1. On 10th December 2007, Law No. (27) of 2007 on Ownership of
Jointly Owned Properties in the Emirate of Dubai ("Strata
Law") was issued laying the foundations of a
"Strata" form of real estate ownership in Dubai.
The Jointly Owned Property Law contemplated the passing of further
rules and regulations providing more detail on how the property
ownership scheme would be implemented and operate.
These rules and regulations have now been published as
"Directions", effective from 13th April 2010.
2. What Are the Relevant Laws?
2.1. Direction for General Regulation concerning Jointly
Owned Properties – "General
Regulation"
The General Regulation deals with consumer rights and in particular
establishes; a disclosure regime (see section 5 of this article),
financial obligations as between developers, owners and Owners
Associations (see section 4.8 of this article) and the entering
into and content of Supply Agreements (see section 4.9 of this
article).
The General Regulation also establishes an enforcement procedure
where Owners breach the terms of the Community Rules, 1
establishes a procedure whereby an administrator can be appointed
by RERA to temporarily administer a development and when such a
procedure can be utilised2 and sets out some of the
requirements in relation to the setting up of Owners
Associations3 the remainder of which are dealt with in
the Direction for Jointly Owned Property Declarations.
2.2. Direction for Jointly Owned Property
Declarations
Every development (including Master Communities) must have a
Jointly Owned Property Declaration. 4 The Direction for
Jointly Owned Property Declarations sets out the more detailed
information required in this Declaration including:
a. Plot, unit and title information and details of Exclusive Use
Areas;
b. The means for assessment of Unit Owners' Entitlements which
will be relevant in determining service charges payable by Owners
and the value of each owners vote;
c. The staging of the development (if applicable);
d. Arrangements for delivery and use of utility services;
e. Community Rules;
f. Information more particularly related to the operation of the
development; and
g. Amendments to Jointly Owned Property Declarations.
The Direction for Jointly Owned Property Declations also sets down
obligations in relating to the filing of Jointly Owned Property
Declarations and the consequences of failing to file.
The content of the Direction for Jointly Owned Property
Declarations is covered in more detail in section 4.1 of this
article.
2.3. Direction for Association Constitution -
"Constitution Regulation"
The Constitution Regulation sets out a mandatory form of
Constitution applying to all developments. The Constitution deals
with the internal procedures of any Owners Association including
such things as the calling of meetings, passing of resolutions,
appointing of Board members, approving of budgets, appointing of
contractors and amending Community Rules. The Constitution
Regulation also describes the role of the Board and Association
Manager and sets out codes of conduct for Board members and
Association Managers (see sections 3.2 and 3.3 of this
article).
2.4. Direction for Preparation of Survey Plans -
("Survey Direction")
The Survey Direction set out a licensing procedure for surveyors
and transitional provisions relating to the preparation of plans.
5
2.5. Direction for Surveyors
The Direction for Surveyors sets out a detailed regime concerning
the preparation and submition of plans and related administrative
matters.
3.The Rights, Obligations and Functions of The Owners
Association, The Board, The Association Manager and The Rights and
Obligations of Owners
3.1. The rights, obligations and functions of Owners
Associations
The principal entity in any strata scheme is the Owners
Association. The functions of the Owners Association are set down
in Part 2 of the Constitution. The principle functions are to;
supervise, manage, maintain, replace and control the Common Areas;
enforce fairly the Strata Law and Directions including the Jointly
Owned Property Declaration and Community Rules; and to conduct the
various record keeping, accounting, legal and administrative tasks
associated with the management of the community or building.
An Owners Association is 'not for profit' and could not
engage itself in a business activity that was not related to the
management of the development. Nor can the Owners Association
undertake tasks more particularly related to an Owners Unit for
example conduct remedial works or undertake legal proceedings in
relation to defects or contractual issues relating to any Unit. In
contrast the Owners Association may take action in relation to
defects in any Common Areas.
Notwithstanding that the Owners Association is the relevant legal
entity its functions, powers and obligations are delegated (to
varying degrees) to the following:
a. The Board;
b. The Association Manager; and
c. The Owners at a General Assembly.
3.2. The Board
The Board is responsible for fulfilling many of the functions,
powers and obligations of the Owners Association.
The Board must be not less than 5 nor more than 7 members, who must
be Owners within the development. 6 Three reserve Board
members should also be elected.
