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Mon 21 May 2007 03:45 PM

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Knowing your rights

Dubai homeowners are slowly making moves to consolidate with the new UAE owner's association law set to be passed.

One of the most telling signs that Dubai may be on the road to becoming a property buyer's market is that sellers do a lot more negotiating than they used to. Now, brokers and agents face a barrage of questions from potential investors about service charges, penalties for construction delays and whether or not they will provide an escrow agreement. If there isn't more certainty soon as to the actual costs of owning a property, new buyers may just decide it is worth waiting, spending a little more money and buying into an established community later on.

In an announcement perhaps aimed at stabilising confidence, the Dubai government said it will enact new laws this year which will strengthen both off-plan investors' and homeowners' rights. The new laws will clarify who owns the common areas of high-rise buildings, and specify who is responsible for managing the fees levied on buyers for maintenance of common areas within communities.

Common areas consist of courtyards, lobbies, parks, lakes, footpaths, bicycle paths, swimming pools and playgrounds. In some communities common areas fall between neighborhoods, and both share the facilities. Sometimes the common areas include retail outlets serving the communities. Some common areas border adjacent properties by other developers.

We have found Emaar to be quite easygoing and open to our suggestions, and we have been able to work things out.

It is certainly difficult to determine responsibility for future maintenance, especially when communities are just established and are in a state of flux. However, if the service charges were determined as accurately as possible during the planning stages of a new development, the end purchasers would have more certainty as to the actual costs of owning a home before they buy.

This would also lessen the need for any aggressive increase of service charges in later years, when the actual costs of maintaining the common areas of communities is going to really be known for certain.

When the new regulations come, homeowners in Dubai who already live in their homes may see changes to their service fees, as it becomes more clear how the common areas are going to be managed and maintained.

In some Dubai communities, residents have already formed committees to get involved in the way their service fees are going to be spent. They are interim committees at present, because they await the passage of an Owner's Association Law, which is said to be forthcoming. An example of proactive investors staking claims to rights that have yet to materialise.

The Arabian Ranches Ownership Association is not a legal entity yet, but it is expected to be once the law is passed. Right now, it is a committee made up of four core members, plus a number of other residents who work in other capacities as advisors, neighborhood representatives and administrative assistants. The Arabian Ranches is an Emaar property development with a rising population of at present 3000 residents.

The association is trying to automate the process of setting up subcommittees to deal with specific issues like safety, finance and accounting and to keep tabs on community developments. Registration is open to all the residents by use of its website (
www.arrcdubai.com

).

At the Arabian Ranches, service charges are US$1632 per month, and there are 6000 properties in the community. That makes US$9,792,000 per year in funds for common area maintenance and other service requirements.

Likewise, Emaar's The Meadows and The Springs communities also have an interim steering committee which oversees both, made up of seven members who represent the residents of nearly 6000 villas.

Service charges are US$1958 per year, and have not changed since properties were first offered for sale. In total there are nearly US$11,696,000 in service charge fees collected annually.

Emaar's Dubai Marina community also has a committee, but it is reportedly not doing as well as the others in cultivating a working relationship with the developer.

Richard Richardson, Chairman of the Arabian Ranches Ownership Association explained, stressing the importance of a gentle approach. "We don't go into meetings [with Emaar] and pound on the table and make demands of them. You can't be blunt or speak harshly because it sours the working relationship with the developer from the start," he said.

"We have found Emaar to be quite easy-going and open to our suggestions, and we have been able to work things out through mutual discussion and collaboration. They recognise the importance of having community involvement in the decision-making with regard to important matters affecting owners and residents," said Richardson.

"Although we have nothing in writing from Emaar, we expect that once the Owner's Association Law is passed, we [the residents] of Arabian Ranches will be allowed to manage the common areas of the community on our own," he said.


The Meadows, The Springs and Arabian Ranches are not high-rise apartments, but separate villas and land plots. The residents of these communities are owners of their individual plots of land as well as their own properties, but according to legal experts, they do not have any right to ownership of the common areas.

The residents at these communities are only owners of their individual homes; they don’t have the right to ownership of common areas.

According to a leading property lawyer in Dubai, Shahram Safai of Afridi & Angell Advocates and Legal Consultants, "Residents at The Meadows, The Springs and Arabian Ranches [which are not high-rise apartments, but separate villas] can only put pressure on the master developer [Emaar] to give them a voice and power to influence decisions with regard to the common areas of the community. Emaar is the owner of those common areas, and it is the owner of the infrastructure and land underlying those common areas.

