Amendments in Jointly Owned Property Law
Investments are supposed to be financial decisions. However, in real life, people often make investment decisions emotionally. This is truer of real estate investments. Individuals get emotionally attached to their homes or the idea of owning a home. Hence, they make decisions based on many parameters that may neither be financial or mathematical. Real estate laws are essential for every individual wanting to invest in or own a property.
In the United Arab Emirates, many new real estate laws have been introduced to standardize processes and formalize transactions between developers, property investors, and other stakeholders in the real estate market. The more recent legislation concerning jointly owned properties is one of the newer real estate laws in Dubai.
What is the Joint Ownership Law?
Law Number 6 of 2019 concerning new joint ownership in Dubai (the "New Law") is an amendment to Law Number 27 of 2007 (the “2007 Law”). The New Law governs and defines the responsibilities of all the stakeholders involved with jointly owned properties in Dubai, which includes those located in free zones and special development zones. The New Law codifies and brings the developers, owners, and facilities management companies under one umbrella to create greater transparency around the management of such properties.
The New Law aims to boost competitiveness and enhance investment in the real estate sector by centralizing control of the owners' duties with the Dubai Land Department (DLD) and the Real Estate Regulatory Authority (RERA).
The Major Changes:
I. New Management System
Under the 2007 Law, all owners of units automatically became members of the owners association of their building upon purchasing their Unit. Through its board, the owners association was responsible for the management, operation, maintenance, and repair of the common areas of the building, which could be delegated to an association manager to perform.
Likewise, the New Law has replaced the management system with a three-tiered system provided under Article 18.
Category I – Major Projects (Article 18 (a)(1)):
Projects in this category will be determined as per the criteria prescribed under the relevant resolution issued by the Director-General. The Developer is also responsible for managing, operating, maintenance, and repair of Common Parts and Utility Services. A Major Project will have an Owners Committee constituted of members selected by RERA from amongst Owners residing in the Jointly Owned Real Property. The duties of the Owners Committee will be determined under the Statute and the rules and conditions prescribed under the relevant resolutions of the Director-General.
The duties of the Owners Committees as set out in Article 24 of the New Law include:
- To verify that the management company manages the common areas.
- To review the annual budget for the maintenance of the common property and to make needed recommendations.
- To discuss the obstacles and difficulties concerning the management, operation, maintenance, and repair of Common Parts; and submit the necessary recommendations on the same to the Management Entity or RERA, as the case may be; and
- To receive complaints from owners and submitting them to RERA when the management company has failed to address them within 14 days of being notified.
Category II- Hotel Projects (Article 18 (a)(2)):
These are projects wherein the Developer must outsource the management of Common Parts to a Hotel Project Management Company as per the relevant rules approved by the Director-General. If the Hotel Project Management Company expresses its wish that a committee is constituted, a Hotel Project will have an Owners Committee constituted of members selected by RERA. However, the Owners Committee will not be authorized to participate in the management of the Hotel Project or its Common Parts.
Article 37 of the New Law provides relief for the incompetence of developers or Hotel Project Management Companies. When the Developer or Hotel Project Management Company is found to be incompetent or unable to manage the common property under Category I or Category II in a manner that ensures their sustainability and serviceability, the CEO may appoint a specialized Management Company to undertake the management and operation of that Jointly Owned Real Property or Common Parts.
Category III- Real estate projects other than the Major Projects and Hotel Projects (Article 18(a)(3)):
Specialized Management Companies shall manage the common parts in these projects, selected and engaged by RERA as per the controls and regulations set by a decision issued by the Director-General. An owners’ committee, formed for each real estate project, must have its members selected by RERA not exceeding nine members. The duties of the Owners Committee are set out in Article 24 of the New Law, as discussed above.
Article 38 of the New Law provides for the incompetence of Management Companies. In the event where RERA does find that a Management Company is incompetent, unqualified, or unable to manage and maintain Common Parts in Real Property projects of Category III, RERA may appoint a replacement Management Company to undertake the management of the Jointly Owned Real Property, by adhering to the following procedures:
- Notifying the Owners Committee of the violations committed by the Management Company and seeking its opinion concerning such violations;
- Serving a written warning on the Management Company stating its mistakes and wrong practices concerning the management, operation, maintenance, and repair of Common Parts; at which point the Management Company may respond to that written warning within 14 days from the date of service of the warning;
- Appointing a certified audit firm to audit the Service Charges account and verifying the Management Company’s compliance with the Service Charges budget approved by RERA; and
- Granting the Management Company a time limit to hand over the management of the Jointly Owned Real Property to the replacement Management Company within 30 days from the date of issue of RERA's decision appointing that replacement Management Company.
