Law and Order
fmME quizzes experts about the effect of JOP Law on their businesses
Jointly Owned Property (JOP) Law, the Dubai equivalent of Strata Law, was introduced at the beginning of 2008.
The law would see an owner’s association (OA) assert responsibility for the maintenance and management of common areas, something previously in the hands of developers.
The OA would appoint a general manager who was responsible for the administrative, secretarial and financial affairs of the OA. He/she would work with the board to develop and implement appropriate strategic planning initiatives.
So what has the law meant for FM service providers? Apart from the general consensus that there is a need for education and guidance around it, particularly to ensure OAs are able to carry out their roles effectively, the FM industry has witnessed both pros and cons to the implementation of the law.
Under the law, only companies offering fully integrated FM services will be considered eligible for providing services to freehold properties. This has left FM service providers that outsource services worried while forcing many of them to adapt in order to keep their custom.
One of the more positive aspects of the law is that it is effective in enforcing rules and regulations such as service charge payments which were previously a contentious issue for FM service providers.
At present, Dubai’s Real Estate Regulatory Agency has registered 218 interim owners associations and there is an expectation that these IOAs will manage about 70 per cent of the freehold properties by the end of the year.
It also seems the JOP Law bug is spreading as Abu Dhabi has started work on its own version of the law.
The difference is that in Dubai; the land is a birthright only for the nationals. Abu Dhabi however seems to have a solution for foreign ownership of the buildings above the land without being able to own the land itself.
Where Dubai’s law states that non-UAE citizens will be allowed to own a share of land in designated freehold areas, the Abu Dhabi law will allow foreign ownership of real estate under a 99 year lease.
Many are interested to see what the Abu Dhabi JOP Law will look like. It will be customised to the emirate of course, but will it be better after seeing the challenges faced by Dubai’s?
Will it face teething problems the way that Dubai’s law has, prior to official implementation?
Arabian Business recently reported on the problems caused by the time taken for OA registration. Until an OA is registered by the Dubai Land Department, it cannot open a bank account, pay bills or hire contractors to oversee building maintenance.
In anticipation of owner takeover of the building’s upkeep, many developers have pulled maintenance services. OAs waiting for registration have not been able to pay bills, collect service fees or mange maintenance contracts.
But this then raises a number of other questions such as; who has legal responsibility for the property’s upkeep if there is a decline in maintenance quality due to the shortfall in funding?
Three years in, as the law continues to develop, fmME spoke to the people directly involved and affected by it, to discuss their thoughts on where the law is now and how they see it developing. Most importantly are their businesses prepared for the impact of it once it goes live?
The FM: Tariq Chauhan, general manager, EMCOR
People are not clear on why JOP Law exists and this needs to be educated. JOP Law primarily protects the interests of individual home owners. Prior to introduction of the Law by RERA, there was no clear cut role matrix to manage and fix accountabilities between developers, home owners and service providers. A lot of work is needed in this regard.
To date there is no clarity with regards to service charge levy. Definitive rules are needed, which have a clear cut enforced mechanism to collect service charges as this is one of the most controversial issues in smooth management of owners associations.
Irrespective, the law is a great step for homeowners and the property market of the UAE. The intentions and objectives are noble but its benefits need to be percolated to end users.
EMCOR is cautious in targeting the freehold market. We feel that JOP Law acts as a deterrent for an integrated facility management model as all services are procured directly and not through sub contracts.
The difficulty for companies like us is that we often outsource projects to get the best quality outcomes from experts in a field. Additional FM employees, means more admin, training and obtaining of licenses, which can be challenging.
OAs are also often exposed to cash flow and credit risks due to service charge collection issues. Collection risks come mainly from homeowners that live outside of the UAE and enforcement is not very effective in such cases.
The FM: Bill Heath, Mace Macro
Although regulations of JOP Law apply, it is unclear whether they have been formally legalised. In time, some of the regulations might need to be reviewed based on reflection and feedback as to how they are working.
