What type of leasehold estate exists when occupation is for an undefined period of time and can be terminated by the landlord or the tenant?

In the world of real estate, a leasehold estate pertains to the agreement between a landlord (the owner of the property, or lessor) and a tenant (the one who occupies the property, or lessee).

What Exactly Is a Leasehold Estate?

Leasehold Estates are basically an agreement in which the landlord allows the tenant to occupy the property of the owner. In other words, it’s a lease agreement between two parties, the landlord, and the tenant.

Types of Agreements

In general, there are 4 types of leasehold estates.

These are:

• Estate for years
• Estate from period to period or periodic tenancy
• Estate at will
• Estate at sufferance

The type of leasehold estate will depend on the leasehold agreement between the landlord and the tenant.

Estate for Years

Estate for years is a leasehold agreement set for a fixed period of time. In other words, this lease agreement has a start date and an end date. Once the end date arrives, the contract will then end.

It’s important to note that although this type of leasehold estate is called Estate for “Years“, the duration of the lease does not have to be specified in years.

The specified period can be in months, or even days; it doesn’t really matter. What’s important is the agreement is for a fixed period of time.

An example of this would be a property owner giving a tenant permission to occupy his property for a period of 6 months.

Estate from Period to Period

Also known as the term periodic tenancy, the difference of this type of leasehold is there is no date of termination.

There can be a specified lease term, like years, months, or even days, but the lease does not end. Instead, the lease on the property is automatically renewed.

So how do these types of lease agreements end?

Either party gives notice to terminate the lease. Typically, it’s stated in the contract how long either the landlord or tenant must give notice.

An example of this is a landlord allowing a tenant to occupy the property on a month-to-month basis.

Estate at Will

Estate at will is probably the vaguest in terms of the rights reserved between the landlord and the tenant.

This type of leasehold estate is usually a temporary agreement in which the landlord gives the tenant permission to occupy his property.

Bear in mind that in this case, only the owner and the tenant are involved. This means that once either party dies, the deal is terminated.

An example of this is when a tenant’s parents let their child stay at their property indefinitely.

While the parents(or lessors) still have possession of the property, their child is given the right to occupancy to the leasehold estate.

Estate at Sufferance

Estate at sufferance is a term you would never want to encounter as a lessor in the real estate world. This estate occurs when a lessee refuses to leave the estate at the end of their tenancy.

After a lease ends, a tenant refusing to vacate the property is known as holdover tenants.

To solve this problem, lessors must search for legal solutions to successfully evict their holdover tenants.

It’s also worth mentioning that holdover tenants are technically not trespassers, as a lease agreement existed for the real estate.

It just so happened that they lost the rights to the property they are occupying, and thus, they have to vacate the property.

An example of this is when one tenant is unable to pay rent, thus, violating the lease contract. If the tenant refuses to leave, the real estate situation becomes an estate at sufferance.

Common Misconceptions

Freehold Estate

As you search more and learn about leasehold estate, you may encounter other real estate terms such as freehold estate. This type of estate is not a leasehold estate.

The key difference here is that in freehold estate, you have possession of the property, not rights to a tenancy.

Mortgage

Of course, when searching on the open market for property, one may come across mortgages, which might seem like renting, but is not.

In mortgage, you periodically pay off your debts to eventually own the property, while in renting, it’s agreed that you will never have the right to own the property you’re renting.

Final Words

When studying for your real estate exam or entering the real estate industry, it’s useful to learn about what a leasehold estate is and its different kinds.

With knowledge of leasehold estates and its related terms, you can now explore a possible job in the industry or maybe even start your own real estate business!

A Q&A guide to corporate real estate law in Sri Lanka.

The Q&A gives a high-level overview of the corporate real estate market; real estate investment structures, including REITs; title; tenure; sale of real estate; seller's liability; due diligence; warranties; real estate tax and mitigation, including VAT and stamp duty/transfer tax; climate change targets; restrictions on foreign ownership; real estate finance; leases; planning law; and proposals for reform.

1. What have been the main trends in the real estate market in your jurisdiction over the last 12 months? What have been the most significant deals?

