UNDERSTANDING

CONDOMINIUM
PROPERTY
REGULATIONS
IN UGANDA

RAPHAEL MUWONGE
B Sc. (HONS) L.E (MUK)
Cert. IVS/ IMSP (RICS)
 INTRODUCTION

What is a condominium?

A condominium is one of a group of housing units where each homeowner owns their
individual unit space, and all the dwellings share ownership of areas of common use.

Units normally share walls, but that isn't a requirement.

The main difference in condos and regular single homes is that there is no individual
ownership of a plot of land.

All the land in the condominium project is owned in common by all the homeowners.

Usually, the exterior maintenance is paid for out of homeowner dues collected and
managed under strict rules.

The exterior walls and roof are insured by the condominium association, while all
interior walls and items are insured by the homeowner.

In summary it is a form of property ownership in which each owner holds title to

his/her individual unit, plus a fractional interest in the common areas of the multi-
unit project. Each owner pays taxes on his/her property, and is free to sell or lease
it. And in essence condominiums, or condos, are apartments that are individually
owned.

Common elements generally include;

 walkways,
 driveways,
 lawns and gardens,
 lobbies, elevators,
 parking areas,
 recreational facilities,
 storage areas,
 laundry rooms,
  stairways,
 plumbing,
 electrical systems and portions of walls,
 ceilings and floors

Parts of the common elements may be designated for the exclusive use of one or
more of the individual unit owners, in which case these are called limited common
elements (or limited common property). In other words, they are limited for the
use only of specific owners.

Examples would include;

 parking spaces,
 roof gardens,
 balconies,
 storage lockers,
 front and back yards

In Uganda, Condominiums are becoming more popular because of better land

utilization, price competitiveness, built-in amenities, and convenient locations and
designs.

The Pros and Cons of condominiums are as discussed here under:

Condominiums – Pros

 Better land utilization,

 Price competitiveness,
 Built-in amenities, and convenient locations and designs.
 There is also a wide price range, from $50,000 to well over a million dollars
depending on the features, level of luxury, and location.
 Condominium ownership appeals to active young singles, couples with or
without children, and pre-retirement and retired couples or singles.
Condominiums – Cons

 People live closer together, thereby potentially creating problems from time
to time; frequent problem areas include the “five p‟s”, pets, parking,
personality, parties, and people.
 Flexibility may be affected if circumstances require that the condominium
be sold in a limited time, as condominiums generally sell more slowly than
single-family houses.
 Money is tied up in the condominium ownership, which may affect
immediate liquidity needs in certain circumstances.
 One could be paying for maintenance and operation of amenities that one
has no desire or intention to use, e.g. swimming pool, recreational centre,
etc.
 Management of the condominium council is by volunteers, who may or may
not have the appropriate abilities, skills and personality.
 There is possible apathy of owners, so that it is always the same people who
are able and willing to serve on council.
 Some elected councils behave in an autocratic fashion.
 Mix between living in a single-family house and in a landlord-tenant
relationship could cause conflict and frustration depending on people‟s
needs, expectations, and past housing experience

KEY FEATURES IN THE CONDOMINIUM PROPERTY ACT

Subdivision of buildings into units

A building or land may be designated as a unit or part of a unit or divided into 2 or

more units by the registration of a condominium plan under the Condominium
Property Act.

The Registrar shall not register a condominium plan unless that condominium plan
describes 2 or more units in it.
For the purposes of the Land Titles Act, a condominium plan is deemed on registration
to be embodied in the register.

if land is held under lease and a certificate of title has been issued under the Land
Titles Act in respect of the lease, the Condominium Property Act applies to the land
described in the certificate of title, excepting from that title all mines and minerals.

Certificate of title for the unit

On registering a condominium plan, the Registrar;

 shall cancel the certificate of title to the parcel described in the plan, except
as to any mines and minerals comprised in it, and
 shall issue a separate certificate of title for each unit described in the plan,
and any interests affecting the parcel that are noted on the certificate of title
cancelled under clause
 shall be endorsed on the certificates of title issued

No more than one unit may be included in one certificate of title and no other land,
except the owner‟s share in the common property, may be included in the same
certificate of title with a unit.