The Board will be elected at each Annual General Assembly by Simple
Resolution of the Owners7 and members of the Board shall
not be paid for their services. 8
All Board members will be registered with and approved by RERA
9 and no Owner may be represented on the Board by more
than one member. 10
The responsibilities of the Board are set out in Clause 12 of the
Constitution and comprise a range of tasks including; ensuring that
the Owners Association carries out its functions under the law and
the Constitution; setting the strategic direction of the Owners
Association and monitoring the performance of the Association
Manager.
Members of the Board must act in accordance with the Code of
Conduct for the Board members as set down in Schedule 1 of the
Constitution which includes; not allowing the Board to enter into
contracts with entities owned by or employing any Board member,
disclosing conflicts of interest and acting in the best interests
of Owners generally.
3.3. Association Manager
Part 6 of the Constitution Regulation provides that the General
Assembly shall appoint the Association Manager who may be:
a. An Owner who is a natural person engaged in a voluntary
capacity
b. A company licensed and registered by RERA and engaged
professionally on a contract.
In both cases, licensing and registration conditions imposed by
RERA must be met.
The Association Manager completes many of the day to day tasks
required to be performed by the Owners Association or the Board but
remains subject to the supervision of the Board, and the Owners
Association at a General Assembly.
The Association Manager's responsibilities include the
following; implementing strategies of the Board and Owners
Associations, completing budgets and accounts for approval by the
Board and Owners Association, negotiating contracts and supervising
the work of contractors, collecting service charges, collating all
communications, coordinating meetings, dealing with legal issues
and related matters.
The Association Manager is also subject to a Code of Conduct set
out in Schedule 2 of the Constitution. The important aspects of
this Code of Conduct include; a requirement to act fairly and
honestly and with reasonable skill and diligence, to avoid
conflicts of interest; to act impartially and in the best interest
of Owners, to disclose any perceived or actual conflicts, to
preserve privacy unless otherwise required in law and to take all
reasonable steps to ensure that goods and services are acquired at
competitive prices and in a transparent way.
3.4. The Rights and Obligations of Owners
The rights of owners can be divided into two bundles of rights. The
first is their right as an owner of a unit and the second is their
right as a member of the Owners Association. We look at each bundle
of rights as well as the obligations of owners below:
a. Unit owner's rights as owners
The Unit Owner is entitled to exercise all of the rights associated
with property ownership such as the right to exclude others from
its unit, the right to decorate (subject to any landscaping or
architectural code that may apply to the exterior), the right to
let its Unit to a third party and the right to sell or dispose of
its interest in the unit. These property rights could not be taken
away or removed for example by a resolution of the General
Assembly.
Ownership rights are however subject to the rights of the Owners
Association, people claiming through the Owners Association and
other authorities in certain circumstances. For example, an owner
of a unit must allow the agents of the Owners Association access to
the unit in order to remedy any problems with the common
areas.
b. Owners rights as members of the Owners
Association
Owners may exercise by Simple Resolution the following rights at
any General Assembly of the Owners Association:
- The right to elect the Board at any annual General Assembly. 11
- The right to approve Supply Agreements including the Association Manager's agreement. 12
- The right to approve the budget including full details of the proposed annual Service Charge. This right would be subject to the statutory obligations on the Owners Association to appropriately manage the development. 13 The Owners Association could not for example neglect to maintain any part of the development as this is a requirement under clause 4(b) of the Consitution Regulation.
- The right to amend Community Rules provided these are not in conflict with the Constitution or any other laws or any Directions of the Land Department or RERA. 14
- The right to require the Owners Association to take any steps in relation to its functions, powers and obligations. Provided the resolution passed at General Assembly is within the Owners Association's powers, or forms part of it functions or obligations then any such resolution should be valid.
c. Obligations of Owners
Owners and occupiers (to the extent provisions apply to occupiers)
are bound by the terms of any Building Management Statement and
Constitution as well as the terms of the Jointly Owned Property
Declaration and Community Rules (being rules relating more
particularly to the conduct of Owners and Occupiers) specified
therein. 15 Once the Master Community is converted to
Jointly Owned Property the owners will be bound by the Jointly
Owned Property Declaration and Community Rules for the Master
Community.
The General Regulation also sets down an enforcement procedure to
ensure owners comply with Community Rules. 16 Where an
owner fails to comply (as determined by the Board), the Board may
authorise the Association Manager to serve a Community Rules
Enforcement Notice on the offending owner or occupier.
Where the owner or occupier fails to comply with the Community
Rules Enforcement Notice, the Board may by further notice impose a
monetary penalty not exceeding AED 2,000 which may be recovered by
the Owners Association as a debt. The notice must be in a form
approved by RERA.
