Owner’s Association Laws in the UAE: Everything you need to know about it.

The United Arab Emirates (UAE), comprises a wide range of remarkable complex and simple real estate properties. This article intends to shed light on the aspect of the collective responsibilities of the joint owners to maintain, manage and repair the commonly shared services and amenities like corridors, hallways, parking areas, recreational facilities of the jointly owned property. UAE is a federation of seven Emirates, Dubai, Abu Dhabi, Ras-al-Khaimah, Sharjah, Ajman and Umm-al-Quwain, each Emirate having its own set of legislation to govern the matters concerning the real estate properties. In this article, we shall focus on the properties law of Dubai and Abu Dhabi with regards to the outstanding charges of the owners association.

Jointly Owned Property in Dubai:

Dubai is a land recognized for having incredible and massive multi-use residential and commercial properties. The maintenance and management of these properties’ rests with the respective owners of the complex properties; therefore, the Dubai government has implemented strong legislation to ensure that such responsibilities are duly complied by the owners of the jointly owned property. In the year 2019, the Dubai government passed a new statute, Law Number 6 of 2019 concerning the Jointly Owned Property (the Jointly Owned Property Law), replacing the previous Law Number 27 of 2007 governing the Jointly Owned Property Law. The recently introduced Jointly Owned Property Law repeals the old unclear provisions and includes new unambiguous provisions with regards to various aspects of the collectively owned properties in order to resolve the unresolvable disputes under the previous law.

 

Key Changes:

The key changes introduced by the newly enforced Jointly Owned Property Law with regards to the managerial responsibilities and service charges are as follows:

Formation of Management bodies by Real Estate Regulatory Authority (RERA) and Replacement of Owners Association to Owners Committee:

The present Jointly Owned Property Law introduces a three-tiered management system to maintain, repair and manage the common areas, based upon the types of real estate projects such as the major projects, hotel projects and the real estate projects apart from the major and hotel projects, which previously used to be under the ambit of the owners association. In the case of major projects, the developer is vested with managerial responsibilities. The developer may further appoint a management company approved by the RERA to carry out the responsibilities on his behalf. In case of the hotel projects, the developer is required to appoint a hotel project management company with the approval of the RERA to manage the common parts. In case of the real estate projects apart from the major projects and the hotel projects, specialized management companies shall be formed by RERA in line with the rules and regulations as specified by the resolution issued by the director general. However, the concept of owners association has not been completely repealed, but has been extensively redefined with regards to their duties and their legal status.
As per the new Jointly Owned Property Law, hereafter, the owners association shall be named as owners committee. Pursuant to the new Jointly Owned Property Law the owners committee are given a legal status enabling them to represent the interest of the owners with regards to the developers and other such persons involved in carrying on the managerial responsibilities of the jointly owned property. Further, article 22 (a) of the new Jointly Owned Property Law states that the owner's committee shall not consist of more than nine (9) members, which also includes the president and the vice-president in cases of major projects and real estate projects (which are separate from the major and hotel projects).

Article 22 (c) lays down the qualifying criteria to be eligible to be the members of the owner's committee as follows:

• Should possess complete legal capacity;
• must be an owner living in the jointly owned real property;
• must possess good character and reputation;
• must not fail to pay the services charges and usage charges; and
• must actively take part in the meetings of the owner’s committee.

Any member who fails to meet the above-mentioned criteria shall be terminated and a new member qualifying the requirements shall be appointed.

Article 24 of the new Jointly Owned Property Law provides the functions of the owner’s committee as follows:

1. To ensure that the management body complies with its responsibilities of maintenance, repair, operation, and management of the common parts in line with the provisions of this law or any other such competent regulations;
2. Assess and come up with essential recommendations on the annual budget for the due maintenance of the collectively owned property and for this purpose, the committee can request financial reports of the jointly owned property from the management company;
3. Discuss the challenges and hindrances for effective maintenance, management, repair, and operation of the common areas and accordingly suggest recommendations on the same either to the management body or RERA;
4. Convey to the management bodies of the complaints and suggestions with regards to discharge of management companies’ key duties as submitted by the owners and the occupants. Further, these complaints and recommendations can be referred to the RERA upon failure by the management entity to resolve them within a period of fourteen (14) days from the date when such complaints were notified to them;
5. The owner’s committee of the real estate projects apart from the major projects and hotel projects can request RERA to replace the management body of the jointly owned property and may also provide the necessary advice to RERA on the selection and appointment of the new management body;
6. Bring to the notice of the management body on the existence of any kind of defects and damages of the structural parts of the jointly owned property or with regards to any urgent repair of any common area;
7. Extend cooperation to the RERA, management bodies, and any other relevant authority with regards to safety, security, and environmental matters of the jointly owned property;
8. The owner’s committee may further submit to the management body a proposal with regards to the new methods of using the common area or on any amendments to the building management regulation which shall be subject to the approval of RERA.