An open debate between the OA, developers and RERA might help to improve matters and understanding. I’m not sure if all concerned realised the volume of work associated with bringing the regulations into force and as such some aspects may not be as advanced as perhaps everyone would like.
Abu Dhabi looks set to create its own JOP Law and it will be interesting to see whether this is done on the experience gained in Dubai.
Mace Macro is purely a facilities management business and has had to deal with not being able to subcontract.
The problem OAs can face is that they need to engage directly with all service companies including specialist services where the values are low but are equally as important for the safe upkeep of buildings.
We do not deliver services such as cleaning and security but appoint companies to do so. This has meant that we need to expand our management capabilities to be able to take on the responsibilities of the association manager but in reality a considerable portion of his/her responsibilities are managing and controlling the performance of third party providers “facilities management.”
Overall I believe the regulations are a good thing in that they protect property owners. Part of the challenge however has also been for owners to understand their obligations to pay service charges in a timely manner in order for services to be provided.
The law exists to ensure that this happens, putting the responsibility in the hands of owners, developers and service providers, bringing them all together.
The OAM: Samer Khalifeh General manager, Kingfield Oam services
Kingfield was officially licensed almost a year ago, prior to which management of properties was conducted under an FM license.
I believe the introduction of JOP Law was the right step needed in the development of the real estate sector in Dubai.
Now owners of property have a say in how their property is run which will have a significant impact on future financial returns on their property. For OAMs like us, it governs and sets the rules/guidelines that serve the basis on how we should operate.
I believe the JOP law will affect the facilities management industry positively and all service providers involved. OAMs need to have a good understanding of FM.
Running a successful OA needs the partnership of all involved. Knowing and understanding what a professional integrated FM service provider can contribute to a building will ensure standards of service are raised, ultimately cementing this partnership and leading to more business attraction.
The Developer: Spokesperson, Emaar Properties, PJSC
Law No. 27 of 2007 concerning Jointly Owned Properties in the emirate of Dubai has been introduced to bring in world-class community management practices to Dubai.
The onus of managing the communities is now on the owner associations (OAs), and it is their responsibility for the quality upkeep of the communities.
As the master-developer, Emaar Properties is committed to work with OAs on an advisory capacity to ensure that quality standards with respect to health, safety and aesthetics are to met to the highest level.
Emaar has been the pioneer in community management services in the region and has always encouraged the participation of owners and their continual feedback to improve services and overall wellbeing of the community.
We are in a very advanced stage in the formation of all OAs and are currently working with 46 interim boards across all our communities which have been elected by owners and registered with RERA.
Emaar Community Management (ECM), a subsidiary of Emaar Properties PJSC, has been one of the first association management companies licensed by the Dubai Real Estate Regulatory Agency (RERA) to offer management services for the proposed owners associations.
ECM recently was also awarded the region’s first ISO9001 certification for owners association management services further highlighting the emphasis that the company is putting on quality of services.
Many of ECM’s association management personnel have been previously certified by the US-based Community Associations Institute (CAI) making them the first personnel in the Middle East with the prestigious certification.
The scope of work covers administrative, financial, technical, and customer service activities for the owners associations, subject to the instruction of the Board of the OAs. ECM now offers its management services in non-Emaar developed communities as well.
Emaar has years of experience in managing world-class communities and our experience will be a value addition for OAs in managing the communities. Emaar knows each community in detail including its assets and equipment.
This knowledge is essential in ensuring the value of the assets and equipment are protected for the long-term. Emaar adheres to global best practices in community management and to the highest quality standards.
The FM: Ben Churchill, managing director, EMRILL
I see JOP Law as halfway through the process of implementation. The law itself has existed for a while and has required time to adapt in order to work effectively in this market.
At Emrill, apart from internal discussions regarding the law and changes to market dynamics, we’ve looked at how best to adapt our services for OAs - the law has forced the industry to focus more inwardly and innovate.
In the past developers were tied to FM companies that were mostly subsidiary companies. OAs are now free to choose providers based on their capabilities and quality of service.
