambitious to rebuild. Using this opportunity, property developers began to embark on building luxury apartments, hotels and condominiums. But the rapidly growing construction business also duped customers by presenting project plans with fake approvals obtained from officials.
Constructing luxury apartments is a lucrative business where a developer could easily make 50 per cent profit. It’s a high yielding market because they only buy a plot of land to begin with.
Several cases of fraud by property developers are mounting at the Condominium Management Authority (CMA) and at the Urban Development Authority (UDA). Several Municipal Councils (MCs) are also charged with issuing fake approvals and CID officials are in and out of these places over clients’ complaints.
One such incident left 54 families in the lurch by a property developer, Ceylon Today learns. An attractive 17-storey condominium in Dehiwala was the dream of doctors, engineers, lawyers and many retired persons. A down payment of Rs 470 million was paid to the developer but now the bank that lent the money for the project is readying to auction off the land at the end of this month.
The condo was to be built at No.14, Ramanathan Avenue, Dehiwala by M/s Civi-Mec Construction (Pvt) Ltd but their CM Towers condominium project, put forward by M/s Civi-Mec Construction (Pvt) Ltd by Edward Anton Amalathas, who was a director, came to a standstill. His office was at Colombo 6.
This particular condominium was designed on a 43-perch land. To build a 17-storey condo with a ground floor is against the law but the developer showed the UDA’s and Dehiwala MC’s approval to his clients.
It is said that only nine storeys can be built on 43 perches of land, including the ground floor. According to law, the number of floors is determined by the land area.
It was the Ministry of Water Supply and Drainage who declined to approve the water supply for the condo when they noticed that the UDA was in fault for approving 17 floors.
It is still unclear how construction went ahead since the Mayor and UDA have to discuss before plans are approved. So how this particular project got green light is a mystery.
Prior to 2017, all construction plans were approved by the MC’s Mayor after holding discussion with the UDA. It is alleged that this approval was issued in a similar manner but was cancelled within three months by the UDA and that matter was not conveyed to the customers, Ceylon Today learns.
But reducing the 17-floor condo to a nine-floor one sucked millions of rupees out of the clients who had saved that money for decades.
The clients have written to President Gotabaya Rajapaksa, Prime Minister Mahinda Rajapaksa, Human Rights Commission, the Ministry of Justice, Central Bank and the Ministry of Finance, pleading for help in this situation because those responsible are the ones in Government offices who had first approved the project and then cancelled it for reasons unknown.
Ceylon Today also found out that this property developer had built a similar luxury apartment and had not issued deeds for those who are already occupying it. The residents have filed a case against him with the Condominium Management Authority (CMA) and they are filing a case against the developer.
According to the CMA, after a building is completed, the property developer should obtain Common Element and Common Amenities (CECA) certification for each flat with which he is able to obtain deeds.
This CMA process begins as soon as the condominium is ready for occupancy and within the first 18 months the developer should obtain the certification and deeds for each client. The CMA, established by Act No. 24 of 2003, has powers to administer, control, manage and maintain condominiums, both public and private in areas such as water, sewage, drainage, gas, electricity, garbage disposal, air conditioning, telephone services, roads, access roads, parks, lawns, playgrounds, walking spaces, etc.
This particular luxury apartment was advertised online with attractive graphics of the complex’s interior which went viral and drew in customers.
One customer who returned from overseas with his hard-earned money was intending to buy an apartment for his family.
“I visited their office and they convinced me as they had developed five other apartments in Colombo. There wasn’t any doubt because I was taken to the site too. The price of each apartment was Rs 10.5 million.”
The client had to pay Rs 500,000 non-refundable deposit initially and then in few weeks had deposited Rs 3 million as instructed. “They gave me three different bank accounts and all payments were deposited to the property developer’s name.”
They had told the buyer to settle the balance payment in 36 monthly instalments and the client had settled Rs 7.08 million before the developer got into a legal battle.
It was in 2014 when the lavish apartment units were advertised and the construction began having obtained approval from the then Mayor of Dehiwala Mount Lavinia Municipal Council Dhanasiri Amaratunga. The approval was for a ground floor plus 17 storey housing complex containing 112 middle-class apartment units including a four-floor car park.
The company started building the complex by laying the foundation and mortgaged the said land to a private bank and presented the approved plan.
Thereupon Civi-Mec Construction entered into sales agreements with many buyers who had made down payments and subsequently the balance in instalments.
Having seen the project approval the private bank agreed to finance the condo at first but stopped short after it was deduced that the project was not viable.
Afterwards, the developer closed his office and went into hiding, he had also bought the land in Ramanathan Avenue for Rs 103 million which he had mortgaged at the private bank.