As article 22 (b) of the new Jointly Owned Property Law states that the owner’s committee can be formed upon registration of at least ten (10) percent of the total units of the jointly owned property as opposed to the previous law which stated that an owners association is automatically formed upon the registration of the first plot with the Dubai Land Department (DLD) and thereafter, anyone who purchases the other units of the same complex shall instantly become members of the owner’s association. This feature of the new Jointly Owned Property Law brings an organized system of management of the complex properties as opposed to the previous law where the owners were vested with the complete responsibilities of carrying out managerial duties.

Articles 25 to 32 of the new Jointly Owned Property Law covers the aspects of the service and usage charges:

Service Charges:

Service charges can be defined as the amount of money required to be paid by the owners of the jointly owned property in order to aid in the maintenance and management of the property and to meet other expenses to effectively maintain the services and facilities of the common area. Article 25 of the Jointly Owned Property Law lays down that the owners are entitled to pay to the management bodies their part of the annual service charges to effectively maintain, manage, operate and repair the common areas of the property. It further sets out the method of determining the amount of share to be paid by the owners in line with the relevant method laid down by the director-general which is, taking the ratio of the area of the owner’s unit to the total area of the entire jointly owned property. The developer also shall pay the annual service charges with regards to both the unsold units and sold units, where the provisions of the sold unit’s contract state that the annual service charges shall be paid by the developer on the behalf of the purchaser. The area of the owner’s unit shall be the same as mentioned in the real property register.

Usage Charges:

Article 26 provides that the master development is entitled to receive usage charges from the owners or sub-developers in return for the management, maintenance, operation, and repair of the common areas of the master project. This shall be applicable to the buildings constructed or under construction or even the vacant land. However, such services and usage charges can only be collected upon obtaining prior approval of the RERA. Article 27 of the new Jointly Owned Property Law expressly states that the management entity is restricted from demanding any service charges in return for the operation, management, repair, and maintenance of the common area and services without prior approval from RERA. This approval shall be granted in line with the approved master community declaration and the relevant rules and criteria as sanctioned by the director-general. It is also necessary that such proposed budget of the service and usage charges by the management entity be priorly approved by a certified audit firm that is recognized by RERA. In the absence of such a certified budget proposal, the RERA may grant temporary service charges until such a budget is certified and approved by the competent audit firm. Such a temporary budget shall be granted in line with the resolution issued by the director-general.

Non-Payment of Service Charges or Usage Charges:

Pursuant to article 28 of the Jointly Owned Property Law, an owner or sub-developer is required to pay the service charges or usage charges as approved by the RERA. Further, it states that the owner is not allowed to waive his interest in common parts so as to evade paying the service charges that the owner is required to pay. Article 29 of the Jointly Owned Property Law states that the developer or the management entity are not allowed to deprive the owners and sub-developers of utilizing the common services and facilities of the common area in order to coerce the owners to pay such service charges or usage charges which are in contradiction to the procedures prescribed by the provisions of this law and the relevant resolutions issued.

Collection of the Service Charges:

Article 30 of the Jointly Owned Property Law provides the procedure to collect such charges and also lays down where such deposited service charges shall be used. The management body is required to open a bank account with a bank licensed to be functional in Dubai and also shall be recognized by RERA for the purpose of depositing the collected service charges. As per the rules mentioned under the relevant resolution which is issued by the director-general, the management body is required to deposit the collected service charges into the account created within a period of seven (7) working days from the date when such services charges have been collected. The developer shall be responsible to collect and deposit the service chargers in the case where the management committee is yet to be appointed by RERA. These service charges are exempted from being attached in favour of the management creditors. These deposited amounts of the service charges can only be used for the following purposes:

1. Expenses on cleaning services of the common area;
2. To pay the amount applicable for the matters involving security and safety of the jointly owned property;
3. Meeting the expenses of maintenance, operation, repairs, management, or improvement;
4. For the purpose of paying the insurance premiums of the jointly owned property;
5. Any fees applicable on the auditing of the budget related to the service charges;
6. For the purpose of paying the fee of the management company in accordance with the amount and method as specified by RERA;
7. In order to cover the developer’s administrative expenses in cases of major projects as approved by RERA;
8. For the purpose of raising funds to meet the emergency expenses, or to replace equipment and devices in the common area, these funds shall be deposited into a different account apart from the service charges account. These funds are not allowed to be used without prior approval from RERA, except in cases of critical emergencies.
9. For the purpose of paying fees in cases of inspection or overseeing the management, operation, repair, and maintenance of the jointly owned property; and
10. To cover any cost as prescribed under the master community declaration and as approved by RERA for the purposes of maintenance, repair, management, and operation of the jointly owned property.