Article 19 of the New Law lays down provisions for the management of Common Facilities. It provides that the master developer of a Master Project will undertake the management and maintenance of the Common Facilities in that project. The master developer must outsource such management and maintenance to a Management Company under a written agreement approved in advance by RERA.
Article 40 of the New Laws states the liability of developers. The Developer remains liable to remedy or rectify any defects in the structural parts of the Jointly Owned Real Property for ten years from the date of obtaining the completion certificate of the Real Property project developed by him.
The Developer remains liable for the repair or replacement of defective installations in the Jointly Owned Real Property for one year from the date of handover of the Unit to the Owner. Such repairs and replacements include mechanical and electrical works, sanitary and sewerage installations, and similar installations. If the Owner refrains from taking possession of the Unit for whatever reason, the liability period shall commence from obtaining the completion certificate of the Real Property project developed by the Developer.
Any agreement made after the New Law is in force and contradicts, in any way, the provisions of Article 40 of the New Law will be deemed null and void.
The New Law has removed the Jointly Owned Property Declaration (the "JOPD").
Under the 2007 Law, the JOPD was a requirement to be registered with RERA governing the use of the common areas and units and specified the duties and obligations of the owners, occupiers, and the Developer.
The New Law has replaced the concept with Master Community Declaration, Statute, and Building Management Regulation (defined under Article 2 of the New Law):
Master Community Declaration: The conditions and provisions governing the development and operation of a Master Project and the Jointly Owned Real Property and Common Facilities therein, including the planning and construction standards of the Master Community.
Statute: The rules and provisions governing an Owners Committee are established and approved by the provisions of this Law.
Building Management Regulation: A document prepared by the relevant bylaws issued by the DLD and entered in the Jointly Owned Real Property Register, which states the procedures for maintenance of Common Parts, including equipment and services in any part of another building, and the percentages of the contribution of Owners in the relevant costs.
Article 20 of the New Law also lays down that before selling any units, and the Developer must issue the Building Management Regulations for significant projects and hotel projects that RERA must approve.
As per Article 6 of the New Law, the Master Community Declaration, Statute, and Building Management Regulation constitute a part of the title deed of Jointly Owned Real Property. The DLD will maintain an original copy of each of these documents. The Developer must prepare and file the Master Community Declaration and the Statute of the complex with the DLD within 60 days from the certificate of completion for the project. However, the Building Management Regulation is prepared by the RERA.
Similar to the 2007 Law, owners must pay to the management body their share of the service charge to cover the Common Parts management, operation, maintenance, and repair expenses (Article 25(a) of the New Law).
However, as per Article 27 of the New Law, the management body may not collect the service charges without first obtaining the relevant approval of RERA. This approval will be issued per the approved Master Community Declaration and the relevant rules and criteria approved by the Director-General. RERA will appoint a legal auditing officer accredited by it for this purpose.
Under Article 4 of the New Law, the DLD will maintain a special register of Jointly Owned Real Property, which contains the following:
- Details of the land plots owned by developers on which Jointly Owned Real Property are to be constructed.
- Details of Units intended for individual ownership in Jointly Owned Real Property and sold by developers, and names of Owners of these Units.
- Details of members of Owners Committees;
- Building Management Regulations;
- Details of Management Entities;
- Contracts for management of Jointly Owned Real Property or Common Parts;
- Statement of the total area of Common Parts and Designated Common Parts, and its ratio to the total area of Units in Jointly Owned Real Property; and
- Details of developer-owned Areas in Jointly Owned Real Property.
Article 42 of the New Law lays down that the Rental Dispute Settlement Centre shall have exclusive jurisdiction to hear and determine all disputes and disagreements concerning the rights and obligations stipulated in the New Law, as per the rules and procedures of the Rental Dispute Settlement Centre.
RERA has been brought into the DLD structure and has a broader regulatory scope under the New Law. Under the New Law, RERA's investigatory and decision-making powers and regulation scope have become broader, more precise, and more robust. While RERA previously only oversaw brokers, owners' associations, and escrow accounts, RERA now regulates all estate business activities and consolidating all such activities. Tenancy registration and regulation are now within the remit of the DLD.