Dubai Jointly Owned Property Law
Jeremy Scott on how the Strata Law will affect homeowners
The implementation of a fully operational strata regime in Dubai and elsewhere in the region is extremely important to the property market for a number of reasons.
Once fully operational, the Strata Law will provide a legal framework that enables a building with multiple-ownership to be subdivided into units and common areas and for owners to register their unit ownership with their respective land registry departments.
Although the Strata Law is essentially a tilting system for the subdivision of buildings with multiple-ownership, it introduces a structure to deal with the management and maintenance of the common areas within buildings.
To date, owners have had relatively passive involvement in the management of their buildings and developers have normally sought to retain the management of them under the sale and purchase agreement for an extended term.
Whilst it appears likely the regulations will place some form of restriction on developers attempting to retain the management rights until the regulations are issued that govern these arrangements, developers have continued to carry on managing their buildings on behalf of the owners.
Without the support of the regulations, developers have experienced difficulty in exiting their developments and passing the reins to new owners due to the uncertainties on the formation of owners’ associations (OA) and an association’s ability to conduct business on behalf of the owners.
The Direction for General Regulation sets out a range of protection for the consumer and investor, the Direction for JOP declarations sets out the requirements for jointly owned property in the form of a memorandum.
The Constitution Regulation sets out a standard form constitution applying to all developments. Community Rules can still be customised to fit a development and are set out in the JOP declaration.
These must be filed for all existing developments, whether completed or not, and include the basis upon which service charges are calculated, staging of projects, restrictions on the use of common areas for where these are required for management purposes and site plans, easements and covenants over the development or individual units, owners’ exclusive use rights, the provision of utility services, community rules, and an architectural and landscaping code regulating any changes to units or the appearance of the development.
In addition, costs between the developer and the OA must be apportioned properly and any surplus paid to the OA within 21 days of formation of the association. An audit report must be provided by the developer reconciling all payments within three months of formation.
Once an OA is registered and licensed, it will be able to use the service charge enforcement procedures and Community Rules Enforcement Notice procedures.
It will be able to approve budget, change the Community Rules and elect its board members by a majority of members or those entitled to vote and amend their own declaration by a 2/3rds majority.
Dubai is currently well into the implementation phase of the directions. Through the Interim OA procedures, Dubai is already seeing dramatic falls in the levels of building service charges being passed on to investors. As OAs are registered, we expect a significant change in service levels and price and the development of a highly competitive market for the goods and services provided to the owners.
As Master Communities are brought within the JOP structure the expectation is that any development costs are excluded from Master Community Service Charges. In addition, RERA will be regulating Master Community Service Charges to ensure these remain at sustainable levels.
The disclosure regime is likely to ensure a more level playing field amongst developers which will, over time, ensure that the better developers dominate the market creating increased confidence.
Jeremy Scott is a senior associate at Al Tamimi & Company and examines how the Strata Law will effect home owners and their ability to manage their own buildings.