After a certificate of title to a unit is issued, the unit comprised in may be;

 devolved or transferred,
 leased,
 mortgaged or otherwise dealt with in the same manner and form as land held
under the Land Titles Act and the provisions of that Act apply to those dealings
insofar as they do not conflict with the Condominium Property Act or the
regulations

Certificate to show share in common property

The Registrar, in issuing a certificate of title for a unit, shall certify on it the owner‟s
share in the common property.
The common property comprised in a registered condominium plan is held by the
owners of all the units as tenants in common in shares proportional to the unit factors
for their respective units.

Except as provided in the Act, a share in the common property shall not be disposed
of or become subject to a charge except as appurtenant to the unit of an owner and a
disposition of or charge on a unit operates to dispose of or charge that share in the
common property without express reference to it.

Liability of owner

Except to the extent that an interest endorsed on a certificate of title relates to that
particular unit, the owner of the unit is only liable in respect of that interest in
proportion to the unit factor for the owner‟s unit.

OVERVIEW OF THE VALUATION OF THE CONDOMINIUM PROPERTY

Income Approach Vs Direct Comparison

Some Condominium properties will trade primarily on direct comparison, while others
will trade almost exclusively on the income approach. Careful evaluation of available
sales evidence and market analysis are two techniques available to discern the most
applicable approach. Generally, one may find the investment criteria of more
significance in the commercial sector, while industrial properties may tend to trade
more on a direct comparison basis. However, there is ample evidence of exceptions to
these observations.

Income Approach

Selection of capitalization rates from sales of Condominium units is desirable.

Particularly for property acquired with at least a partial eye to investment
characteristics, Condominium title ownership represents a distinct impediment, in
that redevelopment cannot proceed until most, if not all, the Condominium title units
are held under common control.
Some analysis suggest that this lack of independence ought to adversely affect the
rate of return that Condominium title properties achieve, a theory that is borne out
by some, and contradicted by other, market evidence.

As Condominium developments continue to age, legislative vehicles will no doubt be

developed that facilitate the redevelopment process. Legislative changes in this area
will warrant careful examination for their effect on the rate of return investors
require.

Appraisers often consider the overall value of a property when evaluating an

appropriate capitalization rate. For Condominium property, this consideration is best
applied to the value of the size of the investment as it would typically be marketed.

Direct Comparison Approach

Condominium properties tend to attract different types of investors than freestanding

properties do. Units often have a stronger owner-occupier appeal. Where the appeal
is significantly towards owner occupiers, the direct comparison could warrant greater
weight in the final conclusion of value consideration.

The common unit of physical comparison is price per square meter of Condominium
lot, with price per square meter of rentable or usable area also offering insight.
Consider the nature and extent of mezzanine build out, as well as nature of parking,
type/cost of heating system, view, and in-project location.

Cost Approach

The Cost Approach is not an appropriate valuation technique for Condominium

properties because of the issues of common land and shared building facilities. The
Cost Approach should be avoided as a valuation technique for market value
appraisals, i.e., for mortgage or value-in-exchange purposes.

Appraisers are routinely asked, particularly by lenders, to complete “all three

approaches” when preparing an appraisal for commercial, residential or industrial
properties, including condominium offices, warehouses, rentals and retail units.
The solution to this problem lies in educating the client of the strengths and
weaknesses of the Cost Approach, and on the research and analysis necessary to
complete a meaningful valuation.

Appraisals in which the Cost Approach is completed ought to make clear the limited
weight that can be placed on the results.

Valuing a condominium by the Cost Approach would require appraisal of the site as if
vacant and available, costing of all structures, landscaping and site improvements,
estimation of soft costs, marketing and holding costs, the estimation of a likely
absorption period, developer‟s fees and entrepreneurial profit, and the determination
of depreciation from all sources. Once the depreciated value of the entire project is
known, it can theoretically be allocated to the individual unit. The results can be
invalid at least, and downright misleading at worst.