Owners have an obligation to pay service charges assessed against
their unit. Failure to pay service charges will enable the Owners
Association to take action against the unit owner. The Owners
Association may notify the owner through the Notary Public and if
the matter is not remedied within three months, the matter may be
referred to the Court for execution. 17 Owners may also
be required to pay a penalty on unpaid service charges of up to 12%
per annum. 18
In addition, the Owners Association will have a lien over the
owner's unit for unpaid service charges and any other lawful
obligations levied against the owner. 19 Prior to any
transfer of a unit, an owner must get a certificate from the Owners
Association confirming that there are no service charges or other
monies owing to the Owners Association in respect of the unit.
20
4. Setting Up An Owners Association
Projects will need to be structured as set out in section 4.2 of
this article. Once the structure is determined a Jointly Owned
Property Declaration must be completed and filed as set out below
in section 4.1 along with the other documentation to establish the
Owners Association as set out in sections 4.3 to 4.9 below.
4.1 Jointly Owned Property Declarations
In order that a development becomes Jointly Owned Property, and for
disclosure purposes (see section 5.2 of this article) a Jointly
Owned Property Declaration must be filed with the Land Department.
The content of Jointly Owned Property Declaration is briefly set
out in paragraph 2.2 of this article. In most cases the first
Jointly Owned Property Declaration will be filed by the developer.
Subsequently this can be amended by the Owners Association at any
General Assembly by Special Resolution 21 , however
changes cannot affect exclusive use rights over common areas
granted to any owner unless that owner consents to the changes.
22
Special provisions apply allowing developers to update Jointly
Owned Property Declarations where it is a staged development but
the updates should only relate to the inclusion of the additional
stages. 23
RERA will retain the ability to review any Jointly Owned Property
Declaration on filing and amendments whether made by the Owners
Association or developers in order to ensure these correctly
reflect the law and are fair on all parties. 24
4.2. Advanced jointly owned property
structures
Certain developments may require more complex Jointly Owned
Property structures. Generally speaking these structures will be
either multiple layers of Jointly Owned Property or a structure
using Volumetric sub-division and a Building Management
Statement.
A Building Management Statement is an agreement between the Owners
of various Volumetric plots with this agreement registered against
the titles of those plots and binding on subsequent Owners.
We look in more detail at each structure below:
a. Multiple layers of Jointly Owned Property
We use a Master Community in this section as an example of how a
layered structure will work however the principles are of general
application and need not apply only to Master Communities.
As discussed above, in due course certain Master Communities will
themselves become Jointly Owned Property. In any Master Community,
Master Developers or Sub-developers will have developed a certain
number of plots into towers or villa and townhouse communities.
Each of such plots may itself become a unit within the Master
Community Jointly Owned Property.
Where a unit in this Master Community also becomes Jointly Owned
Property there will be two layers of Jointly Owned Property. The
first being the Master Community with its roads, parks and other
facilities comprising the community common areas. The second being
the tower with its foyers, lifts, access ways and other facilities
being the building Common Areas or the villa and townhouse
community with its roads and parks access ways and other facilities
to be the district common areas.
The Owners Association of the second layer of Jointly Owned
Property is required to appoint a representative to represent it at
any meeting of the Owners Association of the Master Community.
25
As the owners of units within the second layer of Jointly Owned
Property will also be entitled to enjoy the common areas of the
Master Community they will be required to abide by the Community
Rules and Jointly Owned Property Declaration of the Master
Community and also contribute to service charges. The service
charges for the Master Community will however be levied against the
Owners Association of the second layer of Jointly Owned Property
rather than directly on the unit owners in the second layer of
Jointly Owned Property.
b. Building Management Statements
In certain circumstances a building may contain two or more
incompatible uses or may be more efficiently organised into
separate volumetric plots with an agreement (the Building
Management Statement) between the plots regulating their rights and
obligations in relation to shared areas ("Common
Elements").
An example where a Building Management Statement could be
beneficial is where part of the building is offices and another
part a hotel. The hotel will have a need for facilities, systems
and services that the office plot of the building would not
require.
If the building were the subject of one Owners Association is it
possible that the dominant unit (for example the offices) could (by
virtue of its majority at any General Assembly) neglect the
requirements of the hotel. Moreover were the hotel the dominant
unit it would not be fair that the offices pay for the additional
services that the hotel may require.
An alternative circumstance where a Building Management Statement
would be beneficial would be where there was (for example) a large
podium area with separate towers constructed over parts of that
podium. In these circumstances the towers will have costs for
example lifts and exterior cleaning costs that will not apply to
the podium area.