Emrill has over a decade of experience in providing IFS. We’ve restructured processes and adopted technologies to fit the needs of OAs.
The law has created more opportunity for us and will give us the opportunity to grow organically once implemented.
I agree with the reasons behind the requirement for service providers to directly deliver as there is less value for the end user if the provider is managing several contracts and outsourcing their contract deliverables. Directly delivering services has given Emrill greater control on quality of service delivery.
The OAM: Graham Yeates, Head of Owner’s Association Management, Cluttons Llc
The present state of Strata in UAE is disappointing to say the least. Because the government failed to enforce the directions issued in April 2010 requiring OAs to be registered by the developers, it means that at present only the developer can contract with the service provider because the OA is not in place.
Once the OA is registered it will meet with FM companies including the one already providing the service to the developer and changes may be made to the specification.
That may work well for a number of years for the appointed FM company and then things may (often do) hit a rocky patch if a newly elected board decides to alter things!
Many would agree that it is better to deal with a one owner property than a multi owner Strata. So Strata is not the best thing overall but it is here to stay and FM companies will have to adapt to a changing environment.
Unfortunately, I feel “the powers that be” haven’t put enough pressure on developers to comply with the Land Department timeline. In places like Burj Downtown, JBR and Nakheel projects, we think it could take up to ten years before the owners actually take control.
RERA has smartly put in place the rule of FM service providers being fully integrated to avoid any buck passing. Once the law is enforced, strata managers will liaise with FMs on any issues raised and the rule means owners will have just one point of reference for any incident.
The IT: David Bugden, CEO, My Strata
Mystrata is a technology company for the strata and community management industry. One of the products it offers is MyCommunity, which enables community managers, board members, owners and tenants to communicate and share information.
At present the software has been sold to OAMs and is being used to manage a number of commercial and residential projects throughout the region.
MyCommunity is designed to facilitate a self service community management model.
An owner or a tenant can login to the portal and raise a maintenance request which then sends out an email or raises a work order on the FM service provider’s CAFM system.
It also includes an electronic payment gateway for the payment of services charges, which auto-reconciles the community’s bank account. At present, we are talking to FM service providers about integrating their back-end systems with MyCommunity as we can provide an interface to the residents of the community.
This should help reduce phone calls for OA managers and FM providers. In addition to this, MyCommunity offers service providers like FM companies a platform to market their services and the packages they offer.
Any complaints or requests will be initiated via the portal with the manager or service provider then having access to be able to send status updates.
At the moment FM service providers have a contractual relationship with the OA - a fundamental aspect of our software, but we are keen to develop the relationship between FM providers and owners and residents for issues relating to their properties. Our technology can open up a whole new market for them.
The FM: Nishant Ravindran, general manager, INAYA
Since JOP Law surfaced, there has been a lot of talk about it and eagerness from FM players, eagerness because control will be opened up to service providers meaning a lot of stock for us.
Because it is still in transition, you can’t fully see the effects the law is having or will have on the industry. What you can see is many small developers, working with strata managers and FM service providers, trying to work together to create a plan of ways to work most effectively.
I applaud RERA for their work on the law, but there are elements of it that need fine tuning,specifically the area of duly integrated FM service providers. No FM provider can do everything in-house.
If this is implemented it could potentially be detrimental for FM service providers. There is logic behind IFM in that it mitigates risk whereas OA would retain some of the risk of multidisciplinary contracts.
In addition to this, under the law we would have time limited contracts, resulting in less value for the OA. But the advantage of the law is that it pushes control into the hands of the owner.
We as a company have seen some slow and gradual movement to accommodate for the law and are talking to and meeting strata managers. We are a new organisation and so we can afford to adapt our business model when necessary. Because the law is not yet official, we are concentrating on our core business of the non-strata segment ie. Leasehold.
I don’t foresee the law causing a problem, until homeowners start cutting corners by not using FM service providers in order to save costs. I can see this happening if the relevant education is not in place as to define the need for FM providers. MEFMA or RERA are in a perfect place to be able to educate OAs about this.