Articles

The New JOP Law and its Effect on Developers

03 October 2019

New JOP Register

Per Article 4, a new register shall be established by the DLD for jointly owned properties which shall contain the following:

  1. Land plots owned by the developers, on which the common properties shall be constructed;
  2. units allocated for independent ownership in the common property sold by the developers, and the names of the owners of these units;
  3. members of the owners’ committee;
  4. building management system;
  5. plans;
  6. management body;
  7. management contracts of the common property or the common parts;
  8. area of common parts and private common parts and their percentage out of the area of units in the common property; and
  9. areas owned by the developer in the common property.

 

New three-tier system for management:

Per Article 18, the new law has replaced Owners’ Associations to set in place a new tiered-system for the management, operation, maintenance and repair of the common areas of the building:

  • First Category (Major Projects):

Per Article 18 (a)(1), Real estate projects that will come under this category will be determined by the Director General of the Dubai Land Department (DLD) and the developer shall now be responsible for the management, operation, maintenance and repair of the common areas and facilities services. The developer does have the authority to delegate these responsibilities to a management company per Article 18(c), provided that the management company is approved by the Real Estate Regulatory Agency (RERA) (Article 2).

  • Second Category (Hotel Projects):

For Hotel Projects, the New Law provides that the developer is to entrust management of common areas to a hotel project management company approved by RERA per Article 18(a)(2).

Unlike the first category, an owners’ committee may be formed for each Hotel Project with its members selected by RERA, if the hotel project management company wishes, and the owners’ committee does not have the right to interfere in the management of the hotel project or the common areas.

For the first two categories, Article 37 states that if it is found that the developer or the management company is incompetent or unable to manage the common property in a manner that that guarantees them to be sustainable and fit for service, the CEO of Dubai Land Department may then appoint a specialised management company to manage and operate the common property.

  • Third Category (Real estate projects other than major projects and hotel projects):

The common areas of these projects shall be managed by specialized management companies, which shall be selected and contracted by RERA in accordance with the controls determined by a decision of the Director General in this regard, per Article 18(a)(3). An owners’ committee is required to be formed for projects under this category, with members being determined by RERA operating in accordance with Article 24. However, per Article 24(5), this committee also has the power to request RERA to replace the Management and to advise RERA about the selection and appointment of the new Management.

Obligations of Master Developer

As per Article 19, the Master Developer will manage and maintain the common facilities in the Master Project entrusted to a management company through a written agreement that has been approved by RERA.

In accordance with developer liabilities for major projects and hotel projects, if the master developer of a Master Project is found to be incompetent or unable to manage the common property in a manner that guarantees them to be sustainable and fit for service, the CEO of Dubai Land Department may then appoint a specialised management company to manage and operate the common property.

Obligations of Developer:

Per Article 6(c), the developer is required to submit all necessary documents of the common property to the Dubai Land Department (DLD) within 60 days of the completion date and receipt of completion certificate. DLD can extend the deadline for this by 30 days.

Further, per Article 20, the developer must establish a building management system for major projects and hotel projects which must be approved by RERA before any legal transactions can take place for these projects.

The building management system is defined as a document prepared in accordance with the regulations issued by the DLD and recorded in the new Register, which state the procedures for maintenance of the common parts, and the percentage of owners’ contribution in the costs related thereto, including the equipment and services existing in any part of another building.

Service charges

Per Article 25(a), the developer shall bear his share of the service charge for the unsold units, as well as for the sold units in which the developer is obliged to pay the services charge for the buyer if stated in the agreed provisions of the sale contract.

However, per Article 27, it is prohibited for the management entity to collect any service charges for operating and maintaining the common facilities unless they have obtained prior approval from RERA, for which RERA is to appoint an accredited legal account auditing office.

Utilisation charges

Per Article 26, the Master Developer may collect a utilisation charge from the owner or sub-developer of the Master Project whether it is prefabricated buildings, under construction buildings or vacant land plots, subject to the approval of RERA.

Developer Liabilities

Article 40 of the New Law states that the Developer will remain liable for 10 years from the date of completion certificate of the building to restore and repair, any defects in the structural elements of the common property developed by them, in accordance with the construction contract provisions in the Civil Transaction Federal Law No. (5) of 1985 and the respective RERA directives.

Likewise, the developer is also obligated to remain liable for a period of 1 year from the date of the completion certificate of the building to repair or replace defective installations in the common property which includes mechanical and electrical works and other concerned utilities.

New dispute resolution mechanism

Per Article 42, the Rental Dispute Settlement Centre in Dubai is to have the exclusive jurisdiction to hear and settle all claims, disputes and disagreements relating to the rights and obligations stipulated in the New Law.

Penalties for non-compliance

Per Article 44, violations of any provisions included in the New Law will incur a fine of up to AED 1 million for first offence, doubled to AED 2 million for repeat offenses.

Conclusively, it is evident that the introduction of this law covering JOP’s will be instrumental in reviving the real estate sector within the local domain, that has been recently grappling with problems, such as the reduction of the per capita purchasing power of real estate along with the reduction of large scale investment injections into the economy.

This article is offered for general information only and does not constitute legal advice. If you are in need of assistance with regards to the new law or real estate matters, please do contact or schedule a meeting with one of our consultants at: info@germela.law or +971 4 554 1201.