The Directions require that any mixed use building to be
volumetrically subdivided also be a two layered scheme as discussed
in section 4.2(a) of this article. There will therefore be an
Owners Association for the building and each use within the
building will comprise a unit 26 . If once this exercise
is complete it is considered that for the reasons outlined above a
Building Management Statement should be completed then the same can
be completed but only to the extent that the two layered structure
is inneffective to deal with the issues arising.
The Building Management Statement will identify the Common Elements
and regulate the relationships between the units in much the same
way as an easement may regulate the relationship between parties
over shared land.
Due to the fact that a Building Management Statement will be a
binding arrangement between the unit owners which is outside of
much of the regulation inherent in the Jointly Owned Property Laws
the content of Building Management Statements will be regulated by
RERA.
RERA may refuse to register a Building Management Statement if any
provisions are not in accordance with the provisions of the law or
fair as between the parties. 27
4.3. Establishment of the Owners Association and developer
requirements
In accordance with the Jointly Owned Property Law the Owners
Association is established when the title of the first unit is
transferred to a party other than the developer.
28
In accordance with Law No 13 of 2008 29 and Executive
Council Resolution No 6 of 2010, 30 developers are
obliged to transfer title to units into the name of purchasers upon
completion. Accordingly, purchasers and developers have the power
to ensure the Owners Association is created.
In addition, developers are required to lodge a Jointly Owned
Property Declaration in respect of an 'Existing Project'
within six months of the date the General Regulation comes into
effect therefore the 13 October 2010. 31 For disclosure
purposes Jointly Owned Property Declarations will be required by
13th January 2011 whether the project is an 'Existing
Project' or not.
Where no Jointly Owned Property Declaration is filed within the six
months in which the developer has to file, any three or more Owners
of Units in an Existing Project may serve a notice on the developer
requiring the developer to submit the Jointly Owned Property
Declaration.
In the event, the developer does not within 30 days of the notice
submit a Jointly Owned Property Declaration, the owners may file a
Jointly Owned Property Declaration and recover any costs or
expenses incurred by them in doing so from the Owners Association
which may in turn recover these expenses from the developer.
It should be noted also that the Director General of the Land
Department has a wide discretion to take such action as he
considers appropriate where a developer delays or refuses to file a
Jointly Owned Property Declaration. Such action may include
requiring the developer to furnish the owners with all relevant
records of the development in order that the owners may proceed to
file the Jointly Owned Property Declaration and/or fines for non
compliance. 32
The Land Department may also refuse to register the transfer of the
first unit unless the Jointly Owned Property Declaration and
application for the registration of the Owners Association are
submitted in a form acceptable to the Land Department and RERA.
33 In future therefore it is anticipated that developers
must be in a position to file Jointly Owned Property Declarations
on completion of a development.
4.4. Registration and Licensing
Once an Owners Association is created it still needs to be
registered with the Land Department and licensed by RERA. In order
for an Owners Association to be registered the following documents
must be lodged: 34
a. An application for registration;
b. The Site Plan;
c. The Jointly Owned Property Declaration;
d. The title document for the plot the subject of the Site Plan or
a letter from the Land Department stating that the title document
is under process;
e. An audit report prepared under sub-article 10 of article 7 of
the General Regulation (see section 7.8 of this article) or an
undertaking to provide this within three months from the date the
Owners Association is established;
f. The transfer of the first unit;
g. If the application is made by Unit Owners under sub-article 3 of
Article 11 of the Direction for Jointly Owned Property
Declarations, evidence of service and non-compliance with the
notice (see section 4.3 of this article);
h. The Land Department's Fees;
i. Such other documents as the Land Department will require.
The developer must also: 35
j. Establish the relevant minute books including setting up
appropriate accounting documentation for the Owners
Association;
k. Effect the requisite insurances;
l. Prepare all documents necessary for the first Annual General
Assembly including an agenda, budgets, tenders from suppliers and
any contractual documentation.
In order that RERA grant a license to an Owners Association RERA
will need to be satisfied that the Owners have been sufficiently
informed and are in a position to elect a Board and take over the
running of the development.
Where an Interim Owners Association is in place (see section 4.5
below) and RERA are satisfied that there are no substantial
impediments to the Owners Association taking over the development
RERA will license the Owners Association.
4.5. Interim Owners Associations
Due to the fact that there will in some cases be a delay in the
filing of the relevant documentation in order to register and
license Owners Associations and due to the fact that there will
need to be complex matters reviewed at the first Annual General
Assembly, RERA (as a decision under the Directions) require from
the date of the Directions all developers to establish Interim
Owners Associations for completed developments.