"The residents at these communities are only owners of their individual homes and plots of land, and so they do not have any right to ownership of the common areas. Emaar may develop those common areas as it wishes," he said.

Another property lawyer in Dubai, Ziad Touma of Habib Al Mulla & Company, had this to say, "It is not as clear-cut as a buyer may think, for example in a case where one has been promised a lake view, but future development on the common area takes your view away. It is clear that developers should not do that. But it all goes back to the sales contract signed by the buyer."

"At present, we do not see covenants preventing future development on common areas in sales contracts," he said.

Covenants, written in sales contracts, would prevent unsuitable development of the common areas after purchase. However, legal experts caution that the new laws that are coming are not expected to offer home owners any sort of mechanism to demand that covenants be signed by property developers.

"First, there is the master developer, who has in all cases retained the right to manage the common areas for up to ten years in some developments. Then, there are secondary agreements with other developers - who purchase plots to develop buildings. Then another sales agreement between a unit or villa buyer and the secondary developer. The end-purchaser is simply the final party in the contracting process."

"In order to determine ownership of the common areas, one needs to see all the contracts in the process. In some cases, the developer selling the property to the buyer is not the owner of the common areas," said Touma.

After the community is built-up, the process of managing those common areas begins by determining ownership and responsibility for maintenance. It is expected by legal experts that this would be clarified once the new law is passed. At present, the master developers themselves manage the maintenance of their built-up communities.

Owners of apartments in multi-storey, high-rise apartments have a considerably different title structure than the previously described villa owners do. In all likelihood, the new law will stipulate that buyers of high-rise apartments own a percentage share of the common areas, such as the lobby, courtyard, hallways, elevators, etc.

In a high-rise development, the forthcoming law will be enacted to clarify how the common areas belong to the residents upon purchase of the property. Legal experts expect that the law will be based closely on the Australian "Strata Law" model.

In Australia, the Strata Schemes (freehold development) Act provides a system of title which gives exclusive ownership over part of a building known as a ‘lot' and supporting rights over other parts of the building known as ‘common property'. Common property is all the areas of the land and building not included in any lot.

In most strata schemes, the lot owner owns the inside of the unit but not the main structure of the building. Usually the four main walls, the ceiling, roof and the floor are common property. The corridors, elevators, entryway, courtyard, walkways, sidewalks, green areas, etc. are all common property.

The internal walls within the lot (eg the wall between the kitchen and sitting room), floor coverings such as carpet and fixtures such as baths, toilet bowls, counter tops are all the property of the lot owner.

While it is sometimes a hard concept to envisage, a lot owner effectively owns the airspace (and anything included in the airspace) inside the boundary walls, floor and ceiling of the lot. Airspace can also extend to balconies and courtyards.

The forthcoming law should be clear about the definition of common areas and who owns those. If it follows close to the Australian law, then homeowners should get proper advice about ownership of such things as a tree in the courtyard, or responsibility to maintain an awning sheltering a balcony or a doorway. They could be in your airspace and therefore, would be maintained at your cost.

Everything within the airspace of an owner's lot must be maintained at his or her expense.

According to Shahram Safai, "In order to find out the boundaries between common property and lots in a strata scheme, buyers must look at the registered strata plan. In the case of an apartment sale in Dubai, the sales agreement should stipulate this, usually in the form of an architectural drawing."

"It is anticipated that the new law will state that in a high-rise apartment development in Dubai, the common areas are owned by all of the residents of the building jointly," he said.

"In this case, the law will provide the framework for the residents of a high-rise building to assemble and manage the maintenance of their common areas. If the residents choose to manage these matters themselves, by electing a residents' committee, they will also have to provide mediation when residents have issues to resolve among themselves, and also to give and refuse permission to residents constructing anything on the common areas," concluded Safai.

The owners must look after the common property and carry out all repairs (unless it decides by special resolution that it is not necessary for a particular item and its decision will not affect the safety or appearance of the strata scheme).

This includes replacing and renewing common property when needed.

Experts anticipate that what is likely to happen is that developers in Dubai will not want the burden of managing the common areas of built-up communities indefinitely, and they may want the residents to take over management of these common areas for a whole host of other reasons.

Jack Pearce, speaking on behalf of the Interim Steering Committee representing freehold owners of property in Emaar's The Meadows and The Springs communities said, "We believe that the parks and lakes should be commonly administered by the residents. It makes sense that the residents of the community should manage those common areas like parks, gates and playgrounds. So we need to have an official committee elected to administer all of the funds that come in for maintenance of the common areas."

