Joint ownership of Property has always been a tricky subject due to the involvement of multiple parties in connection with the rights and duties attached to it. For a Unit Owner, the Common Property can be termed as parts allocated to the joint property for the joint use of the owners and occupants of the units indicated in the site plan.
THE LAW RELATING TO THE JOINT OWNERSHIP OF PROPERTY
THE OLD LAW - Law No. (27) Of 2007
Till now, the Law No. (27) of 2007 (“Old Law”) pertaining to the joint ownership of real estate properties in Dubai regulated this field and it provided the framework for the formation of Owners Association. It also described the responsibilities of the Developer, Unit Owners and the Owners Association, regulated the Annual budget and related terms like reserve funds and service charges relating to the same.
The responsibility of the management, control, operation, repair etc. of the jointly owned areas generally are assigned to Facilities Management Companies as per the Law but often the Unit Owners are left in the lurch in case of mismanagement or poor performance of such companies. It is a vicious circle wherein the poor performance and unsatisfactory services provided in the common areas lead to reluctance from the side of the Unit Owners in payment of the service charges (though it is prohibited as per the Law) and this further leads to worsening of quality of the services provided due to lack of funds. Further the membership in the Owners Association who represents the Unit Owners and takes the important decisions like the annual budget for the expenses related to the common areas was not regulated much till September 4, 2019. Sometimes, the Unit Owners could be cornered to pay the outstanding service charges as a lump sum if they needed to transfer the ownership of their properties, even if they were not provided with satisfactory services worthy of such payment. A Legal Expert like us may be able to assist you if you are in such a situation without affecting the ownership transfer of the Unit.
The dire consequences of the improper or lack of registration of the Owners Associations or the facilities management companies is a whole other story wherein, (again) the interests of the Unit Owners are put at even greater risk.
Unregistered Owners Association and Facilities Management Companies can cause great harm to the Unit Owners if they enter into contracts without capacity and the Unit owners may lose their rights in Cases due to this misrepresentation when a dispute arises before the Court of Law.
If you want an expert review regarding how well your interests are protected, we can assist you with thorough contract reviews and recommend the best strategy ahead as “prevention is always better than cure”.
THE NEW LAW - Law No. (6) Of 2019
In light of the above and for the purpose of protection of all the related parties in this scenario, His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President, Prime Minister and Ruler of Dubai has passed the Law No. (6) of 2019 (“New Law”) pertaining to the joint ownership of real estate in Dubai which will be effective within 60 days of its publication in the Official Gazette. This Law annuls the Old Law or any other contradicting law from the date it comes into effect.
The Law describes in detail among others, the concept of Common Areas, Developer Owned Areas, Components of the Unit and Rights and Conditions of the usage and rental in addition to the assigning responsibilities under the Law:
DISTRIBUTION OF RESPONSIBILITIES
The Land Department
Dubai Land Department (“DLD”) will be responsible for preparing and maintaining a register for jointly owned real estate properties including detailed information related to the Owners, Owners Committee (replacing the Owners Association), related building management, Common Areas, Facility Management Companies or other Management Companies (“Management Companies”) engaged, and it should also specify the share of maintenance expenses allotted for each unit owner.
The Developer is made responsible for submitting the required documents to the DLD within the prescribed time (extendable at the discretion of DLD). In case of non-submission of the same and on request by DLD, any party can submit the documents but the related expenses shall be borne by the Developer.
The Developer’s representation of the Unsold Units and their responsibilities relating to the damage to the structure of the Building within 10 years and replacement of the faulty items within 1 year are also detailed in the Law.
Three Categories Of Jointly Owned Real Estate Properties – who has the responsibility for maintaining common areas in jointly owned real estate properties?
The charge of management, operation, control, repairs etc. of the common areas of the jointly owned real estate properties has been specified in the Law, i.e. whether it lies with the Developer, with some functions assigned to Owners Committee (1st category), or the Hotels Project Management Company and the related Owners Committee (2nd category) or specialized facility management companies and the related committees (3rd category).
OWNERS COMMITTEES – Replacing The Owner Associations
The membership of Owners Committee will be overseen by Real Estate Regulatory Authority (RERA) with specifications included in the law relating to the number, functions and conditions of inclusion in the committee.
It is very clear that the protection of the interest of the Unit Owners primarily depends on the Developer ensuring that the requirements as per the New Law are satisfied and they cannot shun their responsibilities after selling the Units. The Unit Owners or the Owners Committee should see to it that this is done timely and for this, retaining a Legal Expert who can review the situation regularly can be an added protection to avoid conflicts in future.
