A new law to regulate market could come soon

It is fair to say that 2007 has been a year of progress in terms of regulating the Dubai real estate market. We have seen increased rental regulations, stricter controls for real estate agents, as well as the implementation of the Escrow Law and the introduction of RERA, the Real Estate Regulatory Authority.

All such measures are a welcome addition and were definitely needed in order to add credibility to the industry and improve investor confidence. Many of the new rulings are consistent with those in established international markets and in line with this, I believe the next addition to the Dubai market will be the Strata law, or condominium law, as it is also known.

Strata laws are in place in various countries including Australia and New Zealand where its concept, which relates to the ownership and maintenance of the common areas of a building, has been used for many years.

Under the current property law in Dubai, the common areas of all buildings are still registered in the name of the developer. In the absence of a Strata law, there is a lack of clarity in terms of the legal ownership of such areas, whereby technically, buyers own their unit but have no claim on communal areas. This raises issues in terms of the responsibility for maintenance and upkeep of the building.

At the moment, in most cases either the developer or an agent appointed by developer, is looking after the common areas and charging residents a service charge for doing so. Strata law will put that ownership into the hands of the home owners who will then become responsible for ensuring such areas are managed and maintained effectively.

How it works

For anyone wondering how Strata law works, here you go:

The first thing I would say is that in the first instance, it requires the involvement of specialists, people with relevant experience in the field. Initially, I imagine developers will contract in Strata management companies to set the law up, which the buildings owners will then become bound by. In simplest terms, under this management the ownership of common areas is defined and budgets for maintenance are calculated with the management team taking responsibility for maintaining the building from then on.

After a period of time, the owners will be given the option of keeping the Strata management company in place or going it alone and creating a Home Owners Association. If they choose to go it alone, owners of units within each building will elect a committee of members. It will be the committee's responsibility to budget for all required maintenance, including an allowance for unforeseen issues, and for contracting in a team to carry out the work.

The estimated maintenance costs will be divided by the number of units and all owners will be requested to pay their share in the form of a service fee. To work effectively, the law needs to include strict rules governing the payment of service fees, especially when considering the number of Dubai property owners that are based overseas. The enforcement of high penalties should help reduce situations where the Home Owners Association suffers financially or the building suffers as a result of owners failing to pay their dues.

Overall, I feel Strata law is a real positive for home owners in Dubai. As well as providing legal ownership, it will help to safeguard investments and even add value to them, by putting in place a fundamental legal structure to manage and maintain buildings and common areas, therefore giving owner's peace of mind.

The writer is managing director, Better Homes.