On 14 September 2018, the Ministry of Construction (MOC) issued Notification 227/2018 (the Notification 227) to set up the Condominium Registration Office. Registrars in the respective Regions and States (save for Kachin State, Bago Region and Magway Region) have also been appointed under Notification 227. The Registrars will be responsible for registering the purchase of condominium units and issuing the ownership titles to purchasers, which can then be used as security for finance. Notification 227 on “Appointing Registrar and Opening Registration Office relating to Condominiums” paves the ways for implementation of the Condominium Law 2016 (Condominium Law) and Condominium Rules Notification 267/2017 (Condominium Rules).

Prior to Notification 227, implementation of the Condominium law and Condominium Rules was effectively held back because developers were unable to register any development as a condominium under the Condominium Law even if the development met the requisite conditions (as set out in the Condominium Law, which we will recap below).

Developers will be able to register their projects as condominium land, and operate under the Condominium Law. In addition, potential condominium owners can look forward to pledging their condominium unit as security to obtain bank loans (after successfully obtaining their condominium registration/ownership certificate).

Condominium Law 2016

The Condominium Law, enacted in January 2016, prescribed a broad framework for condominium developments in Myanmar:

1. Criteria to be a condominium development
   
   A ‘Condominium’ is defined as a building of at least 6 stories, constructed on collectively owned land and registered under the Condominium Law.
   
   Land on which Condominium can be developed must be a type permitted for residential development, at least 20,000 square feet, and transferable into collective ownership.


2. Ownership certificates and proportionate share value interest in the condominium development
   
   Condominium registration certificates (one for each condominium unit) will serve as proof of ownership for each unit or apartment in the condominium. The concept of a ‘share value’ interest in a condominium development as a whole relative to the individual unit owner’s proportional ownership rights (similar to strata-title rights in Singapore) is recognised for the first time in Myanmar.


3. Foreign ownership rights
   
   Non-Myanmar citizens can own up to 40% of the condominium, and these foreigner owners can transfer, lease and mortgage their ownership rights.
   
   Do note, however, that one owner cannot own more than 25% of the condominium.


4. Condominium management committee
   
   The Law also mentioned a condominium management and governance regime. A condominium management committee shall be formed to make decisions relating to the condominium and its upkeep.

The Condominium Law was generally praised, in particular for its recognition of foreign ownership rights. However, there remains a gap in relation to the registration process (i.e. no body and no procedure were in place for registration) and a lack of clarity on foreigners’ eligibility criteria (including how the 40% foreign ownership would be calculated).

Condominium Rules (the Rules)

The Condominium Rules were passed in December 2017, setting out detailed implementation provisions, paving the way towards facilitating investments in condominiums in Myanmar. We set out some of the key clarifications set out in the Condominium Rules below:

1. Eligibility of state-owned land to be registered as condominium land
   
   Clauses 20 and 21 of the Rules clarify that state-owned land may be converted into condominium land. Currently, many property development projects are on state-owned land under long-term leases from the Myanmar government including build-operate-transfer (BOT) arrangements, other leasehold or grant land arrangements. This clarification is good news for the ongoing developments.


2. Procedures for conversion and registration of land
   
   Procedural requirements for developers to convert and register land as condominium land were stipulated. However, the Rules only addressed the conversion process for situations where (i) the owner of the land is co-developing with the developer and (ii) there is a direct sale of the land by the owner to the developer. The Rules did not provide for situations where (i) state-land is converted, save for providing that the land shall be converted at the condominium registration office, with the approval of the management committee, and (ii) the land owner provides a long-term lease to the developer.


3. Clarification in relation to foreign ownership
   
   The Condominium Law provided in broad terms that foreigners can own up to 40% of the condominium development. The Rules clarified that the 40% threshold relates to the "saleable floor area" of a condominium building, which is defined as the total area less the common areas (clause 14(d) of the Rules). Prior to any sale or transfer of a condominium unit, the transferor must check with the Condominium Registrar and may only proceed if the transfer would not result in the 40% foreign ownership threshold being exceeded (clause 34 of the Rules).
   
   The Rules provide that foreigners will have the same rights and obligations as Myanmar citizen condominium unit owners (clause 46 of the Rules). Do note that condominium ownership (regardless of nationality of the owner) is subject to any restrictions on the underlying title to the land on which the condominium is developed on.
   
   The Rules, however, do not specify whether foreign ownership rights are limited to natural persons (i.e. whether foreign companies can purchase condominium units).


4. Purchaser protection mechanisms
   
   Condominium developers are required to obtain a general condominium developer license, as well as a separate license for each condominium development, both for which the Rules have prescribed extensive qualification requirements.
   
   Further, pre-sale of condominium units is only permitted after 30% of the foundations have been completed. The developer must set up a designated bank account for each development into which it must deposit 20% of the estimated development costs (or such other percentage as stipulated by the management committee), and must send the management committee quarterly bank statements.
   
   Developers also have management obligations, and is responsible for maintenance of the project throughout the construction period and for one year following completion of the project.


5. Mortgage of condominium
   
   The Rules also clarify that a unit owner may use the condominium registration certificate as a security for the purposes of procuring a bank loan (clause 41 of the Rules). The express recognition of an owner's ability to leverage the condominium asset as security is encouraging given that it has been challenging to leverage on immoveable property as an asset in the present retail lending market.


6. Clarification on condominium ownership and subsequent transfer of ownership
   
   The Rules clarified the mechanisms for ascertaining ownership of a condominium unit as well as for transferring ownership to subsequent owners. The 'legal owner' is the person whose name is on the condominium registration certificate issued by the Condominium Registrar. Any transfer of ownership must be registered with the Condominium Registrar within 30 days, and the transfer must be notified to the condominium association's executive committee within 7 days of the transfer. These registration requirements are in addition to applicable requirements under the Registration Act (1909).


7. Maintenance of the condominium
   
   The Rules provided for establishment of an association of the condominium unit owners (with an executive committee) in charge of the management and governance of the condominium (e.g. common property rules, maintenance of common property). The condominium association has the locus standi to bring claims in court and take action to protect the collective interests of all unit owners.
   
   The Rules also impose the requirement for unit owners to pay various service fees and make maintenance fund contributions. Such fund will be managed by the executive committee of the condominium association in accordance with the Rules (which, amongst others, stipulate a requirement for maintenance of records and accounts).

Moving Forward

Pursuant to Notification 227, the registration offices are to be located within the Department of Urban and Housing Development (DUHD) offices within each Region and State (except Kachin State, Bago Region and Magway Region, where registrars have not been appointed), with the Deputy Directors of DUHD being named as Registrar. Condominium units must be registered by the developer within 30 days of building completion.

The formation of Management Committees is the crucial next step in implementing the Condominium Law, as the committee is responsible for issuing licenses to developers, certifying developments as complying with requirements under the law and ensuring condominium land is collectively owned.