Background and introduction
Just recently, His Highness Sheikh Mohammed bin Rashid Al Maktoum Vice President and Prime Minister of the UAE issued Law No. (6) of 2019 pertaining to the Joint Ownership of Properties (Joint Ownership Law) in Dubai. This newly enacted law repeals Law No. (27) of 2007 concerning Jointly Owned Property in the Emirate of Dubai.
Furthermore, the new law applies to all major real estate development projects and jointly owned properties in Dubai, including properties situated within the free zones and special development zones.
Joint Property Law came into effect on the 18th of November 2019. All stakeholders must conform with the Joint Property Law by or before the 18th of May 2020, thus giving all stakeholders a period of 6 months to comply with the law from the date of effect.
Who is affected by the new Joint Property Law?
The Joint Property Law affects the subsequent stakeholders who must take guidance on what steps will need to be undertaken to bring their procedures into compliance:
- Rental Dispute Settlement Centre
- Owners associations
- The Institute: Real Estate Regulatory Institute (RERA)
- Management Companies
- Legal Auditors
- Hotel Operators
What are the key elements of the new Joint Property Law?
Enhanced clarity on the application of the Law
As per Article 18, Joint Properties now fall into three classifications and are subject to the application of the 2019 Joint Property Law:
(1) major projects;
(2) hotel projects, and;
(3) other types of projects other than the first and second categories.
Directions and documentation accepted and approved by RERA prior to the entry into force of the new law continue to be applicable, provided they are not conflicting with the Joint Property Law. Ownership certificates and other documents related to individual units in a jointly owned real estate property shall be used by Dubai Land Department as per the conditions of Law No. (7) of 2006 concerning real estate registration in Dubai.
Owners’ Associations no longer exist
As per Article 49 of the new law, Owners’ associations are no longer responsible for the management of the common areas within the joint property. Instead, a Management Entity will replace the Owners’ Association in the rights and obligations arising from the new law.
Additionally, Owners’ Committees, entities with full legal personality, will represent the interests of the owners in relation to the developer and / or the other stakeholders involved in the management and supervision of jointly owned properties in the Emirate. As per Article 22, the Owners’ Committees for the first and third categories (major projects and real estate projects other than major projects and Hotel projects) should not include more than nine members, including the President and Vice-President thereof. Moreover, the Committee shall be formed upon registration of not less than 10% of the total number of properties in joint real estate in the real estate register. Furthermore, Article 24 lays out the responsibilities the Owners’ Committees need to undertake, such as reviewing annual budgets, discussing obstacles relate to management, reviewing complaints and suggests and much more.
The Management Entity shall provide RERA with a report every 6 months regarding the management of jointly owned properties, and other information as requested by the law. Moreover, RERA has the capacity to request the Management Entity to provide additional information or statements of accounts of the revenues and other expenses. As per Article 27, the Management Entity cannot impose or obtain any fee of any type from the owner against the management whether it be operating, maintenance and repair of the Common Parts or Common Facilities unless it receives an approval from RERA.
Finally, as per 24(5) of the new law, for projects in the third category (real estate projects other than major projects and Hotel projects), RERA can appoint another facility management firm to oversee the common areas of the jointly owned real estate project.
Centralized documentation and registration requirements
Dubai Land Department shall prepare and administer a unique register for jointly owned properties, which will include details such as, but not limited to:
- land owned by developers,
- units allocated for independent ownership at these jointly owned properties,
- members of the owners committee,
- building management system,
- management entity,
- contractual documents concerning management of jointly owned properties or common parts.
On the other hand, developers have new obligations, such as:
- i) As per Article 6 of the new law, upon completion of the jointly owned property, including obtaining the certificate of completion from the appropriate entity, the developer must submit certain documentation Dubai Land Department within 60 days of the completion date and receipt of completion certificate.
- ii) The Developer must put in place a building management system for megaprojects and hotel projects managed by them, considering Article 20 of the new law. The system should be approved by RERA before concluding any legal acts for these projects. In the event this management system is not present for such jointly owned properties, then it may refer to any specialised company for the preparation of this system.
Clarity on the Service Charges and Use Charges
RERA maintains its supervisory role over the Service Charges and Use Charges. Under Article 33(3) of the new law, these charges shall be inspected and operated by RERA and shall be referred to a legal auditor who is certified in this aspect.
The collection of charges shall be made in a specially designated bank account opened by the Management Entity in the Emirate. The Management Entity shall have the obligation to deposit in this account the charges within 7 days from the collection from the owners. The funds collected in such accounts are to be used for strictly designated purposes, such as insurance of the jointly owned property, maintenance, and cleaning or creating cash reserves to be used in emergency situations.
As per Article 32, in the event an owner does not pay their Service Fee, then the Managing Entity can impose via a written notice ratified by RERA, a request to pay within 30 days from the date of such notification. This new time frame is substantially shorter than the 3-month period offered under the previous law. Whereas such notices are executory, owners who do not comply may be in the situation of having their unit(s) sold in auction for recovery of the outstanding Service Charges.
Non-Compliance and Jurisdiction over disputes
Violations of any of the acts as prescribed in the legislation and the decisions issued pursuant to the Jointly Owned Property law will be subject to a fine of AED 1 million. Penalties will be doubled in case of repeated violations within a year, as per Article 44 of the new law.
In terms of jurisdiction, the Rent Disputes Settlement Centre will now have jurisdiction to resolve disputes in relation to Joint Properties. As per Article 46 of the new law, if a party believes that a decision or procedure has been taken against them which is unfair, they may file an appeal in writing to the Director-General of Dubai Land Department within 30 days from the date of being notified of the appealed decision or procedure. Within 30 days from the date of filing, the appeal will be reviewed and ruled upon.
Overall, the newly enacted law will play a substantial part in the Dubai real estate market, as the law has been tailored to be more precise towards the regulations of jointly owned properties. The law implies enhanced transparency and uniformity for all stakeholders involved in the management and operation of jointly owned property.