VALUATION OF THE CONDOMINIUM PROPERTY (COMPULSORY ACQUISITION)

There are two ways to assess the value of a condominium taken by eminent domain,
either by assessing the value of the entity as a whole or by aggregating the value of
the individual unit. In general, a condemning authority prefers to value the
condominium as one parcel, owners, generally fearful that a single valuation will
produce a smaller award, prefer appraisal on the unit basis.

Sound arguments can be advanced in support of either method. Not only is the unitary
appraisal more simple than a fragmentary one, but it also enables the public authority
contemplating condemnation to gauge its probable cost with a greater degree of
certainty.

Regardless of which method is used, just compensation requires that condemnees

receive the fair market value of their property, not the cumulative worth of their
various interests therein. The fact is that it is impossible to value either a
condominium building without resort to the cumulative worth of all of the interests, if
you are fixing the value of the entire building.
The real expediency is in the methodology of the condo itself in dealing with ground
leases, where applicable, and underlying mortgages, since there they relate to the
entire property not just individual units.

Assumedly each unit value is proportionately reduced by the amount necessary to pay
off the mortgage or ground lease. The real problem is that these problems should
be dealt with in the underlying documents and we are told that almost all are
silent on the subject of condemnation of the units themselves.

How does one value the entire, clearly not by rental as in an apartment house? They
are not the same. Nor by rental or sale of the property as a whole, it never happens.
Supposedly one could take sales prices of comparable units in other buildings and
come to an average unit of value and leave it up to the underlying documents to
apportion it among the various owners, treating the proprietary lessee as an owner,
which he is, if you ignore form. And in all of this we are dealing with an entire taking
or even of one or more units, less than the whole, where, clearly, justice, if not the
underlying documents, requires valuation of the individual units involved.

Some of the problems we foresee in a valuation of the entire as a unit are as follows:

 is the entire to be valued as the owners would sell them, one at a time, or
some other methodology to get a value of the whole such as an average unit
price;

 how does one deal with unsold units in the sponsor‟s hands;

 how does one treat tenants existing before a conversion who opt to continue as
tenants and pay rent, rather than buy;

 how does one value the whole in a mixed use building, stores, offices and
apartments (which, no matter which method is used, is a problem);

 since what we are dealing with is what in essence are peoples‟ homes, not
different than one family house, and these owners make modifications to their
 homes, affecting their value, how are they justly compensated in a valuation of
all as single unit

After clear analysis of the statutes, regulations and texts as well as sample
documents, we have come to the firm conclusion that, in the case of all or specific
units being taken, the only method that is both feasible and just, requires a valuation
of each individual unit.

The problems of underlying mortgages and ground leases while complicating the
process is handleable and on balance should not be the determinant. While it may be
expedient to do it otherwise, it would not do justice.

As one would value 20 row houses which are individually owned on a house by house
basis, there is no reason to treat condominium units differently.

At the end of the day, we believe that if the information we have received is
accurate, that the underlying documents for condos are largely silent on the subject
of condemnation, that is a situation which should be rectified, or we may see some
strange results in condemnation proceedings.

HOW TO EVALUATE OR PRICE A CONDO UNIT? BY ANDRA RUS _PROPERTY SHARK

(https://www.propertyshark.com/Real-Estate-Reports/2015/11/24/how-to-
evaluate-or-price-condo-units/)

When running a valuation or trying to determine the best listing price for a
Condominium unit, there are several factors one needs to take into consideration. To
begin with, recent market trends should be accounted for – whether sale prices are
rising or listing inventory is low, for example. A broker‟s personal knowledge and
experience will play a key role especially when it is complemented by accurate and
up-to-date real estate data, such as:

 Recent sales of similar condo units.

 Active for sale inventory.

  Other elements that will affect the price, such as the physical
condition of the unit, the building amenities/fees, and the location.

