Homeowners vs owners’ associations vs developers in the UAE: Who has control?
Just who has control over your property in this tri-party relationship?
When it comes to owning a UAE property, it’s important to know how much control you retain.
Crucially, you need to know where your rights begin and end – and how you will be impacted by the owners’ association. The OA, as it’s known, is the non-profit entity that manages common areas in jointly-owned properties, i.e. buildings or communities where there are multiple title deed holders.
Knowing who has control over which elements of your property will help protect your interests in the event of a dispute.
Your level of interaction and influence varies. The big three or four government-owned developers tend to operate a little differently, but for all other developers, small and mid-size, the OA rules and regulations operate as standard and almost as per the way the law was written, with a few exceptions. However, in a growing and developing market there will always be a few areas which are last to be implemented when it comes to new laws that are a first for not only the country, but for the region.
But it is still a huge positive that these laws are being implemented as they recognise the rights of the owners and bring confidence for investors that their rights are on the agenda and respected.
Right to inspect and obligation for payment of service fees
Under UAE property law, anyone who buys a unit in an apartment block (or any other jointly-owned property) will automatically become a member of the OA for that building.
The OA is responsible for three key areas: the management, monitoring and maintenance of common areas within the building. It may delegate these responsibilities to an association manager.
In many cases the OA also has the right to sue and to own assets, such as claim unpaid service fees.
In practice, this aspect where they can force the sale of properties or stop renting and renewing of properties where the owner has not paid their fees for a long period of time is still in its infancy, lacks teeth and needs to be strengthened. Almost every building has 1-3 per cent of owners who, for various reasons, have not contributed to the greater good of the building and who tend to be years, not months, behind the rest of the owners in paying the maintenance and service fees. This is a problem all over the world.
But this is a vast improvement from 5-6 years back in the UAE when the laws were still new.
What is needed?
– A link to the Ejari system would be one way to eliminate some of these issues, in blocking issuing of leases and DEWA bills.
– A stronger ability to cancel elevator, gym, and car parking access would also assist.
– If a tenant finds out after a lease has been signed that service fees have not been paid and cheques issued are already with the agent, it should be possible for those rental cheques to be re-issued and deposited to the DLD pending clearing of service fees by the owner. This will help respect the tenants’ rights, and if the owner does not clear the fees, the DLD should be able to make the payment from the rent collected.
So, it certainly shouldn’t be ignored or under-estimated when you buy property. In fact, it would be risky not to scrutinise the OA, its board and its manager, and to make sure the landlord has paid their fees in full and up to date when renting.
As a homeowner, you have the right to access the OA’s written records concerning your property and community.
You will be able to scrutinise:
– The financial accounts.
– Minutes of board/ general assembly meetings.
– Insurance policies.
– The register of all contracts and agreements.
– The register of assets and the annual budget.
The OA must show you these records upon request. If you feel there is something within the records that you are not happy with, it’s important to raise this with the association manager.
Ideally, the manager should be registered and licenced with the local government agency of the emirate where your property is located.
In Dubai, under the jointly-owned properties law (JOP Law), both the OA and association manager should be licensed and registered by the Real Estate Regulatory Agency (RERA). Unfortunately, progress has been slow and the licensing process post registration has been stalled for a number of years due to a mismatch with local laws. We hope that this will be overcome in time for Expo2020 or a workaround the banking issues should be in place, especially with the new foundation law coming into place and with investors like Warren Buffett coming into Dubai. We need to close off this one last item related to OA’s. The OAs need to be able to be in control of their own bank accounts or at the very least the developers should not be to able to control the OA’s bank accounts. This defeats the very purpose of the OA in the first place.
It is essential that we don’t have Warren Buffet’s first purchase of property in Dubai stuck in a developer OA dispute over beach access and service fees with the developer!
This means many OAs do not function as a legal entity when it comes to contracts, bank accounts and the ability to sue or be sued. The lack of a bank account is the single biggest disappointment with the current system, as it removes the independence and any bargaining tool of the OA with the developer of the property. It can be held to ransom by the developers who act as the signatory on the OA bank account and can arbitrarily leverage this position, weakening the intended purpose of the law.
