Bank on it
fmME debates RERA changes permitting bank accounts for owners' groups
RERA says IOAs can open bank accounts from September 2012. fmME’s experts weigh in on the latest development in JOP law. Brent Baldwin, senior legal consultant, Hadef & Partners and Khalid Choksy, director, Outlook Community Management go head-to-head.
Does this move mean progress in implementing JOP law? If so, how?
Khalid Choksy says: Yes, this will provide Owners' Associations (OAs) a framework to be recognised as a separate legal entity and enter into supply agreements, right to sue in their capacity and own movable assets which are the foundations of JOP Law. It will also assist them in gaining experience in self-management outside the unwanted control of the developer.
Brent Baldwin: Yes, there is positive progress. This move is going to allay some ongoing issues because it will give the OA control over its finances. It should give boards the ability to follow up on payments and get payments released without having to worry about opening a bank account in the name of the developer or the OAM.
What are the negative aspects to how JOP law is progressing?
Khalid Choksy says: The JOP Law was enacted in November 2007 and since then operated at an ‘interim level’ to ensure smooth handover from the developer to home owners association. This concept is new in this region and education is required from industry professionals to ensure OAs fully understand and comply with the law.
Brent Baldwin: There are several areas that need further clarity and regulation. Allowing OAs to have bank accounts goes part of the way but there are continuing issues about their status. It’s unclear whether this will result in OA’s gaining full legal status, or if it will continue with IOAs with the right to open bank accounts.
Do you think IOAs being able to open bank accounts will help resolve service fee charge issues?
Khalid Choksy says: This will allow homeowners to manage their own finances with service charges deposited in accounts managed by the OA and not the developer. This will promote transparency and confidence, and will facilitate the work of OAs particularly in collection and spending amounts related to services of buildings.
Brent Baldwin: Opening bank accounts by itself won’t resolve the issue. Most owners aren’t paying because either they are disappointed with the level of services, or want audited accounts for the period when the developer was in charge, or want the developer to have no further involvement, or are overseas or don’t have the money.
What needs to happen next?
Khalid Choksy says: As an association manager, I think we would like participate in regular meetings with RERA to discuss the next steps and formulate a standard ‘developer handover checklist’ to ensure smooth handover from the developer to the owner’s associations on all compliance and legal factors.
Brent Baldwin: The two main things include clarification regarding the OA’s legal status, and a formal handover procedure for developers to transition full control of a building to owners, including an established procedure for carrying out an audit of the building. Sorting out those issues is going to be a significant challenge.