The Interim Owners Association (excluding the developer) must elect
an Interim Board. The purpose of the Interim Board is to facilitate
the setting up of the Owners Association and the handover of the
development to the Owners Association by allowing greater
communication on between the developer, Owners and RERA.
The Interim Owners Association and the Interim Board will conduct
their affairs in accordance with the Constitution Regulation
however, any decisions of the Interim Owners Association or the
Interim Board will not be binding on the Owners Association as the
purpose of the Interim Owners Association is not to transact the
business of the Owners Association but to facilitate its
establishment and the taking over of its responsibilities.
4.6. Limited Licenses
In the case of incomplete Master Communities or where the need
otherwise arises RERA may allow limited licenses in order that the
Interim Owners Association can have limited legal status as an
Owners Association including; the ability to work with the
developers management team, monitor tenders, monitor budgets and
work with RERA and the developer to have these approved, approve
auditors, work with the developer concerning improvements to the
Community Rules or the development and to facilitate the collection
of service charges.
Limited licenses will only be granted to developers in exceptional
circumstances and where there is a clear need for a limited
handover.
4.7. The first Annual General Assembly
Once the Owners Association is licensed the developer must provide
all relevant documentation to the Interim Board. The Interim Board
and the developer may then liaise with the Association Manager and
have the Association Manager call the first Annual General
Assembly. This must be called within three months of the licensing
of the Owner Association. 36
4.8. Financial Matters – As between developers,
owners and Owners Associations
Developers are responsible for all costs and expenses associated
with the plot until the Owners Association comes into existence.
37
Developers are not entitled to charge connection fees in relation
to the building. 38 This requirement may not apply to
any connection fees assessed against the unit which will be a
matter of contract as between the developer and purchaser.
Owners who have taken possession of their units even though title
has not been transferred are responsible for amounts corresponding
with correctly calculated service charges however developers must
not collect such charges in advance from purchasers of the units
unless these have been approved by RERA. 39
Where a developer has collected any funds from purchasers on
account of service charges, the developer must within twenty one
days from the establishment of the Owners Association pass any
funds unexpended to the Owners Association. The developer must also
within three months of the date which the Owners Association is
formed have a registered auditor undertake an audit of the monies
received and expended and within 21 days of receiving that report
pay to the Owners Association any reconciled balance of
funds.
The Land Department may also direct the developer to pay funds to
the Owners Association within 21 days of being directed to do so by
RERA or the Land Department.
The developer is responsible for structuring the development,
registering the Owners Association and the costs of this provided
the Owners Association will be responsible for the reasonable costs
of preparing documents such as agendas and budgets as are necessary
for the first Annual General Assembly (see section 4.4 (j)(k) and
(l) of this article). 40
Once the Owners Association comes into existence the developer will
be responsible for service charges pertaining to any units that
remain unsold, regardless of whether these are occupied or not and
regardless of whether the developer is in dispute with any
purchaser who has not settled their purchase of the unit.
Once the Owners Association is established, fees and expenses paid
in advance by the developer may be recovered from the Owners
Association where it is proper to do so. 41 Developers
must also transfer title to any goods or equipment purchased with
funds collected from purchasers to the Owners Association.
Jointly Owned Property Declarations will be allowed to be
registered for existing projects with theoretical site plans. This
is on the basis that: 42
a. In the case of communities comprising Jointly Owned Property the
owners will arrange and pay the cost of preparing Common Areas Site
Plans in accordance with the directions with such plans to be
prepared and registered within one year from the date the Owners
Association comes into existence;
b. In the case of buildings no Common Areas Site Plan in accordance
with the directions is required however the Owners Association may
complete one if it wishes;
c. In the case of Units each Owner shall at its expense have a Unit
Site Plan carried out in accordance with the Directions. It should
be noted that the transfer of the Unit may not be permitted unless
such plans are prepared.
These interim arrangements with regard to plans will only apply to
developments that are completed and handed over or other
developments the Land Department may determine are subject to the
interim provisions.
In the case of new developments plans for proposed units and common
areas will be required to be completed in accordance with the
Directions for Surveyors as part of the approval process for the
development. Upon completion all units and common areas will need
to be surveyed and plans submitted with the Jointly Owned Property
Declaration.
4.9. Contracting, Supply Agreements and consumer
protections
In general terms, agreements with third parties (other than Supply
Agreements) can be approved by the Board by majority resolution.