In case the funds raised for the purpose of meeting the critical emergency expenses are not sufficient, the Dubai Land Department (DLD) may request the owner to bear such expenses on obtaining prior approval from RERA with regards to the same. Likewise, for the purpose of collecting the usage charges, the master developer is required to open a usage account for each major project with a bank licensed to operate in Dubai, and such bank should be recognized by RERA. The developer on using the common facilities for profitable purposes as approved by the DLD is required to deposit a percentage of the net profits emanated from such use in the usage charges account within a period of ten (10) days from the date of receiving such proceeds by using the common amenities. Such percentage is fixed by the relevant resolution issued by the director-general. The funds deposited in the usage charges accounts also shall be used only for the purposes as stated above under the service charges. The master developer can further on obtaining prior approval from RERA, can use a specific sum from the funds deposited in the usage charges account for the purpose of repair or maintenance in the developed-owned areas in the master project as long as these areas can be accessed for public use without any consideration or fee. Article 32 of the Jointly Owned Property Law lays down the procedure in which the collection of service charges and usage charges can be conducted and also the way to deal with the non-payment of such services. As per article 32 of the Jointly Owned Property Law, the management body is entitled to have the possession of the units of the unpaid service charges, and thereby, such units are restricted from being disposed of, until the service charge due to the management entity is paid.

Procedure to Claim the Outstanding Service Charges from the Owner:

On failure by the owner to pay the service charges, the management entity shall first serve a legal notice requesting the owner to pay the service charges within a period of thirty (30) days from the date when such notice is served. If the owner failed to pay the service charges within the stipulated period of the time limit, then a financial claim against the owner can be referred to the Rental Dispute Settlement Center (RDSC) by the management entity. Thereafter, the presiding judge of the RDSC shall enforce the execution of such financial claims in line with the relevant rules and procedures as observed by the RDSC. If necessary, the execution judge shall pass an order of the public auction of such a unit belonging to the owner of the unpaid service charges in order to retrieve the service charges due unto the management entity. The owner who failed to pay the service charges is required to bear the cost of court fees, advocate fees as prescribed by the execution judge. The notice shall be served in the method as decided by RERA. The same procedure is applicable even in cases of unpaid usage charges.

Service Charges in Abu Dhabi:

Law number 3 of 2015 on the Regulation of the Real Estate Sector in the Emirate of Abu Dhabi (the Real Estate Law) is the governing legislation on various aspects of the real estate properties. Article 68 of the Real Estate Law entitles the owners union to collect the service charges from the owners for the purpose of carrying out its functions. The Articles of Owner’s Association Laws in the UAE union specify the kinds of service fees and the method of collecting them. If the owner fails to pay the service fees on the due date, the owners union may in line with the resolution of its Board of Directors notify of the same to the owner of the real estate property through a registered mail, along with the acknowledgement receipt requesting to settle the unpaid service charges within a period of three (3) months from the date of receiving such notification. In the event, where the owners of the unpaid service charges fail to pay the service charges due unto the owners union, the owners union may submit an application before the presiding judge of urgent matters, requesting to auction the real estate unit of such unpaid service charges in order to recover the service charges due unto them in line with the provisions of the Federal Law Number 11 of 1992 on the Civil Procedure Code. Thus, the new Jointly Owned Property Law of Dubai has been enforced with an intention to overhaul the provisions of the previous law on the jointly owned property and ensure that the disputes regarding the Owner’s Association Laws in the UAE are effectively resolved. Violations of any of the provisions of the legislation or regulation pursuant to the Jointly Owned Property Law can attract a fine of UAE Dirhams one million (AED 1,000,000). Further, the party who is convinced that the procedure or decision of the RDSC has been unfair can make a written appeal to the director-general of the DLD within a period of thirty (30) days from the date of being notified of such decision or procedure. Thereafter, within a period of thirty (30) days from the date of submitting such appeal, the appeal shall be reviewed and concluded. Further, the new Jointly Owned Property Law incorporates features of transparency, whereby, the homeowners get to access the breakup of the fees paid by them for the maintenance of their property and the common area. To know more about Joint Owned property laws, one can consult the team of property legal department in Fotis International. With years of expertise, they are widely known in this field.