This is the only real issue with the implementation. The progress around all other aspects of the law and its implementation have been inspiring to the region.
As a result, developers often remain involved in management and hold a utility services account for the building. If there is a dispute with the OA, or even the developer, contact the regulatory agency.
You can elect the owners who make up the board
When you buy an apartment in a shared building you are automatically part of the OA, but not the board.
Typically, the board consists of around five to seven elected unit owners, who work as volunteers. While all owners can vote on larger items, only the board votes on regular day-to-day running issues. It is important to exercise your right to elect the owners that make up the board at each annual general assembly. After all, it’s in every homeowner’s interest that common areas are effectively managed.
In most new buildings there is lots of enthusiasm for this role and function, but as a building enters its fourth year and so on, the level of interest from the owners on the board tends to drop off and the quorum tends to be missed first time around in electing the board.
And as we all know the phrase, no unpaid job or good deed goes unpunished for long. Hence in boards where everyone is a volunteer, over time, personal interests and agendas overtake best intentions. It is part of every pro-bono board in the world.
What will the future bring?
A DLD certified course for Professional OA Board Members, like non-executive directors and nominee roles in company law, where there is a place on the board for specially qualified individuals who might not necessarily be a unit owner.
We are probably two to three years away from this, but this is the next step in building non-conflicted board members to act and work in a paid professional capacity for the greater good of the OA, the owners and the property. One or two on each board in the coming years would solve a lot of headaches and issues.
You can vote on the budget and service charge
Homeowners in apartment blocks and other jointly-owned property must pay an annual service charge that covers maintenance and upkeep of the common areas.
The charge should be approved by the regulatory agency, such as RERA in Dubai. The agency should also approve any auditor that the OA has asked to prepare a financial report.
While many homeowners may have little involvement with the OA, it is important to know that you can vote on the annual budget and service charge. It is a right well worth exercising since it gives homeowners the ability to put pressure on the OA to keep fees at a reasonable level.
You can vote on the association manager
As a homeowner and OA member, your voice counts when it comes to the appointment of the association manager.
The manager has a key role regarding common areas of jointly-owned property. Their responsibilities include:
– Handling homeowners’ complaints and requests.
– Implementing decisions of the general assembly.
– Keeping the books and records required by law.
– Preparing the annual budget.
– Issuing service charge notices and collecting payments.
– Supervising contractors and suppliers.
Importantly, if the manager is not performing to the expected standard, you can table a motion for the termination of their contract. This is done via a simple resolution of the general assembly. Where there is no quorum reached in the first AGM and a vote is proposed to change the OAM, it is important that the laws are followed. There must be the right reason to make changes, with no vested interest. Therefore, in the future, professional paid members could be the long-term solution. Likewise, some of the best OAMs are those who have evolved out of large developers like Emaar, who have an excellent name and reputation in the market and Emaar owners are some of the happiest in the country. But for others, the line between developer and OAM remains blurred. However, I am confident in the coming year this will be sorted out.
You must accept the board has the final say
If the OA votes for something within the community – such as redecorating the common areas or deciding to close the pool for refurbishment – their group vote is final.
So, if you want to have more influence in the control of your property, it makes sense to put yourself forward for election onto the board.
There are many benefits to owning property in the UAE and purchasing a unit in a managed block is a popular option, but it is important to understand how the OA system works. The law is not perfect and not fully implemented, but it is evolving and improving every year. And stands out in the region, as the most progressive and advanced in terms of ensuring owners’ rights. Imagine, 15 years ago, there were no title deeds, and now we have owners’ associations, owners’ and tenants’ rights, and a forum for dispute resolutions.
No other country in the region and even further afield has made this much progress in such a short amount of time,
To protect your assets and ensure your block is well managed, don’t shy away from exercising your rights to the full.
Michael Burke is managing partner at Arabian Escapes, a Dubai-focused real estate company