The main trends in the real estate market have been towards multi storey high-rise apartment complexes and mixed development projects. Due to the COVID-19 pandemic and the current economic crisis faced by Sri Lanka, there has been a slight downward trend in this area of the real estate market, which is not expected to have an impact on the long-term outlook for the Sri Lankan real estate market.

Notable multi-storey high-rise apartment complexes and mixed developments include Shangri-La, Altair, Astoria, Colombo City Centre, Havelock City, and Cinnamon Life.

One of the most significant deals has been the Colombo Port City Development, with provisions for commercial and residential businesses on reclaimed land.

2. What entity types and acquisition structures do investors typically use for real estate investment in your jurisdiction?

Investors typically develop real estate through limited liability companies. The advantage is that the liability of a company is limited to its shareholders' equity.

Foreign investors, mainly due to restrictions on foreign ownership of land, develop real estate through joint ventures with landowners (local investors). These joint ventures involve a joint venture company/special purpose vehicle in which the foreign investor and the local investor hold shares up to legally permitted percentages in consideration of the equity/debt and land investment that will be made by the parties into the joint venture.

Real Estate Investment Trusts (REITs) have been recently introduced into the Sri Lankan market through rules issued by the Securities and Exchange Commission of Sri Lanka (SEC) to implement the Securities and Exchange Commission Act, No. 36 of 1987 (effective from 31 July 2020).

Although relatively new, REITs are expected to bring benefits as an alternative investment option for the public to take advantage of the growing real estate market. Identified as SL-REITs, REITs are to be listed on the Colombo Stock Exchange under a licence issued by the SEC.

Gains from the disposal of land or building sold, exchanged, or transferred to a licensed REIT listed on the Colombo Stock Exchange are exempt from tax.

There are also proposals to exempt dividends distributions by REITs from income tax and to reduce stamp duty by up to 0.75%.

Investors acquire real estate directly through asset purchases or through share purchases of companies holding real estate.

In an asset purchase, stamp duty at about 4% of the market value of the asset must be paid at the time of sale. Stamp duty is not due on a share purchase.

Due to the restrictions on foreign ownership of land under the Land (Restrictions on Alienation) Act No. 38 of 2014 (as amended by Act No. 03 of 2017 and Act No. 21 of 2018), foreign investors can only purchase real estate through investment in shares up to the legally permitted percentages.

3. What are the main sources of finance and types of investors for real estate investment in your jurisdiction? Does your government encourage overseas investment into real estate in your jurisdiction, for example through real estate investment legislation?

Typically, the main source of finance is debt/bank finance. The types of investors vary depending on the investment (for example, mixed development projects and large-scale condominium projects mainly attract institutional investors).

Overseas investors with expertise in property development are encouraged to invest in real estate in Sri Lanka. The Board of Investment of Sri Lanka has been established, among other things, to encourage foreign investors into the jurisdiction by offering various concessions in the form of customs duties and expatriate visas based on the quantum of investment made by overseas investors.

4. Are there restrictions on foreign ownership or occupation of real estate (including foreign ownership of shares in companies holding real estate)? Are there restrictions on foreign lending, security and guarantees to buy or occupy real estate in your jurisdiction?

There are restrictions on foreign ownership of real estate, but not on foreign occupation of real estate. Foreign ownership of real estate is restricted under the Land (Restrictions on Alienation) Act No. 38 of 2014 (as amended by Act No. 03 of 2017 and Act No. 21 of 2018) with effect from 1 January 2013, subject to certain exemptions. The Act prohibits transfer of ownership in real estate to a foreign national, foreign company, or company incorporated in Sri Lanka with 50% or more foreign shareholding (either direct or indirect). One exemption to this prohibition is a transfer of ownership of real estate after 1 April 2018 to a company listed on the Colombo Stock Exchange.

A company with less than 50% foreign shareholding that purchases real estate must maintain that percentage for at least 20 years from the date of purchase.

From 1 January 2013, foreign ownership of shares in companies that hold real estate is subject to the same restrictions (that is, the company must maintain its foreign shareholding at the permitted threshold).