The agreement must be stamped with the official stamp of the Owners
Association and witnessed by the Association Manager and one or two
members of the Board. 43
In the case of Supply Agreements (being an agreement with a term of
one year or more) with third parties, the Supply Agreement must be
approved by a Simple Resolution of the General Assembly and should
be executed by the Chairman and one other Board member through the
Association Manager. 44
Long term contracts are one area where it is perceived an Owners
Association could be materially prejudiced were developers or other
interest groups entitled to bind the Owners Association without
restriction.
No Agreements are allowed with a term over three years.
45
"Supply Agreements" are defined and regulated in the
General Regulation and the Constitution Regulation. Supply
Agreements are defined as agreements for a term of one year or more
for the supply of goods or services including Utility Services to
an Owners Association either directly or through the Building
Management Group. 46
Examples of Supply Agreements will be agreements for the bulk
supply of utilities, Association Manager agreements, maintenance
contracts and other similar agreements.
Any Supply Agreement entered into whilst the Entitlement of Owners
other than the developer is less than 2/3 of the aggregate
Entitlement ("Control Period") can be set aside at the
first Annual General Assembly of the Owners Association by a
resolution of a majority of owners other than the developer or
related interests. 47 During the Control Period the
developer will be deemed to only control a maximum of 50% of the
Unit Entitlement in the development. 48 Although (where
the developer does retain more than 50% of the units) this is
likely to still constitute a majority at any Annual General
Assembly, the ability of the developer to enter into contracts will
be regulated as below.
The content of any Supply Agreement is regulated as follows:
49
a. In the case of goods supplied a description of these and the
price paid for them must be included. The price must be competitive
with prices obtainable on the open market.
b. In the case of services detailed descriptions of these services
must be provided and the fee for these set out. The fee must be
competitive with fees obtainable on the open market for similar
services. There must be a means of monitoring and assessing the
performance of the service provider and the ability to terminate
the agreement for non-performance or other default. Provisions must
also be included allowing the Owners Association to vary the
services or service levels whereupon adjustments of the fee will
also take place.
c. Secret commissions are prohibited.
In any case where the Supply Agreements are noncompliant, any owner
can apply to the Court for relief and the Court may either
invalidate the Supply Agreement or make an order varying the terms
of the agreement.
All supply contractors must be licensed and cannot subcontract
their services or require that staff salaries or overheads be paid
by the Owners Association.
In addition to the regulation of Supply Agreements any contract for
management services in relation to Common Areas must be through
companies licensed by RERA and the management contract must be
registered with RERA. 50 This provision is to ensure
that all companies are appropriately licensed and in particular do
not perform the function of the Association Manager which due to
its position of responsibility will be regulated through a diligent
licensing process.
Where a development is complete and titles have issued in relation
to this then the developer will not be entitled to enter into
Supply Agreements on behalf of the Owners Association.
51 Some developers may have reserved to themselves in
their sale and purchase agreement the right to exercise the vote of
the owner by proxy or as attorney. These provisions will be
innefective and a General Assembly will need to be called in order
that the owners themselves may approve the Supply Agreement.
5. Developer Disclosure Statements
5.1. Interim Disclosure Statements
There are two relevant periods. The 'First Period' is from
the date the 13th April 2010 (being the date the Directions took
effect) to a date three months later therefore the 13th July 2010.
The 'Second Period' is a from the 13th July 2010 to 13th
January 2011 (therefore nine months from the date the Directions
took effect).
During the First Period, prior to the purchaser signing a contract,
the developer must attach to the contract a notice to the purchaser
in a form approved by the Land Department. Where the developer
fails to attach any such notice the contract will be voidable by
the purchaser. 52
During the Second Period, prior to a purchaser signing a contract,
the developer must attach a notice to the contract in a form
approved by the Land Department and also give to the purchaser an
Interim Disclosure Statement. 53
An Interim Disclosure Statement must be signed by a representative
of the developer and set out the following information:
a. The description of the building or project of which the proposed
unit will be part;
b. The intended land use within building or project (for e.g.
