The jointly owned property law no. (6) of 2019

Key elements of the new JOP Law:

• the old Law No.(27) of 2007 concerning Jointly Owned Property in the Emirate of Dubai is revoked and replaced by the new JOP Law.
• The Directions and any joint property documentation approved by RERA remain valid to the extent not inconsistent with the Joint Property Law.
• Owners Associations will no longer exist and instead a “Managing Agent” (effectively an approved management company) will be responsible for the management of the Joint Property or Master Community. Actual management of the jointly owned property, which was formally the responsibility of the owners’ associations, must now be delegated to managing bodies, being either developers or specialized property management companies appointed by the developer via RERA-approved contracts.
• A Committee of up to 9 resident owners will be appointed by RERA with an advisory function only.
• The Managing Agent must enter into all contracts for the Joint Property or Master Community and hold the relevant insurance and shall be required to give a bank guarantee for an amount to be determined by DLD.
• The Master Developer shall manage and maintain the facilities involved in the master community, provided that this is entrusted to the management company under a written agreement previously approved by the Agency.
• Service Charge and Use Charge collection procedures are clearly set out and include a power of sale in the event of continued defaults in payment.
• RERA continues to have a supervisory role over Service Charges and Use Charge.
• RERA now has the power over the appointment and removal of managers or committee members.
• Fines of up to AED 1,000,000 for first offences and AED 2,000,000 for subsequent offences may be issued.
• The Rent Disputes Settlement Centre will now have jurisdiction to resolve disputes in relation to Joint Properties.

Management Structure:

Managing bodies will be monitored by the owners’ committee and RERA will conduct inspections of jointly owned property to assess the efficiency of the managing bodies. RERA may, independently or in consideration of a request of an owners’ committee, replace inefficient managing bodies. Where the replacement involves a management company, RERA must:

1. inform the owners’ committee of the managing company’s contraventions and seek its opinion;
2. notify the managing company of its contraventions (the managing company may reply within 14 days);
3. appoint a third party to audit the service charges account; and
4. if RERA decides to replace the managing company, the existing managing company must hand over to the new management company within 30 days.

If the managing body is a developer or hotel management company, the director of RERA may appoint a specialized management company to perform its obligations.

Service charges

Service charge payment defaults are a major concern for Developers. The JOP Law now explicitly states:

1. owners may not refuse to pay service charges that have RERA approval;
2. the managing body has a lien over all units for unpaid service charges; and
3. units cannot be disposed of with unpaid service charges.

Now, managing bodies can take serious action against defaulters in a few quick steps:

1. RERA notifies the managing body that the service charges are unpaid;
2. the managing body makes a claim within 30 days of RERA’s notification. The claim must be endorsed by RERA and served as RERA directs;
3. if the service charges remain unpaid, the claim becomes enforceable at the RDSC; and
4. the unit may then be sold at public auction “whenever necessary” to collect the unpaid service charges.  The owner is liable for court and legal fees determined by the judge.

The JOP Law expressly forbids managing bodies from restricting access to the unit or the jointly owned property so as to promote service charges payment.

Service charges may only be paid into RERA-approved accounts and used for jointly owned property expenses.

Further Observations:

• Owners’ committees will not have independent legal personality. Instead, committees’ chairpersons will represent the committee before the managing body and RERA, and the committee members will “enjoy full legal capacity”. It is not yet clear whether owners’ committee members are protected from liability claims, and if not, whether owners will volunteer to be committee members if that potentially exposes them to personal liability.
• The JOP Law appears to preserve “contractual agreements” between developers and owners predating the JOP Law’s enactment. This raises the question of whether master developers can continue to rely on onerous master community declarations even if those declarations contradict the JOP Law- if the provisions are included in the sales contracts and/or deeds of adherence, they may qualify as “contractual agreements” and therefore remain enforceable.
• The JOP Law contemplates new regulations, which may clarify these questions.

Compliance Update:

• Existing owners’ associations need to transition to owners’ committees and register with RERA;
• JOPDs need to be updated to reflect this transition, and must be registered;
• If more than 10% of a development has been sold, an owners’ committee needs to be formed and registered;
• Managing bodies need to submit project plans (in addition to the original site plan requirement) to RERA;
• Management company contracts need to be approved and registered;
• Plans need to be updated to identify developer-owned areas and master community areas;
• Building management systems and completion certificates need to be submitted; and
• Service charges need to be approved by RERA.

Timeline for Compliance of New JOP Law:  All stakeholders must comply with the Joint Property Law by 18^th May 2020.

Recommendation:

Appointment of Legal Consultancy services for Strata Consultation to be able to revamp the Sale and community documents, declarations and other related documentation which needs to be prepared to be in line with the new JOP law for Phase 1, 2 and 3.