5. How is title to real estate evidenced? What is the system for public registration/recordation of title? Is electronic access and electronic conveyancing available?

Title to real estate is evidenced through title documents and/or public registration. Registration is not compulsory for real estate transactions. However, registration provides priority over prior unregistered transactions. When title is not registered, title is evidenced through title documents.

Title documents are registered in land registers that are maintained and managed by land registries located in each district.

Electronic access to title information and electronic conveyancing are not currently available. Electronic signatures are not accepted by the authorities managing title registers/records.

6. What are the main information and documents registered/recorded in the public registration/recordation system? Can confidential information or documents be protected from disclosure?

The following information is registered in the public registers of title:

• A brief description of the transaction (for example, transfer, gift, lease, or mortgage).

• Particulars of the parties involved in the transaction.

• A brief description of the real estate.

• Particulars of the instrument through which the transaction was effected (deed number, date, and notary public).

• Conditions attached to the transaction (if any).

Information in the public registers of title is accessible to the public. Therefore, confidentiality cannot be maintained.

7. Is there a state guarantee of title? Are authorities that manage public title registration/recordation systems liable for title registration errors? Is title insurance available and is it commonly used?

There is no state guarantee of title for private land. Land registries that manage public registers are not liable to pay compensation for any errors made in relation to title registration.

Notaries can be liable for breach of their duties under the Notaries Ordinance, including when this results in registration errors.

Title insurance is available and is commonly used for land with defective title.

8. How can real estate be held (that is, what types of tenure and other main ownership rights exist over land)?

Real estate can be held as freehold title either in whole (absolute) or in co-ownership.

Real estate can be held as leasehold title.

Title to apartments can also be held as freehold title. Apartments registered as condominiums are governed by the Apartment Ownership Law No. 11 of 1973 (as amended).

Other rights over land include:

9. What types of preliminary agreements are typically used in the sale of real estate and are they legally binding?

10. Briefly outline the typical main provisions of a commercial real estate sale contract and main real estate provisions of a typical share purchase agreement.

The main provisions of a typical commercial real estate sale contract include the seller's obligation to:

• Transfer the real estate free of encumbrances (private or State) to the buyer.

• Warrant and defend title.

Standard terms and conditions typically used in a commercial real estate contract include:

• Deposit/advance payments.

• Defects liability period (particularly for condominiums).

• Remedies for breach of conditions.

The main real estate provisions in a typical share purchase agreement include warranties of title.

11. What real estate due diligence is typically carried out before an acquisition?

Real estate due diligence is typically carried out at the outset of the transaction on the pedigree of the title, planning, and building approvals. Depending on the location and nature of the construction, this due diligence also extends to other governmental approvals/licences (for example, environmental, coast conservation, and tourism). Deeds, plans, other title documents (testamentary proceedings), local authority documents (ownership, street line and building line, conformity, building plans, and so on) are also reviewed to assess compliance with the relevant laws/regulations.

The buyer's legal advisers are usually involved in the due diligence process and produce a due diligence report with their findings and recommendations. Based on these findings, surveys and/or valuations of the real estate may be carried out by licensed surveyors and valuers.

12. What real estate warranties are typically given by a seller to a buyer in the sale of commercial real estate? What are the main limitations on warranties, for example, qualified by knowledge and disclosure?

The typical real estate warranty provided by the seller is to warrant and defend title to the real estate against any third parties. These warranties are not usually qualified by disclosure.

In a share sale, real estate warranties are typically ring-fenced.

13. Does a seller have any statutory or other liability to the buyer in a disposal of commercial real estate?

A seller has no statutory or other liability to a buyer to disclose real estate information or in relation to title, except for any personal liability for breach of warranty (see Question 12).

14. Briefly outline the environmental legislation and potential liability in a purchase of real estate. Is it common to carry out environmental due diligence and obtain environmental insurance? How is environmental liability typically dealt with in the sale contract?

It is not common to secure environmental insurance. Environmental due diligence may be carried out depending on the type of real estate (see Question 11).

