Jun 10 2012
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Jointly Owned Property Law: How are matters proceeding
It is now over four years since the Law Concerning Jointly Owned Property in the Emirate of Dubai (JOP Law (Law No. 27 of 2007)) came into force and nearly two years since the last General Directions were issued. So how is the new law impacting the lives of those, who are meant to be directly taking benefit of the law that was brought in to bolster transparency in the way buildings were being managed and in turn bring back investor confidence into the once faltering real estate market in Dubai?
The Essence of the Law
The Dubai JOP Law is broadly based on the Australian strata titles system, which has been introduced in one form or another in numerous countries around the world. The Australian system has stood the test of time, first being introduced in New South Wales in 1961. The version of strata titles being introduced in Dubai is nowhere near as complex and prescriptive as its Australian counterpart. This was a deliberate outcome to ensure that the new law accommodates the scale and complexity of Dubai projects and encourages the innovative and cutting edge development that has brought Dubai worldwide recognition.
There has been a vast amount of commentary regarding the JOP Law since its inception and its implementation in 2008. The main purpose of the Law was to provide transparency to the investors with how its building or community is being managed and most importantly, from an investor's perspective, give legitimacy to the service charges being levied; to all intended purposes the JOP Law has been seen to actually bring about a reduction in the service charges being levied since being introduced.
The Requirements of Registration of the OA
- an application for registration;
- the Site Plan;
- the Jointly Owned Property Declaration (JOPD);
- the title document for the plot subject of the Site Plan;
- an audit report prepared under sub article 10 of the General Regulation;
- the transfer of the first unit;
- registration fees of Lands Department
- any other documents as required or requested by the Lands Department.
Issues Facing the OA
As many strata lawyers and other professionals in Dubai will tell you theory is much simpler and effective than the practical aspects of that theory.
In theory the JOP Law does afford a great deal of transparency to the investors as to how its building or community is being managed by engaging the investor directly through election of the board members of the OA. However, there have been to date a number of practical issues that the OA's are facing in the running of its community and/or building.
Feedback from those in the industry and those directly involved in OA's has been one that has tended to show a lack of understanding of the practical side of the OA, its purpose and most of all its management. RERA has taken steps to educate those in the industry as well lay people by introducing specific management programs through the Dubai Real Estate Institute.
RERA too has identified that before a final registration may occur an OA must be at least recognised as an Interim OA, so that it may carry out certain aspect of its functions and help sustain its community.
This in turn has led to ambiguity in the market and the scope of the OA. For example, an OA only takes legal identity once it is registered with RERA; prior to that can an OA really enter into service contracts for its building and community? Prior to registration at RERA, the OA cannot open a specific trust account for collection of the Service Charges it is levying for the maintenance of its building or community, so how does an Interim OA collect a service charge that has been approved by RERA? The OA, once registered, exists as a non-profit organisation with a Chairperson and Board of Directors. It is not an LLC, so what of the liability of these Board Members if there be any contentious issue, which has a financial liability greater than the funds available to the OA?
These are issues that are of a serious nature and require sound legal advice and should not be taken lightly.
RERA is affording assistance to all developments for the registration and management of OA's and has taken a lead in this matter. OA's are not just made up of lay people with no other commitments; a lot of OA Board Members have full time commitments with work and businesses. This is where the creation of the OA Manager has been of great assistance to the implementation of the Law and the running of successful OA's. The OA Manager is there to assist with the day to day running of the OA.
The greatest test yet to come is that of non-payment of service charges by investors. A number of interim OA's are facing issues with non-payment of service charges by investors, who are more often than not, not based in Dubai and have purchased units purely as a rental income generator. The JOP Law provides that the OA may take a lien over a unit, where the owner has unpaid service charges. Until the OA is fully registered and approved at RERA it will not be able to take any steps of legal recourse against the defaulting party. Only after a three month notice period through a notary public will the OA be able to take the matter before an Execution Judge. This means that the OA for a period of at least further months will still not be able to collect service charges from defaulting parties and could possible extend further if the matter is objected before the Execution Judge by the defaulting party. The other matter for consideration is those investors that are not based in the UAE, what if there is no response from the owner; will the Courts or RERA enforce a sale to satisfy outstanding debts? The Law is unclear on this point and only test cases brought by OA's in such situations will tell as to the stance the authorities in Dubai will take.
The JOP Law is a law that can do so much for investor confidence in the Emirate of Dubai as well as provide greater transparency to owners and investors on how communities are managed and funded. As the market matures with the OA in place, only time will tell if further amendments will be needed to the Law to help it mature also.
Ammad Naser is the Head of Real Estate at The Legal Group. The views expressed in this article do not necessarily constitute the views of Zawya.
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