Once a residential condominium is completed and ownership of the units is transferred to the co-owners, a condominium juristic person must be established as stipulated in the Condominium Act (including the Act of 1979 and its amendments up to 2008). This condominium must have management in place to provide various services to the co-owners in the common areas, such as swimming pools, gyms, gardens, parking, security, cleaning services, and utility costs. The main income is derived from collecting common area fees. For example, if a condominium has a total personal area (saleable area) of 30,000 square meters and the common area fee is set at 40 baht per square meter per month according to the juristic person's regulations, the condominium must collect 1,200,000 baht in common area fees each month. If 3,000 square meters have been transferred to co-owners, the juristic person will receive 120,000 baht from the co-owners and 1,080,000 baht from the developer.

              In this example, a common question arises: Can the developer be responsible for the management costs during the initial phase without using the common area fees paid in advance by the co-owners at the time of ownership transfer and without paying the common area fees to the juristic person? This method can be referred to as “not using the common area fees yet”. From the perspective of the co-owners of the 3,000 square meters, this seems beneficial because they do not have to share any costs for the building. However, from the developer's perspective, managing the building during the initial phase with a small number of co-owners (few residents) means lower maintenance costs, potentially only 800,000 baht per month instead of the 1,080,000 baht that must be paid according to the ownership ratio. At first glance, this seems good, but considering another perspective, if the juristic person collects the full amount and uses it for management, which we can call “immediate use of common area fees”, the juristic person will have a surplus of 400,000 baht as reserve funds that will continue to grow, benefiting the juristic person in the future.

              The next question is which approach should be taken, as both methods may have supporters and detractors. Early co-owners of the project may prefer the “not using the common area fees yet” approach because it delays their payment of common area fees in the next round. However, later co-owners may feel this is unfair to them, as the juristic person could have had reserve funds from management if they had operated under the “immediate use of common area fees” method, making future management more flexible.

 

              To answer this question, we can refer to Section 18 of the Condominium Act, which states that  “co-owners must jointly bear the costs arising from the provision of common services and from tools, equipment, and facilities for shared use, as well as costs incurred from the maintenance of common property in proportion to the ownership ratio of each co-owner in the common property as per Section 14 or according to the benefits related to the units, as specified in the regulations.” This section also adds that “owners of land and buildings under Section 6 must be co-owners of units that have not yet been transferred to any individual and must jointly bear the costs as mentioned in the previous paragraphs for those units.” Here, the owners of land and buildings under Section 6 refer to the developers.

              In summary, once the first unit is transferred and the condominium juristic person is established, the developer is only responsible for paying the common area fees according to the ownership ratio they hold (not yet transferred). The expenditures and management of the condominium will be conducted through the condominium juristic person only. Therefore, the method of “immediate use of common area fees” is the correct approach according to the Condominium Act. In practice, the developer will pay the common area fees monthly based on the remaining units each month. For further details, interested parties can study the Condominium Act or the course on Law and Taxation for Real Estate Development in the Master of Science program in Real Estate Development Innovation (MIRED) at the Faculty of Architecture and Planning, Thammasat University, which also covers this topic in its curriculum.

References

Condominium Act B.E. 2522. (1979, April 30). Royal Gazette, 96 (67), 29-54

Condominium Act (No. 2) B.E. 2534. (1991, September 30). Royal Gazette, 108 (171), 1-12

Condominium Act (No. 3) B.E. 2542. (1999, April 27). Royal Gazette, 116 (31), 1-4

Condominium Act (No. 4) B.E. 2551. (2008, March 6). Royal Gazette, 125 (44), 58-76