"At present the common areas of our communities are being managed by Emrill, the specialist property management company within Emaar, which is administering the fees collected from residents for service charges. This is out of necessity, since someone has to manage the maintenance until the entire work can be handed over to the residents."

"Emaar has intimated to us in our meetings that the residents would be free to choose how to manage and administer the funds for maintenance of the common areas in due course," said Pearce.


Richard Richardson, Chairman of the Arabian Ranches Ownership Association said, "For example, all landscaping and maintenance of the common areas used for recreation and playgrounds and cricket pitches will be the responsibility of the association."

"Soon we will be implementing a full audit of the way monies have been spent for the upkeep of the common areas so far, and thereafter it will be our committee's responsibility to continue managing the accounts."

"We expect Emaar to release the audited accounts to us for study in the next three to six months," said Richardson.

This handover of responsibility may be formalised into law by the promulgation of the forthcoming Owner's Association Law, which will pave the way for the present residents' and owners' committees to take decisions (in consultation with the master developer) about how their common areas are maintained and managed.

It is anticipated that the new law will state that the in a high-rise apartment development in Dubai, the common areas are owned by all the residents of the building.

At present, these committees are made up exclusively of volunteers, and it has some legal experts concerned.

Ziad Touma also said, "As in other jurisdictions, the law is most likely going to allow for a civil entity to be formed called an association of the residents, which will be allowed to elect their own committees and sub-committees as they see fit to manage their affairs.

"The law should also provide a mechanism for how elections are to take place and how the committees will function.

"Residents will pay their service charges directly to the association, who will manage the maintenance of the common areas.

"In Lebanon, if a resident does not pay his service charges, he loses his right to vote on matters and in extreme cases the association has the right to seize his apartment.

"An association is registered at the Land Department in Beirut, and has the power to sue and be sued," said Touma.

Shahram Safai of Afridi & Angell further added, "Incorporating an owner's association in these communities will also introduce corporate governance standards, establish good accounting practices, guarantee an official audit takes place annually on how the resident's maintenance fees are spent, as well as establishing a sinking fund for the future."

With the community association of the Arabian Ranches slowly making their voices heard, it's just a matter of time when the other communities will follow suit.

Emaar properties

Development name

Arabian Ranches

Type of development

Community development

Date of delivery

Emaar has handed over 10,000 new homes from its several development projects (including The Arabian Ranches and The Greens) as of June 15, 2005

Target market

Exclusive residential community segment built around two world-class golf courses, equestrian and polo grounds, the multibillion-dollar community is set around a network of man-made lakes and health spas all covering an area of around 3000 acres. Arabian Ranches comprises of luxurious one and two-storey single-family homes, measuring from 2500 to 4000 sq ft. The community also includes features such as riding trails, bicycle and pedestrian links to the golf resort, restaurants, shopping and outdoor facilities creating a truly unique Arabic residences.

The Greens

Leading the way in modern, hi-tech apartments in Dubai is the Greens. It features state-of-the-art gadgets and smart furnishings, built with lush landscape combined with well-maintained courtyards. The residence is also complemented with a swimming pool and up-to-date gym equipment. The Greens has four equally designed building communities all constructed to fit the taste of discerning residents. The community enjoys the following amenities:

• Private, secured gardens

• Shared BBQ facilities

• Secured underground parking

• State-of-the-art security for all buildings

Service charges: getting homeowners by surprise

On the Jumeirah Lakes Towers website under ‘Frequently Asked Questions' one will find information about service charges in a sign of things to come.

"The Association, consisting of representatives of all units in the tower, will be responsible for the maintenance of the tower. The service charges that a resident is liable to pay for the unit he/she bought at Jumeirah Lakes Towers includes:

• Building service charge will cover the maintenance of the tower and its immediate environs (within the tower plot limits).

• Master community service charge (payable to [the master developer] DMCC) will cover the maintenance of the roads, lakes, waterfront, landscaping, etc., and services such as sewage and garbage collection.

• Car parking/podium service charge will cover the common areas within each trio (group of three towers) or cluster, including the shared car parking garage."

Earlier, the common mistake people made when they bought residential property off-plan was that they didn't ask many questions before signing the dotted line. Early buyers who rushed in to buy hastily sacrificed this foresight to be first.

The properties' strategic location and closeness to several business and residential districts are the main reasons for the flock of property buyers.

New laws that the UAE government are closely planning are on the way and will hopefully institutionalise a now flexible process of mediation, allowing residents to have a forum to discuss everything that is going to, and may happen, within their communities so that a kind of ‘self-governing' experience can be guaranteed for Dubai's new community homeowners.

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