The destitute buyers subsequently made complaints to the Police, CID and the Fraud Bureau. Also some buyers had filed civil suits against the director of Civi-Mec and Amalathas was subsequently arrested. He was released on bail by the Magistrates Court of Mount Lavinia.
These clients have formed the ‘Ramanathan Avenue CM Condo Buyers Association’ to seek justice. They say the authorities have cheated them of their money and destroyed their dreams.
So far the developer had collected a total sum of Rs 550 Million without any interest calculated.
Citing the default sum of Rs 120 million loaned towards the project, the lending bank exercised powers vested to its Board of Directors and initiated the process to recover the said loan by auctioning the property.
Currently the Ramanathan Avenue condo comprises only the ground floor with columns and structures up to the second floor.
One client who booked a two-bedroom - 815 square feet unit on the sixth floor said that he became suspicious with the delays. “The apartment should have been handed over to us in 2018 after four years of construction.”
Apparently the property developer had joined hands with another partner, and in 2018 there had been a general manager and chairman, but the customers could not trace them as there was no e-mail or phone numbers to contact them. It was then they had started lodging complaints to the CID.
The bank was considering auction for Rs 167 million with interest but instead started looking to sell based on the current market value and that is only for the property and not for the structures.
A stay order was issued preventing the auction by the Commercial High Courts due to an injunction filed by Civi-Mec which was concluded by lifting the said stay order and allowing the bank to recover an accumulated sum and other costs totalling Rs 160 million.
The bank has again notified the auction of the property for 28 October which will jeopardise the hopes of the 52 plus and other unknown buyers, who had invested their life savings to own a house.
In the event the bank auctions the property, it will leave everybody with no legal right or claim for the property thereafter. However, if the complex is constructed to be a seventeen-floor building with 112 units, it may alleviate the current housing issues.
There are many cases where developers had sold apartments built on land mortgaged with money lending institutions. Many apartment owners, being unaware of the mortgage had bought apartments at unit rate with the transaction being done on a sale agreement to later realise that they are unable to obtain a deed and that the developer is missing.
There are also instances where even the land is not mortgaged and the transaction is done again on a sale agreement, just with no deed. Such circumstances cause immense hardships to new home-owners and many end up with long drawn litigation. This has to stop and a proper system should be in place so that people cannot be taken for a ride by so-called property developers who dupe their clients with hopes of owning a dream apartment.
Some tenants have still not received their deeds - CMA official
Legal Officer at the CMA Nisansala Ilayperuma noted that they were informed about the Ramanathan Avenue project. She said that that the same developer had failed to meet the Common Element and Common Amenities Certification of another luxury apartment (name withheld) in 2018. “He has not yet obtained deeds for those clients who are already occupying the luxury apartment,” she said.
She said the Common Element certification should be issued to every flat. “The developer should get certified for guarantee and warrantee the building ,water, electricity, common land certified, generators if using, staircase, foundation, beams and washing areas etc., under Act No. 11 of 1973 that was amended as Act No. 45 of 1982 and amended again as Act No. 39 of 2003. After this certification he should proceed to obtain deeds for those clients which he did not do. It was then that the clients came to us demanding deeds for their flats.” She also said while the CMA are handling the matter related to the deeds of the other property, they are also about to file a case against the condo at Ramanathan Avenue. “We are filing a legal case against non-registration of the condominium plan.”
She said she cannot endorse whether there was fraud or not but said that the developer did not obtain those certifications at the CMA. However she said that the CMA does probe whether the building is constructed according to the UDA plan. She said that is the duty of the UDA.
She also said they have received more than 300 complaints from different clients related to purchasing of condominiums for residence and commercial purposes.
17-Floor plan rejected after approval – Dehiwala MC Official
A planning officer at the Dehiwala MC said the previous mayor had approved the 17-floor condo but the plans were cancelled after three months.
“The matter with the CM Condo has reached us and CID officers visited our MC several times to probe the matter,” the official who wanted to remain anonymous said.
He also added that this particular property had been issued with ground floor plus 17 storeys but was later cancelled. However he said the Mayor alone wouldn’t have approved it because such approvals come after they are discussed with UDA officials. He said that he had no information regarding it since he had joined recently.
However, he noted that a maximum of nine floors will be approved if it is built on 43 perches of land. “We have a chart compiled by the UDA. Every client should come and check with us whether the plan is correct or not.”
“We will classify a condo that has over five units and sometimes a building with two units could be called a condo. A developer could build two storeys with a ground floor on 10 perches of land and only nine floors can be approved for 43 perches. That plan was illegal, but the number of floors was reduced to nine storeys plus a ground floor within three months. Before 2017, MCs had power to approve a property development plan but even then the MCs discuss with the UDA before a plan is approved.”