Articles

The New Law and It’s Effect on Management Entities

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.

 

OA Replacement with Management Entities

Previously, the owner’s association was responsible for the management, operation, maintenance and repair of the common areas of the building and were allowed to delegate these responsibilities to external contractors. However, Article 49 now replaces the owner’s associations and assigns the respective rights and obligations to management entities as specified under the new system in Article 18.

New three-tier system for management:

Per Article 18, the new law has 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):

Real estate projects that will come under this ambit will be determined by the Director General of the Dubai Land Department (DLD). Per Article 18(a)(1), 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).

Further, for each Major Project, it is mandated that an owners’ committee be formed with the members to be selected by RERA. Article 24 states the functions of the owners’ committee will include, but are not limited to:

  1. Verifying that the Management Company manages, operates, maintains and repairs the Common Areas;
  2. Reviewing the annual budgets prepared for the maintenance of the common property and submitting recommendations.
  3. Receiving complaints and suggestions submitted by the owners and the occupants of units regarding the management, operation, maintenance, repair of the Common Areas, and notifying the Management Company. The owners’ committee can submit these complaints to RERA if the Management Company does not address them within 14 days from the date of notification.
  4. Notifying the Management or RERA about any defects in the structural parts of the common property or for any damage or defects requiring emergency treatment.
  • 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.

Similar to the previous categories, Article 38 states that if it is found that the management company is inefficient or unable to manage the common property, RERA may then appoint an alternative management company to manage the common property. The Article also provides for the procedure that RERA will follow in such a situation.

Service charges

Per Article 25(a), owners are required to pay to the management body their share of the service charge to cover the expenses of the management, operation, maintenance and repair of the Common Areas. 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.

Obligations of Management entities

Per Article 34, the new system of management entities can contract with maintenance, guarding, cleaning, insurance institutions and companies and other institutions and companies to the extent necessary to perform their duties and obligations. The management entities are now also required to provide RERA with a periodic report every six months on the management of the common properties. Further, per Article 33, RERA shall maintain supervisory control and shall inspect the operation, management, maintenance and repair of common property.

Per Article 41, the management entity is also tasked with obtaining comprehensive insurance coverage for the common property. The insurance premiums payable by each unit owner shall be covered by the annual service fees to be paid.

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.