residential , furnished or hotel apartments and retail);
c. Any features pertaining to ecological sustainability;
d. Any special use that applies to the proposed unit (e.g. serviced
apartment);
e. Facilities on the common areas that will be available for use by
owners and Occupiers as of right;
f. Facilities within the building or project that will be available
for use by owners or occupiers on a commercial basis;
g. Items of furniture and furnishings (if any) for the proposed
Units that the developer commits to make available without
additional charge;
h. A draft plan for the proposed unit showing the areas of the unit
required by the Directions for Surveyors to be shown on the plan
for registration purposes but showing no other areas;
i. A schedule of materials and finishes for both the proposed
common
areas and the proposed unit;
j. Whether any Supply Agreements are to be entered into by the
proposed Owners Association and, if so which agreements;
k. Proposed arrangements for the supply of Utility Services to the
Jointly Owned Property and the Unit;
l. Where any utility service will be provided by non-Dubai
government entity, other than the Owners Association, a statement
identifying the utility service and indicating how charges will be
paid for that utility service;
m. Whether the Owners Association will on-sell any utility service
to unit owners and, if so, providing details of the supply
arrangements;
n. Whether construction is commenced and if not specifying the
estimated date for commencement of construction;
o. A reasonably estimated date on which the property will be handed
over to the purchaser;
p. A statement directing the purchasers attention to their
obligation to register the contract in the Interim Real Estate
Register in accordance with Law No. 13 of 2008 and associated laws
including the statement explaining the consequences of
non-registration.
Developers are deemed to have warranted that the information in the
Interim Disclosure Statement is complete and accurate in all
material respects. 54 The developer will be liable to
the purchaser and any subsequent purchaser in damages for any
matter that is incomplete or inaccurate for a period of two years
from the date on which the unit is transferred from the developer
to the purchaser.
Failure to provide an Interim Disclosure Statement will mean that
the contract is voidable by the purchaser. 55 Customers
who on-sell units must also provide the Interim Disclosure
Statement to the purchaser. Failure to do so will mean that this
on-sale may also be voidable by the on purchaser. It is strongly
suggested therefore that developers and anyone on-selling a unit
receive a signed copy of the Interim Disclosure Statement
acknowledging that an Interim Disclosure Statement has been
received by the purchaser.
The plan to be attached to the contract must be completed in
accordance with the Directions. The purpose of this provision is to
ensure that all developers are applying the same standards of
measurement when selling units to the public.
The warranty is expressed as applying to "material omissions
or inaccuracies" and therefore notwithstanding that the
developer may have acted honestly and in good faith the developer
will remain liable. Developers will therefore need to take great
care pre-estimating and leave a reasonably large margin of
error.
As the First Period expires on 13 July 2010, a relatively short
timeframe exists in which developers must prepare their Interim
Disclosure Statements should developers wish to continue to market
and sell units.
5.2. Disclosure Statements
At the expiry of the Second Period or for new projects, a
Disclosure Statement in accordance with the General Regulation will
be required. 56 The Disclosure Statement will be the
same as that for the Interim Disclosure Statement except in the
following respects:
a. Any ecologically sustainable development ratings applying to the
building of project including details of the specifications
authority will be included;
b. A copy of the proposed Jointly Owned Property Declaration will
be included;
c. A copy of any proposed Building Management Statement will be
included;
d. A budget prepared on a reasonable basis and including provision
for General Fund and Reserve Fund and catering for the first two
years of operation will be included;
e. An estimate (based on the budget) of the service charges for the
unit will be provided;
f. Details of utility service providers will be disclosed including
whether the entity is related to the developer and a reasonable
estimate of the annual cost except where the utility service
provider is a government entity.
As with the Notice and Interim Disclosure Statement, failure by the
developer to provide the Disclosure Statement (or a consumer to
provide the same in any on-sale) will mean that the contract is
voidable by the purchaser. 57
As with Interim Disclosure Statements developers are deemed to have
warranted that the information in the Disclosure Statement is
complete and accurate in all material respects. 58 The
developer will be liable to the purchaser and any subsequent
purchaser in damages for any matter that is incomplete or
inaccurate for period of two years from the date on which the unit
is transferred from the developer to the purchaser.
For Existing Projects, developers will need to complete Disclosure
Statements by 13th January 2011 if they intend to continue selling
units in the development. This is a large task on the part of
developers as the modelling will need to be virtually complete for
the entire project noting in particular that a Jointly Owned
Property Declaration including the service sharge modelling,
Building Management Statement and necessary modelling and more
comprehensive budgets and estimates in relation to service charges
will all be necessary.
Estimates in relation to service charges will need to be correct as
at the date of sale and developers should keep evidence as to how
these were calculated in case the matter is disputed later when
costs may have gone up.
Developers must, when registering a new project also submit full
plans for the development (both units and Common Areas Site Plans
prepared in accordance with the Directions for Surveyors) in order
that the Land Department can keep a register of all saleable areas
in the development. Where any floor or part of the development is
to be subdivided or sold differently from that submitted then a
replacement plan must be submitted and approved by RERA and the
Land Department.
