Source: http://www.tamimi.com/en/publication/publications/section-1/law-update-july-2010/better-managed-property-the-dubai-jointly-owned-property-strata-directions.html
Timestamp: 2013-05-26 04:04:13
Document Index: 76186684

Matched Legal Cases: ['art 2', 'art 6', 'art 3', 'art 7', 'art 8', 'art 11', 'art 13']

Better Managed Property The Dubai Jointly Owned Property (“Strata”) Directions - Al Tamimi & Company
Better Managed Property The Dubai Jointly Owned Property ...
Better Managed Property The Dubai Jointly Owned Property (“Strata”) Directions	by Jeremy Scott - - Dubai Office 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 DeclarationsEvery 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; andg. 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 SurveyorsThe 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 AssociationsThe 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; andc. The Owners at a General Assembly.
3.2. The BoardThe 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 RERA9 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 ManagerPart 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 capacityb. 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 OwnersThe 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 ownersThe 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 AssociationOwners 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 AssociationProjects 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 DeclarationsIn 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 structuresCertain 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 PropertyWe 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 StatementsIn 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 requirementsIn 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 LicensingOnce 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 AssociationsDue 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 LicensesIn 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 AssemblyOnce 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 AssociationsDevelopers 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 protectionsIn 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 commonareas 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 StatementsAt 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.
ConclusionsThe 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.
Footnotes1 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.	Print