Real estate sale contracts do not typically deal with environmental liability. However, in a share sale, the sale and purchase agreement usually includes environmental warranties and indemnities.

15. What types of liability can a buyer inherit relating to the real estate? Can a seller retain liability relating to the real estate after the sale?

A buyer can inherit liability for matters relating to the real estate that occurred before the sale. Examples include:

• Third party claims relating to ownership of the real estate.

• Breaches of planning law.

A seller retains liability to the buyer, buyer's heirs, executors, administrators, and assignees, even after the property has been sold to the buyer.

16. When does the sale become legally binding? What are the main documents and formalities for exchange and completion/closing of the sale? When does title transfer? Is notarisation required?

If the parties entered into a preliminary agreement in the form of an agreement to sell (see Question 9), the parties are legally bound to proceed with the sale of the real estate subject to the terms and conditions of that preliminary agreement.

The preliminary agreement usually specifies that the sale is subject to the recommendation of title by the buyer's lawyer. In certain instances, the sale may be subject to conditions precedent. An advance payment is typically paid on execution of the preliminary agreement.

When the buyer's lawyer provides recommendation of title and all conditions precedent are met, the parties finalise the sale by executing the sale agreement/transfer deed.

If there is no preliminary agreement, the buyer can opt to proceed based on the outcome of the due diligence process.

Following due diligence and acceptance of title by the buyer, the parties execute a sale agreement/transfer deed for the conveyance of ownership to the real estate on receipt of the purchase consideration by the seller. At closing of the sale, the seller must hand over to the buyer:

• The original deed(s) through which the seller acquired title to the real estate.

• Original survey plan(s) depicting the real estate as approved by the local authority.

• Other approvals requested for by the buyer.

In a sale of real estate through a share sale, the parties execute a share sale and purchase agreement. The above documents are also handed over to the buyer. Additionally, the seller will deliver all other documents relating to the seller's operations (for example, in relation to shares, employees, other assets, financial records, and so on).

Title transfers to the buyer once the sale agreement/transfer deed is executed by the seller. The sale agreement/transfer deed is stamped and notarised and submitted for registration to the relevant land registry.

Under the Prevention of Frauds Ordinance No. 7 of 1840 (as amended), any instrument relating to immovable property must be notarised. There is no standard notarisation fee. The fee varies depending on factors such as the transaction value.

Stamp duty is payable on the purchase of real estate.

Stamp duty is paid by the buyer on the market value of the real estate at the time of the sale. Stamp duty is calculated as follows:

• Market value of LKR100,000 or less: LKR3 for every LKR100 or part of it (3%).

• Any balance over LKR100,000: LKR4 for every LKR100 or part of it (4%).

The following transactions are exempt from stamp duty:

• Mortgage securing a loan of LKR3 million or less taken for the construction of a house or the purchase of a house or land for the construction of a house from specified entities (see Question 24, Mortgage Tax/Registration Fees).

• Conveyance or transfer by or on behalf of the government, if no consideration is received.

Stamp duty is not currently payable on a transfer of shares in a company holding real estate.

18. Is tax imposed on a seller's profit or gain on a sale of real estate? What are the rates and are there any exemptions? Does it apply to a transfer of shares in a company holding real estate and at what rate?

A seller's gain from a sale of capital business assets or investment assets (that is, assets that are not used for business purposes or in the production of business income) is subject to income tax. These assets include:

• Membership interest in a company (such as shares), partnership, or trust.

• Security or other financial asset.

• Option, right, or other interest in an asset listed above.

The tax rate depends on the type of asset and nature of the seller, as follows:

• Gain on a sale of an investment asset: 10%.

• Gain on a sale of a capital asset: standard income tax rate applicable to the seller (that is, corporate or personal income tax rate).

The following gains are exempt from tax:

• Gains on a disposal of listed shares (that is, shares quoted on any official list published by any stock exchange licensed by the SEC).

• Gains on a sale of shares in a non-resident company, if these represent a substantial participation in the company. A substantial participation means the holding of 10% or more of the value of the shares in the company (excluding redeemable shares) together with controlling, directly or indirectly, 10% or more of the voting rights in the company.

