June 20 2008
On April 1 2008, three months after it was enacted by the government of Dubai, Law 27/2007 on Ownership of Jointly Owned Properties in the Emirate of Dubai (the Strata Law) came into effect.
The Strata Law represents yet another landmark move in the government’s drive towards streamlining the local real estate market and adopting international best practices. Implementing regulations dealing in more detail with many of the concepts referred to in the Strata Law are expected to be issued in due course. The property market in Dubai has clearly entered a phase of proper regulatory frameworks and asset management protocols.
Property Law 7/2006 had already set the tone in its Article 23, which legalized freehold ownership of land and property to UAE and Gulf Cooperation Council (GCC) citizens, while allowing the same rights to non-GCC expatriates, but limiting them to pre-designated areas which will be approved by the ruler of Dubai.
Article 23 states that a multi-floor or apartment real property will be considered a single real property unit and a folio will be designated thereto in the Real Property Register. Supplementary folios in the names of the owners of such apartments, floors and common areas will be added to the original folio. In practice, the Land Department opens a main register for the building itself and within the main register there is a sub-register for each apartment or office.
Prior to the enactment of the Strata Law, Article 23 of the Property Law was the only article dealing with the registration of individual apartments and offices in a multi-storey building.
The new Strata Law deals with such issues as:
The Strata Law is expected to stabilize the real estate market. Professionally executed strata and facilities management is widely expected to enhance quality of life and investor confidence in the United Arab Emirates, thereby providing more stability to its real estate market. Strata management covers all common facilities shared by owners and tenants such as:
Strata management is vital for maintaining a high-quality living environment, the health and well-being of residents and cordial relations between owners.
In this regard, the Strata Law has introduced a number of key policies and provisions.
If a developer plans to develop its project in stages, the master community declaration must disclose the arrangements for staging such project.
The site plan, the master community declaration and the association constitution must be lodged with the Land Department and attached to the title deed of the jointly owned property.
A developer is liable for structural defects for up to 10 years after completion of the building and liable for defective appliances for up to one year after completion of the building.
An owners’ association will be formed upon registration at the Land Department of the first owner, other than the developer, of a unit in the project. The owners’ association is a non-profit legal entity and has a separate legal existence from its members. Accordingly, the owners’ association has the right to sue and be sued in its own capacity.
The owner of an apartment or office, and the developer with respect to unsold units, will be registered as owning the freehold interest in its unit, together with an undivided share in the common areas of the building in the proportions indicated in the master community declaration unless agreed otherwise. A unit owner’s interest in the common areas cannot be disposed of separately from the unit itself.
The owners’ association must insure the building and maintain public risk insurance to cover against personal injury to owners and occupiers within the project. Such insurance premiums will form part of the service charges of the owners’ association.
The owners’ association will have a lien on every unit for unpaid service fees and any other obligations levied against the unit owner in accordance with the provisions of the Strata Law or the association constitution. This right will remain even after ownership of the unit has been transferred to a new owner.
Each unit owner will pay the owners’ association its share of the annual service fee to cover the cost of the management, operation, maintenance and repair of the common areas. Such fee will be calculated in proportion to the unit area of the total area of the jointly owned property. The master or sub-developer pays its share of service charges with respect to unsold units.
A unit owner may sell or dispose of its unit and is entitled to mortgage its unit in favour of a bank or financial institution, provided that such disposition conveys the whole of its interest in the unit and the unit’s undivided interest in the common areas. A unit owner may also lease its unit on condition that the unit owner and tenant remain obliged to comply with the association constitution and the master community declaration towards other unit owners, occupiers and the owners’ association.
A unit co-owned by two or more persons may not be divided among the co-owners unless the Land Department’s approval is obtained. The Strata Law creates a right of first refusal to purchase another co-owner’s share in a unit offered for sale to a non-owner. The right of first refusal does not apply to a sale between spouses, lineal ascendants, lineal descendants, brothers or sisters, or their descendants.
In conclusion, the initial phase of the property boom in Dubai saw a high volume of investment flowing in and extensive and spectacular real estate developments being launched. The government of Dubai is currently working to ensure the sustainability and continuing growth of the real estate market by means of introducing policies for the professional management of assets and real estate projects and by adopting international best practices.
For further information on this topic please contact Tony Maalouli at ProConsult Advocates & Legal Consultants by telephone (+971 50 625 8284) or by fax (+971 4 329 8733) or by email (firstname.lastname@example.org).
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