UGANDA, Kampala | Real Muloodi News | Property deals can be fraught with risks, often leading investors to fall victim to fraud and mismanagement. The soaring property prices in major cities make any seemingly affordable option attractive, sometimes without adequate scrutiny.
The real estate sector is seen as a lucrative investment opportunity, drawing many eager to grow their wealth. However, this eagerness can be exploited by dishonest industry players.
Abuse of the Defects Liability Period (DLP)
James Rutaro, an investor with several condominiums in Kampala, highlights issues in the condominium market.
Developers allegedly exploit loopholes in the condominium law by using the cheapest materials possible to maximise their profit margins. These materials often include substandard finishing items that are not immediately noticeable to buyers.
“One of the articles in the contract you sign during the condominium transaction states that anything that breaks or malfunctions within the first year is the responsibility of the developer,” Rutaro said.
This period is known as the Defects Liability Period (DLP). Developers might use this to their advantage by installing materials that last only through the DLP, avoiding the costs of repairs later.
Rutaro added, “Some developers will even wind up the business after selling a poor-quality property, making it impossible for dissatisfied owners to lodge complaints.”
He experienced this firsthand when he bought a condominium from a developer who had previously operated under a different company name, likely to evade accountability for past substandard projects.
Mortgage Mismanagement
John Paul Okwir bought a condominium in Naalya through mortgage financing in 2019. The property was advertised by a reputable bank, which he trusted. However, he soon faced numerous issues.
“The electric wiring was poorly done, with wrong gauges and cheap fixtures,” Okwir said.
Although these problems were initially fixed under the DLP, more significant issues emerged after this period. Three years post-purchase, structural problems became apparent.
“Roofs started collapsing, ceilings fell in, and pergolas buckled,” Okwir noted.
With the DLP expired, the developer refused responsibility, claiming maintenance issues. The 78-unit owners pooled money to repair the roofs, addressing safety concerns.
They even drained the swimming pool to prevent water damage to the building’s structure.
“The bank that sold us the property has done nothing about this unfairness,” Okwir said.
Despite ongoing mortgage payments, the bank continues to market the developer’s properties, ignoring the unresolved issues.
Property Management Challenges
Condominium developers sometimes stay on to manage properties post-sale, but this can lead to conflicts of interest.
A developer in Naalya created a property management arm to handle their buildings, allegedly to cover up defects.
“Whenever there was a problem, they would fix it immediately, but they ignored essential services like security and sanitation,” said a condominium owner.
The owners eventually took over management due to poor service, highlighting the need for competent and transparent property management.
Developers might manage properties to control common areas like parking lots and public toilets, generating additional revenue. This practice underscores the importance of informed investment decisions and thorough due diligence.
Investors in property deals should be aware of potential fraud and mismanagement in the real estate sector.
Ensuring due diligence and understanding the legalities of transactions can help protect investments from unscrupulous developers and fraudulent practices.
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