• Gains on a transfer of land or building to a REIT listed on the Colombo Stock Exchange and licensed by the SEC.

• Gains on a sale of units, or derived from the sale of capital business assets or investment by a unit holder, in a REIT listed on the Colombo Stock Exchange and licensed by the SEC.

Resident individuals are not subject to tax on:

• Gains on a sale of an investment asset that do not exceed LKR50,000, if the individual's total gains during the year of assessment do not exceed LKR600,000.

• Gains on a sale of a principal place of residence, if the individual:

  • owned it continuously for three years before the sale; and

  • lived in it for at least two of those three years.

Gains on a disposal of shares in non-listed companies (including companies owning real estate) are subject to income tax as described above.

19. Are any methods commonly used to mitigate transfer tax liability on acquisitions of real estate, or tax on gains from the sale of real property?

20. Is VAT (or equivalent) payable on a sale of real estate? Who pays? What are the rates? Are there any exemptions?

VAT is charged on any taxable supply of goods and services made during a taxable period, by a registered person, in the course of carrying on a taxable activity in Sri Lanka. A "taxable activity" includes any activity carried on as a business, trade, profession, or vocation, or any action in the nature of a trade, and anything done in connection with the commencement or cessation of that activity.

VAT is payable on a sale of real estate (which includes a supply of land and improvements to land). The taxable value is the consideration paid less the market value of the bare land at the time of sale and costs of improvements as at 1 April 1998.

The standard VAT rate is 12% on the value of the supply. The seller pays VAT but passes the cost onto the buyer.

Sales of residential properties are exempt from VAT.

21. Are municipal/local taxes paid on the occupation or ownership of business premises or business ownership? Are there any exemptions?

Municipal taxes are payable on the occupation of residential and business premises. The rates are based on the value of the premises. Certain categories of properties are exempt from payment of municipal taxes (such as buildings used for schools, property used for religious purposes, and buildings used by military sentries).

22. Are there targets or incentives to reduce greenhouse gas emissions from buildings in your jurisdiction? Is there legislation requiring buildings to meet certain minimum energy efficiency criteria?

There are incentives to reduce greenhouse gas emissions from buildings by substituting them with solar power. The Sustainable Energy Authority Act No. 35 of 2007 provides that the management board of the Sri Lanka Sustainable Energy Authority is responsible for adopting and implementing measures to conserve energy and improve efficiency in the use of energy in all sectors. It also lays down regulations to set specific energy consumption benchmarks that all consumers must comply with.

23. Are provisions relating to the energy efficiency of buildings commonly included in contracts for the sale of real estate or in leases (for example, green leases)?

Provisions relating to the energy efficiency of buildings are not commonly included in contracts for the sale of real estate or in leases.

24. Briefly outline the typical security package required by lenders in relation to commercial real estate lending. How are the most common forms of security interest relating to real estate created and perfected? Is there a mortgage tax/registration fee?

The typical security package required by lenders includes security interests over land and buildings in the form of a charge or mortgage. Other security interests include mortgages created over rental income, bank accounts, insurance policies, key agreements, and so on.

Mortgages are subject to stamp duty at the rate of 0.1% of the amount lent. A nominal registration fee is also payable.

Stamp duty is not payable for a mortgage securing a loan of LKR3 million or less taken for the construction of a house or the purchase of a house or land for the construction of a house from specified entities.

25. What other real estate related measures do lenders typically take to protect themselves against default by the borrower?

Lenders sometimes obtain a power of attorney to act as the borrower's attorney to deal with the secured asset in the event of default by the borrower. Most lending institutions require recourse against guarantors to protect themselves against default by the borrower. Lenders also rely on credit enhancements through additional security, third party guarantees, and so on.

26. Can lenders incur environmental liability? What measures do lenders typically take to manage potential environmental liability?

Lenders may incur environmental liability by enforcing their security and becoming an owner of the secured real estate.

Lenders may obtain indemnities from the borrower for any potential environmental liability.

