Legal Briefing

UAE strata law: enforcing the rights of owners’ associations

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Real Estate | 04 July 2011

On 31 December 2007, Law No 27 of 2007 (concerning ownership of jointly owned property in the emirate of Dubai) was published in the official gazette, which came into force on 1 April 2008.

Jointly owned property (JOP) is the term used to describe a building or land that has been divided into units and where part of the land is designated as common areas (Article 2 of Law No 27).

Law No 27 imposed requirement for the formation of owners’ associations. However, there were no regulations on matters such as how an owners’ association should be formed, for example.

Recent regulations have been enacted in an attempt to fill this void.

FORMATION OF AN OWNERS’ ASSOCIATION

An owners’ association is a legal entity, entrusted to ensure that the common areas and the development as a whole are managed. The members of an owners’ association are the owners of the units in the building. The constitution will contain all the obligations and rights of an owners’ association, and will also stipulate the rules for general assemblies, board meetings and, importantly, the role and responsibilities of the manager.

An owners’ association is formed on the registration of the first sale of a unit in a development (Article 17 of No 27). However, an owners’ association will not be fully operational until the JOP declaration and other relevant information is registered with the Land Department and the Real Estate Regulatory Agency (RERA) licenses the owners’ association.

The following documentation has to be presented to RERA for an owners’ association to be registered:

  • title documentation, eg –
    • copy of land site plan,
    • copy of land title deed,
    • copy of approved common areas site plan,
    • draft JOP declaration, and
    • draft of building management statement (for multi-use projects only);
  • evidence of the general assembly meeting including copies of the invitations sent to the owners inviting them to attend the meeting and a summary report of the general assembly meeting approved by the board;
  • evidence of board meeting including a copy of the minutes of the meeting and a summary report of the meeting both approved by the board;
  • information concerning the board including passport and visa (for expatriates only) copies of each board member; and
  • financial and technical reports of the project.

In addition RERA may request a deposit of AED1m.

MANAGEMENT AGREEMENT

It is common practice for the developer to appoint itself as the manager of the development for two to five years. The owner cannot object to this as consent will have already been given by the owner on execution of the sale and purchase agreement.

The directions for general regulations concerning JOP, relating to Law No 27, afford an owners’ association more autonomy to manage the development.

Article 17 (5) of the regulations provides further that any manager appointed must be licensed by RERA and that the management agreement must be registered with RERA.

The management agreement must state the fees for any services performed, which must be competitive with fees obtainable on the open market. In addition, the agreement must also contain a means to monitor and assess the performance of the services.

Article 17 (6) of the regulations specifies that:

‘If… [an] association manager agreement does not comply with any of the above clauses then any owner may apply to the appropriate court to invalidate the agreement or amend its terms.’

Such provisions at least provide owners’ with a method of control in relation to management and should serve to rein in wayward developers.

DISPUTE RESOLUTION

Articles 88 and 89 of the Direction for Association Constitution (the Constitution Rules) state that if there is a dispute it shall be referred to mediation or conciliation. An owners’ association may be able to conduct the mediation if it is not party to the dispute. Each party will bear their own costs and the cost of the mediator or conciliator must be borne equally by the parties. If the dispute cannot be resolved through these methods, it will be referred to private arbitration. The terms of the arbitration must be agreed between the parties, failing which, the terms may be specified by RERA.

CONCLUSION

In the past, developers have not necessarily been accountable for their actions. With the introduction of Law No 27, the regulations and the Constitution Rules, a level of accountability in respect of fees, monitoring and assessment of the performance of these services, and a mechanism for dispute resolution has been introduced.

So far, over 150 interim owners’ associations have been registered with RERA. It remains to be seen whether the various rules and procedures will be enforced by RERA, but the initial signs are promising. Hopefully the new regime will give teeth to owners’ associations, which, until now, have had no real means of enforcing their rights.