In order to help you with this complex process, we‟ve put together a series of tools
that can quickly deliver the data you need to base your decision on:

 Comparables

Sales within the building

Looking at sales within the same building is often the starting point and can provide
the most accurate data for determining the best listing price. However, since even
units within a building can differ a lot in terms of layout, lighting, or views, it is even
better to look at units in the same line and on similar floors.

When available, this type of information will be displayed in our Units & Related
Parcels section of property reports. You can choose a floor or line and expand it in
order to check for recent sales that may qualify.

Further, you can choose to run a comparable sales search within the building only.

You can use any unit in a building as the subject property of your valuation; in this
example, we used Unit B0803 from the Manhattan House Condominium at 200 East
66 Street.

Go to our Comparables tool and just make sure to select ‘New York City Condos’
under Property type and choose radius as „Just This Building‟. You can then enter any
optional criteria so that your search results will be relevant for your subject property,
such as: square footage or number of bedrooms or bathrooms.

The results will then be generated based on your criteria, together with a Valuation
Dashboard showing key sales stats. You can then further customize your search by
including/ excluding results or by adding/removing columns before you save or print
the results.
Other comparable condominium sales

Ideally, using sales within the building would be the best solution for determining the
listing price of a unit, which will work very well in the case of new developments or
buildings with high sales activity. However, with resale condominiums, you might
need to look outside the building as well in order to find comparable sales.

In this case, you can use our advanced filtering options in order to get results that are
relevant: unit size, year built or other criteria that you may find useful based on your
subject property‟s characteristics. As for the area to include in your search, you can
go by radius, neighborhood or even draw your own area on the map with our polygon
tool, which will give you the flexibility of selecting the exact area you wish to
consider.

 Active condos for sale inventory

After having looked at recently closed sales of similar units, the same approach should
be taken with active for sale listings. This will help you determine how market supply
and demand can be used to determine the value of your unit. You definitely need to
be aware of the competition the listing will get once on the market, while also finding
those elements that will make your listing stand out among the others.

You can run your search on Point2Homes by first selecting your main options:
location, property type, unit size, and a price range to include:
Plus, there are some additional criteria you can enter for better filtering of the
results, for example the year built, the listing date, or whether there‟s an upcoming
open house scheduled.

You can even search by a keyword (pool, gym, view, etc.) in order to look at how
units with similar amenities are priced.

 Other factors that might influence the price.

Besides looking at recent sales and active for sale listings, there are other elements
that may influence the sale price of units. We‟ve already mentioned elements such as
the view, exposure, building amenities and fees.

After you‟ve adjusted your valuation based on these elements and taken into
consideration any improvements that have been made to the condo unit, there are
some other things we suggest you check:

 The property’s proximity to the subway: this can make a significant difference
in pricing since areas that have seen huge price increases often follow the
subway map. In order to help you quickly determine how the unit stands in this
respect, we have created a Subway Accessibility Map

 The school district the property is zoned for, which you can also view on our
maps. Browse through our collection of school proximity and districts here.

 Pre-foreclosure and foreclosure activity in the area as it may affect the health
of the market and have a negative influence on the sale price of a property.

 Other potentially attractive community features such as bike facilities, public

facilities or parking availability in the area. It is also useful to be aware of any
issues that might negatively impact the sale, for example toxic sites or crime
incidents in the area. Look through our full maps collection here and choose
those that might be of interest in your case.
 REFERENCES

 Non-Residential Condominium Valuations; Professional Excellence Bulletin (PP-

16-E), September 1995, Revised January 2007; Appraisal Institute of Canada.

 M. Robert Goldstein (2007), Valuation of Condominiums and Cooperatives;

Column in the New York Law Journal.

 How to Evaluate or Price a Condo Unit? By Andra Rus _Property Shark

(https://www.propertyshark.com/Real-Estate-Reports/2015/11/24/how-to-
evaluate-or-price-condo-units/)

 How to value an apartment building? By Mjkagan | Last updated 02/02/2015

(http://kagansblog.com/2011/10/how-to-value-an-apartment-building/)