27. Briefly outline the main remedies for lenders in relation to secured real estate if the borrower defaults on the loan. What is the effect of the borrower's insolvency on the lender's remedies?

If the borrower defaults on the loan, the general remedy available is to obtain a court order declaring the mortgaged property to be bound for the money due and ordering a judicial sale of the property. Under the Recovery of Loans by Banks (Special Provisions) Act No. 04 of 1990, a licensed commercial bank within the meaning of the Banking Act No. 30 of 1988 has the power to sell the property without recourse to court. Based on case law, this remedy is not available against third party mortgagors.

Any disposition of a company's property/insolvent's property after the commencement of insolvency proceedings is void, unless the court orders otherwise. Lenders with security interests over real estate rank among the secured creditors.

28. Briefly outline key additional issues for lenders in relation to construction and development projects.

In construction and development projects, the lender should monitor progress and compliance with development milestones and financial covenants agreed by the borrower. In certain projects, real estate is leased to the borrower to carry out the development. In these circumstances, they can only create a security interest over their leasehold rights, which may not be a satisfactory form of security for lenders compared to security over freehold rights, where the lender can sell the real estate offered as security to recover the outstanding debt. In addition to real estate, lenders can obtain an assignment of rights under project contracts, which provides protection in the form of step-in-rights.

29. Are other real estate finance techniques commonly used in your jurisdiction? For example, real estate securitisation and sale and leasebacks.

30. Are commercial lease provisions regulated or freely negotiable? Which legislation applies?

Commercial lease provisions are freely negotiable unless the leased premises are regulated by the Rent Act No. 7 of 1972 (as amended). This Act applies to all premises except, among others, business premises located in specified areas if the annual value of the premises as specified in the rates assessment exceeds certain prescribed amounts, and premises where the landlord is a company registered under the Companies Act No.17 of 1982.

31. Are there formal legal requirements to create and execute a lease? How are leases executed by a company, a partnership, and individuals?

Under the Frauds Ordinance No. 07 of 1840, a lease must be in writing and executed in the presence of a notary public and two witnesses. This does not apply to leases at will and leases for a term not exceeding one month. Registration in the public registers is for priority only and is not compulsory for a lease to be valid.

The execution requirements for a company are set out in its constitutional documents. For a partnership, a lease must be executed by all the partners. An individual can execute a lease by signing it.

32. At what intervals is rent usually paid in a business lease? How are rent levels usually determined and reviewed?

Rent levels are paid and reviewed according to the contractual terms agreed by the parties and entered in the lease.

33. Is stamp duty and VAT (or equivalent) payable on rent?

Stamp duty is payable at 1% of the total lease rental. VAT is payable on rent if the landlord is registered for VAT.

34. Is a rent security deposit or other security usually required by the landlord?

A security deposit is typically retained by the landlord until termination of the lease. It is generally not interest-bearing and will be refunded after deducting legitimate amounts at the end of the lease term, in accordance with the contractual terms agreed by the parties. There is no typical amount or a limit on the amount of a rent security deposit. Although not common, landlords may request other forms of security such as bank guarantees.

35. Is there a typical length of lease term or restrictions on the duration of a lease? Do tenants of business premises have security of occupation or rights to renew the lease at the end of the contractual lease term?

The lease term is agreed by the parties to the lease agreement.

There is no minimum length of the lease term. The maximum term of a lease granted to a foreign national, foreign company, or company incorporated in Sri Lanka with 50% or more foreign shareholding (either direct or indirect) is 99 years (Land (Restrictions on Alienation) Act No. 38 of 2014 (as amended)).

The rights relating to renewal and security of occupation are subject to the parties' agreement and included in the lease agreement.

36. What restrictions typically apply to the disposal of the lease by the tenant?

The landlord's consent is generally required to assign or sublet the lease. If the lease agreement provides that the landlord consents in advance to any assignment or sublease, the tenant will not need to obtain a separate consent.

Unless otherwise provided in the lease agreement, a change of effective control or transfer/sale of the tenant will not affect the lease.

37. Does a landlord or tenant retain any liability under the lease after the lease is assigned?

The landlord retains liability under the lease after the lease is assigned.