Conclusions
The Jointly Owned Property Law and the Directions introduce a
comprehensive ownership scheme in relation to buildings and
developments in Dubai.
The laws incorporate the successful features of similar ownership
schemes internationally as well as many unique features.
In particular the Jointly Owned Property regime applying to Master
Communities will further the low tax, user pays strategy of the
Emirate and allow owners to have representation at the Master
Community level.
The disclosure scheme established will ensure that extensive
preparation is conducted by all developers when planning their
developments and should eliminate many disputes, misunderstandings,
or disagreements as to what the contract entailed.
Consumer protections and owner representation will also ensure that
Owners Associations get the best deal possible from suppliers which
will translate into a greater transparency and trust with regard to
the costs associated with the development and will give substantial
support to the market.
Owners Associations will furthermore have the mandate and the legal
machinery to ensure service charges are collected and Community
Rules enforced.
Consumers will also be comforted by the clear consumer protection
provisions set out in the Directions and the fact that RERA and the
Land Department maintain, where necessary, the ability to take
action to solve problems.
Footnotes
1 Article 18 of the General Regulation.
2 Articles 20 to 22 of the General Regulation.
3 Articles 23, 24 and 25 of the General Regulation.
4 Articles 11(1) and (2) of the Direction for Jointly Owned
Property Declarations.
5 Article 10 of the Survey Direction.
6 Clause 7 of the Constitution Regulation.
7 Clause 8 of the Constitution Regulation.
8 Clause 9 of the Constitution Regulation.
9 Clauses 10 and 11 of the Constitution Regulation.
10 Clause 8 of the Constitution Regulation.
11 Part 3 Clause 8 of the Constitution Regulation.
12 Part 7 Clause 49 of the Constitution Regulation.
13 Part 8 Clause 62 of the Constitution Regulation.
14 Part 11 Clause 86 of the Constitution Regulation.
15 Article 6(2) and (3) and Article 27(2) of the Jointly Owned
Property Law and Clause 4(e) of the Constitution Regulation.
16 Articles 18 and 19 of the General Regulation.
17 Article 25(2) of the Jointly Owned Property Law.
18 Clause 67 of the Constitution Regulation.
19 Article 25(1) of the Jointly Owned Property Law.
20 Clause 98 of the Constitution Regulation.
21 A resolution carried by votes equal to or exceeding 2/3rds of
the total Entitlement.
22 Article 9(1) of the Direction Jointly Owned Property
Declarations.
23 Article 10(1) and (3) of the Direction for Jointly Owned
Property Declarations.
24 Article 4(2) of the Direction for Jointly Owned Property
Declarations.
25 Part 13 Clause 97 of the Constitution Regulation.
26 Article 10 of the General Regulation.
27 Article 33(3) of the General Regulation.
28 Article 17(1) of the Jointly Owned Property Law.
29 Article 8 of Law No 13 of 2008.
30 Article 7 of Executive Council Resolution No 6 of 2010.
31 Article 11(2) of the Direction for Jointly Owned Property
Declarations.
32 Article 11(7) of the Direction for Jointly Owned Property
Declarations.
33 Article 4(1) of the Direction for Jointly Owned Property
Declarations.
34 Article 23 of the General Regulation.
35 Article 25 of the General Regulation.
36 Clause 22(a) of the Constitution Regulation.
37 Article 7 (1) and (2) of the General Regulation.
38 Article 7(8) of the General Regulation.
39 Article 7(9) of the General Regulation.
40 Article 25 of the General Regulation.
41 Article 7(7) of General Regulation.
42 Article 10 of the Survey Direction.
43 Clause 91 of the Constitution Regulation.
44 Clause 51 of the Constitution Regulation.
45 Article 15(1) of the General Regulation.
46 Definition of "Supply Agreement" in the Constitution
Regulation.
47 Article 16(1) and (2) of the General Regulation.
48 Clause 22(b) of the Constitution Regulation.
49 Article 17(1) of the General Regulation.
50 Article 17 (1) (c) and (d) of the General Regulation.
51 Article 34 of the General Regulation.
52 Article 29 of the General Regulation.
53 Article 29 and 30 of the General Regulation.
54 Article 32 of the General Regulation.
55 Article 30 of the General Regulation.
56 Article 4 of the General Regulation.
57 Article 5 (1) and (2) of the General Regulation.
58 Article 5(3) of the General Regulation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
