Decoding Dubai’s new law governing jointly owned properties

Dubai issued in September a new pertaining to the joint ownership of real estate in the emirate. Law No. (6) of 2019 outlines the procedures concerning the maintenance of buildings and common areas in addition to what share of costs each owner should pay.

One of the key changes under the new law is the abolition of existing owners’ associations and transferring the rights and obligations, including the responsibility for the management, operation, maintenance and renovation of the common areas in a jointly owned real property (JOP) to management entities (MEs), according to Dubai-based law firm BSA Ahmad Bin Hezeem & Associates.

“MEs will now be responsible for procuring insurance policies, to ensure maintenance or reconstruction in cases of fire, demolition and destruction,” says Shaikha Al Shamsi, associate at BSA, which recently signed an agreement with the Dubai Land Department “to streamline Dubai’s real estate sector processes”.

In addition, she says funds collected by the MEs from the owners of the units to cover expenses related to management, operation, maintenance and renovation shall be pre-approved by the Real Estate Regulatory Agency (Rera) and deposited in a special account with one of the licensed banks.

Calling this a landmark initiative, Paula Wehbeh, head of international business development at Ellington Properties, says the new law will add to investor confidence and the competitiveness of Dubai’s real estate sector. “Bringing more transparency to homeowners and investors, the law will ensure international investors the same level of trust and confidence they have while investing in Dubai’s realty as they do in their home countries,” she says.

Categories

The law covers three major categories – mega projects where the developer is responsible for the management of the property, hotel projects where a developer appoints a company to manage it and real estate projects where a developer appoints a specialised facilities management (FM) company.

“The owners’ committee for the first (mega projects) and third (real estate projects) categories can have no more than nine members selected by Rera and should be established when 10 per cent of the joint real estate units are registered,” explains Mario Volpi, sales and leasing manager at Engel & Voelkers Dubai, adding that a developer cannot be part of the owners’ committee unless there are unsold units.

While Dubai’s real estate industry continues to push for greater transparency, this move will bring “additional regulation and significantly boost competitiveness and investor confidence”, says Ali Sajwani, general manager of Damac Properties.

Empowering Rera

The new law stipulates that Rera shall regulate the management of joint ownership, oversee real estate developers and MEs, and conduct inspections on the operation, management, maintenance and repair of JOPs and their common areas and facilities. Pursuant to the new law, Al Shamsi says Rera shall have the right to register violations and issue warnings to MEs. Rera is also authorised to audit contracts for services such as security, maintenance, cleaning and insurance.

“Moreover, Rera shall have the right to audit expenses made from funds in the bank account designated to cover the service fees,” she adds.

Developer’s responsibility

The new law also stipulates that the developer remains responsible for repairing structural defects for 10 years after obtaining the certificate of completion, and shall be responsible for repairing defects in electrical, electromechanical and sanitary works for one year.

Sajwani says the new law clearly delineates the role of developers, owners’ associations and facilities management companies in matters related to management of common areas and building structures, and places accountability on Rera to ensure the proper management of JOPs. “Developers have now been made responsible for the implementation of building management systems, maintenance of building structures for the first 10 years, as well as the provision of adequate parking spaces at no extra cost,” says Sajwani. “This safeguards the interests of investors and owners’ associations.”

With the law mandating FM companies to submit reports to Rera every six months on the management of the property and common areas, Wehbeh feels the quality of services and the overall upkeep of a community will be enhanced.

“This in turn adds to the long-term value of the investment. Bringing greater transparency to property upkeep and allowing property owners to be engaged in the process, the law will contribute to high-quality maintenance,” she says.

The law also ensures that owners’ committees are set up in a timely manner and that common areas and annual budgets are properly managed.

“FM companies that are appointed by the owners’ associations are to seek Rera approval before charging fees, which will ensure standardisation of fees and services across the city,” says Sajwani.

With Rera overseeing revenue and expense reports and inspecting jointly owned properties, he says the law will ensure fairness to all parties involved.

Given that an FM company won’t be able to charge fees unless approved by Rera, Volpi expects the system to help ensure buildings are better managed. “Tenants and owner-occupiers will live in even better-managed units and owners will be able to sell units easily in the future given the buildings will be managed more professionally,” he says.

The new law, which came into force yesterday, applies to all real estate development projects and JOPs in Dubai, including those in special development zones and free zones.