The tenant does not retain any liability after the lease is assigned to a third party.

38. Who is usually responsible for keeping the leased premises in good repair and for insuring the leased premises? Are there provisions for the ownership of improvements carried out to the premises during the lease?

The tenant is responsible for keeping the leased premises in good repair unless the repairs are structural, for which the landlord is typically responsible. The landlord can negotiate with the tenant to pass on the landlord's repair costs to the tenant.

The landlord is responsible for insuring the leased premises. The tenant must insure the movable contents in the premises. Therefore, the landlord and the tenant have separate insurance policies.

Insurance is typically obtained to cover loss or damage caused by fire, storm, tempest, flood, inevitable accident, explosion, strikes, and so on. Generally, the landlord's insurance costs are not passed onto the tenant.

Any improvements forming part of the land (immovable) are owned by the landlord. However, the parties can agree on compensation for improvements made with the consent of the landlord. It is also accepted that a tenant who makes necessary improvements can claim compensation from the landlord, whether the improvements were made with or without the landlord's consent.

39. What remedies are available to a landlord for a breach of the lease by the tenant? On what grounds can the landlord usually terminate the lease? What is the effect of the tenant's insolvency?

The landlord can bring a court claim for damages for breach of the lease by the tenant.

Typically, the lease agreement provides that the landlord can terminate the lease for non-payment of rent or a material breach of condition.

The landlord cannot claim unpaid rent after the commencement of insolvency proceedings. After the commencement of insolvency proceedings, any disposition of a company's property/insolvent's property is considered void unless the court orders otherwise.

40. Can the tenant withhold rent payments in certain circumstances, for example for serious damage to the leased premises? Can the tenant terminate the lease in certain circumstances?

Certain agreements provide for a reduction in the rent or the right to withhold rent payments in the event of serious damage to the leased premises caused by a force majeure event.

The tenant can terminate the lease in accordance with the termination provisions of the lease agreement.

41. In what circumstances can local or state authorities purchase business premises compulsorily (expropriation)? Is the purchase price or compensation based on market value?

42. What authorities regulate planning control and which legislation applies?

Planning control is regulated by the relevant local authority and, in areas declared as urban development areas, by the Urban Development Authority of Sri Lanka (UDA). Planning regulations are issued by the relevant local authority or the UDA. The City of Colombo Development Plan 2008 was published by the UDA to regulate construction within Colombo's city limits.

There are specific protections for special categories of historic buildings provided in the Antiquities Ordinance No. 9 of 1940 (as amended). The regulatory body is the Department of Archaeology.

43. What planning consents are required for building works and the use of a building?

A development permit must be obtained from the local authority/UDA for building works based on a building plan approved by the local authority/UDA. A certificate of conformity must be obtained for use and occupation of the building.

44. What are the main authorisation and consultation procedures in relation to planning consents?

Planning consents include approval of survey plans (including condominium plans), building plans, and issuance of development permits.

Planning consent is granted by the local/provincial authority or the UDA based on the location and the nature of the development. The initial decision time varies depending on the application.

The applicant has a right to appeal a refusal to issue a preliminary planning clearance to the Minister of Megapolis and Western Development within 30 days of the decision.

Third parties do not have the right to object to the grant of planning consent. However, objections can be made through public interest litigation before the competent court/authority.

45. Have there been any key recent developments in the real estate sector? Are there proposals to reform real estate law and are they likely to come into force and, if so, when?

The Land (Restrictions on Alienation) (Amendment) Act No. 21 of 2018 has removed the earlier restriction preventing foreign nationals from owning apartments below the fourth floor of a condominium building.

The government is proposing to introduce new rent laws to expedite the eviction of tenants and the recovery of premises leased under notarially executed leases.

Professional and academic qualifications. Attorney at Law, Supreme Court of the Democratic Republic of Sri Lanka; LLM, University of Aberdeen, Scotland, 2001/2002

Areas of practice. Real estate; securitisation; commercial and corporate.

Languages. English, Sinhalese

Also Found In

• Commercial Real Estate Financing

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