changing legislation industry
Although Dubai’s freehold ownership laws have opened up the property market, the Strata Law takes this a step further by removing ownership of common areas from developers and transferring it to owners, which may not have been anticipated by a developer when it constructed a project. The market needs time to get its head around this change and understand what the purpose of the law is and how it will operate, and this is difficult to achieve while the regulations remain outstanding. There’s no question that the regulations are needed, as there is a
huge degree of uncertainty with owners and developers regarding the payment of service charges and ownership of common areas and maintenance responsibilities, with some developers taking a “hands off” approach and others trying to retain as much control as possible. In addition it is still unclear whether such a regime should extend to complex master developments that are the size of small cities in some cases.
Owners associations are already being formed, but what power do they have at the moment without clear issuance of regulations?
Owners have always had the ability to form incorporations under the Civil Code but it has been difficult to move these one step further to assume full management and ownership of common areas without the co-operation of the developer. The current situation requires some type of contractual scheme that sets down the rules and regulations of the relevant development and a bank account for the collection of service charges to be established in someone’s name. We are aware the DLD is facilitating the registration of owners’ associations
despite the lack of the implementing regulations, which apparently involves noting the existence of the association in the DLD’s internal records and the issuance of a letter of confirmation of registration. Although on the face of it this seems a practical way of dealing with the issue, the
problem that still needs to be addressed is whether that association has any legal status. Arguably, until the implementing regulations are issued it won’t, and so on a day-to-day basis such an association would have difficulty, for example, in opening a bank account, entering into a contract, granting a Power of Attorney or initiating any court claim. So although, to the DLD’s credit, it is attempting to address the issues, we still need the implementing regulations to be issued so people understand where they stand legally.
Are developers stymieing the process as service charges have been such a cash cow in the past?
Owners have been up in arms about this issue in some developments and service charges may have been treated as a source of revenue for some developers. There are examples of great disparities in service charges across very similar developments and that is concerning. Some developers have been very sensible with the approach they’ve taken and
would rather step back from involvement in ongoing management and are happy to turn things over to the owners. But arguably until implementing regulations are issued they still have to be involved to some degree as they retain registered ownership of common areas, may have the bank accounts in their name and may have to enter into contracts on behalf of the owners.
There has to be a change in attitude and will- ingness to effect this across all of the emirates, and we’re not quite there yet
20 /
/apr-may 2010
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