ANNUAL FEES – SERVICE AND USAGE – What You Need To Pay?
The law basically prescribes two kinds of fees: (1) the Service Fee collected for the maintenance and management of common areas and (2) the Usage Fee collected for facilities or utilities in the common areas. Special Bank Accounts for the Fees are mandatorily required to be opened with banks licensed to operate in the Emirate and approved by the Real Estate Regulatory Agency (RERA). The law specifies that the fees shall only be used for the purpose it was collected for and as specifically prescribed by the law. The Developer is also required to deposit a percentage of the profits earned by them, using the common areas in the Usage Fees bank account.
The timely payment of the Service and Usage Fees can only ensure the quality of services provided relating to the common areas, if the funds are disbursed judiciously. We assume that the new law will improve the current situation prevalent in Dubai, where even after spending money, many of the Unit Owners remain unsatisfied.
MANAGEMENT COMPANIES – Who Ensures Their Competence?
Management Companies can be appointed to undertake all the responsibilities regarding the common areas and for support services like assigning annual budgets and expenses for the same, provided they satisfy the requirements prescribed by the Law. As an added protection RERA will be involved at multiple stages like budgeting, ensuring that the Management Companies are approved, by requiring reports every 6 months from the Management Companies and review of the expenses and services provided by them. Resultantly we can expect an improvement in the quality of services provided and ensure that the Unit Owners are not overcharged for the same.
Management Companies cannot charge service charges for operating and management of common areas without the Approval of RERA and replacement of incompetent Management Companies by RERA will now be an option. Further Bank Guarantees from Management Companies can be required as per the law which can be used if after due notice, damage to the jointly owned property or its parts or facilities are not repaired when damage was caused due to their action, negligence or inaction.
Actions including replacement of service provider and availing bank guarantees for expenses can be used against Incompetent Developers, Hotel Management Companies, or appointed Management Companies etc. as per this Law.
UNIT OWNERS – Should You Pay?
The Law requires the Unit Owners to pay their share of the Annual Fees, as long as it is approved by the authorities but no fees can be charged from the owner without the approval from RERA. Also the annual budget relating to the fees has to be approved by accredited auditors. Further the Unit Owner cannot be compelled to pay the fees by any actions of the Developer or Management Company, whereby he is prevented from receiving or benefiting from the unit or the common parts or related facilities.
PENALTIES, DISPUTES AND REMEDIES
The law prescribes for penalties up to AED 1 million and AED 2 million for repeated violations and the disputes arising are to be reviewed by the Rental Dispute Centre (RDC) in Dubai. The acts that shall be defined as violation for inviting such penalties shall be decided by the Chairman of the Executive Council. The decision or action taken against any party under this law can be appealed before the Director General by any interested person, within (30) thirty days from notification of the same and the decision on the Appeal will be final but without prejudice to the right to approach the Courts.
NON PAYMENT OF ANNUAL FEES – Are Unit Owners Protected?
In case of nonpayment of the fees by the Unit Owner, the law prescribes guidelines to proceed against them through issue of 30 days’ notice, raising a claim, and finally execution by Execution Judge before the RDC. The Judge can also sell through Auction the Unit to cover the unpaid service charges and the costs for the same may be borne by the Unit Owner. Whether the nonpayment of service charges will invite penalty, is a question that may be answered when the list of violations as mentioned above are issued by the competent authority.
Adjustment time of 6 months from the date of the new law coming into force (or as extended by the Director General) is granted to the concerned parties to adjust their status as per the law. But the law will not prejudice the contracts concluded between the Developer and the Owner before this law comes in force, except for the formation of owners' committees.
Whether the Old Law or the New Law is applicable in each case, there is no dispute that the Unit Owners should pay the applicable Annual Fees for ensuring that the expenses for the maintenance of the common areas are met.
But if you are a Unit Owner please ask yourself:
In most cases when a potential risk comes into existence, the other parties may wash their hands of the case by finding reasons to refuse their responsibilities. The Unit Owners on the other hand, many of whom may be living abroad and who are not updated regarding the laws or its requirements are caught unawares to face the risk.
To protect your interest, as a Unit Owner you need in-depth knowledge and expertise in the laws, regulations and procedures before the Government Authorities which is not always possible! So in the alternative seek advice from such an Expert like Allegiance International.
We believe each case is different but if you let us help, we can assure you that the protection of your interest will be our first priority!
For more information and any queries kindly contact us:
+971 (4) 369 5542