If you own or are planning to buy into a Jointly Owned Property, it’s important to understand everything involved. We’ve collated a list of commonly asked questions but if your query isn’t covered, please feel free to contact us directly.
What is a Jointly Owned Property?
Jointly Owned Property (also known as Strata Title Property) refers to the sub-division of land and buildings into units and common property. Jointly Owned Property covers buildings such as high-rise apartments, retail developments, office towers, villa communities and industrial buildings. These developments often have shared facilities as well as common property.
What Laws and Regulations apply to Jointly Owned Properties?
The following documents clarify the laws and regulations relating to Jointly Owned Property:
Law No. 27 Concerning Ownership of Jointly Owned Property.
Direction for General Regulation.
Direction for Jointly Owned Property Declaration.
Direction Association Constitution.
Directions for Surveyors.
What is a shared facility?
Examples of shared facilities include such items as hallways, entrance lobbies, swimming pools, tennis courts, golf courses, gymnasiums, elevators, vehicle parking and pathways. All owners within the development contribute to the maintenance and operation of these shared facilities and the common areas by paying money into a General and Reserve Fund that are jointly known as service charges.
What are common areas?
Common areas, which are shown on the site plan in the Jointly Owned Property Declaration are those parts of property designated for common use by unit owners and occupiers and are generally those areas that are not part of an individual unit. The areas may include, but are not limited to: hallways, lobbies, stairwells, lifts and lift wells, roof, driveways, common area car parks (as opposed to individual allotted car park spaces for unit owners). They also cover service utilities and associated equipment such as air conditioning, cabling, electrical, telecommunications, computer and data service utilities, security systems, plumbing, drainage systems, mail delivery systems. Other systems designed to enhance the utilities of units and or common areas – such as gardens, pools, gymnasiums, and recreational rooms – are also covered in this term.
What is an Owners Association?
All owners collectively within a Jointly Owned Property are referred to as the “Owners Association”. An Owners Association is a separate legal entity from the individual owners just as a company is a separate legal entity from its shareholders.
What is the primary purpose of an Owners Association?
The primary purpose of an Owners Association is to manage, operate and maintain the common property and facilities within the Jointly Owned Property.
How do Owners Associations operate?
An Owners Association operates in the same way as a business. The Owners Association can make rules regarding the use of common property and units that are binding for the Association, unit holders, tenants and visitors. Rules adopted by an Owners Association must not contravene the Jointly Owned Property Law.
What are service charges?
Owners Associations raise funds by levying contributions from all unit holders. These are known as “service charges”. The General Fund is an annual service fee that covers the cost of maintenance, repair and management of the common areas for the budgeted year and includes building insurance, utility services and administration costs. Unit holders must also pay a service charge to the Reserve Fund to provide funds for maintenance and renewal of long-term structural and capital items of the building such as elevators. The General Fund levy and Reserve Fund levy are jointly known as “Service Charges”
What is unit entitlement and how is it allocated?
The amount that each unit holder contributes to the maintenance funds is calculated according to the ‘unit entitlement’. The unit entitlement is allocated on the basis of the proportionate floor area of a given unit to the total area of all units within the Jointly Owned Property development.
What are the legalities covering service charges?
All unit holders are effectively guarantors for their Owners Associations liabilities. Owners Associations debts are paid for by levying owners and once a levy is approved, by a majority vote of a general assembly, the levy becomes a legally recoverable debt. This debt is payable by the unit owner to the Owners Association and recovery of the debt is enforceable at law if it is not paid on or before the agreed date.
What are the duties of an Owners Association?
The Owners Association is responsible for ensuring community rules are being followed by residents and ensuring harmony within their community. The Owners Association must appoint an Association manager to perform many of the management and supervisory tasks of the Owners Association.
What is an Owners Association constitution?
An Owners Association constitution defines the functions and powers of the Owners Association and determines how the financial and administrative affairs will be managed. The constitution also determines the processes required to protect the integrity of the common areas and the rights, responsibilities and obligations of owners and tenants. It aims to guarantee the fair and equitable management of the common areas for the peace and quiet enjoyment of the owners and tenants.
What are the key roles in an Owners Association?
The key roles involved in an Owners Association include:
The Owners who have the right to vote in the meetings of the Owners Association.
The Boardof Directors (more often referred to as ”the Board”) who are owners elected on a democratic basis by a majority vote of owners on an annual basis at each Annual General Assembly. The role of the Board is clearly defined and governed by the constitution and the Jointly Owned Property Law.
In some instances subcommittees, which may consist of members other than Board members, may be formed to assist the Board on a specific task with a view to making recommendations to the Board.
Subcommittees can be particularly helpful when some owners who have not been elected to the Board can offer specific skill and expertise in the areas of management, maintenance and repair where such expertise is not an area that is covered by the expertise of any of the elected Board members.
The Owners Association must appoint an association manager by contract and the services to be provided to the Owners Association are clearly defined in the Regulations. An association manager can be an individual or a company on a paid basis or a proprietor on a voluntary basis and the manager appointed must not have a conflict of interest in the management of the Owners Association affairs and/or business.
Service providers are those individuals or companies who provide goods or services to the Owners Association for the benefit of the owners.
The property developer is the person or company that had the vision of the development and proceeded to finance and build the development.
The property builder is the person or company that constructed the development in accordance with the developer’s vision.
The Real Estate Regulatory Authority(RERA) monitors compliance of all the above in accordance with the law, rules and regulations of Dubai.
What is the role of the Board of Directors?
The Owners Association is made up of all the owners or their duly appointed representatives, and is managed by the owners of the building or community under the guidance and direction of the Owners Association Board of Directors (“the Board”).
The Board comprises a minimum of five and a maximum of seven members and the developer may not be represented by more than one member on the Board. The Board members are not paid for their services and must ensure the functions of the Owners Association are carried out in accordance with the law and the constitution. Owner members nominate and elect the Board by a majority vote of the owners on an annual basis at the Annual General Assembly.
What is the role of the association manager?
The association manager is appointed by the General Assembly and may be an owner acting in a voluntary capacity (that is, the owner receives no remuneration for the role) or a specialist company licensed and registered by RERA.
The association manager is an entity with a statutory function to perform the day-to-day running of the administrative, financial and secretarial aspects of the Owners Association, in addition to arranging the maintenance and upkeep of the common areas and facilities owned by the Owners Association.
These mandatory obligations of the Owners Association are detailed in the Jointly Owned Property Law Regulations.
What is the role of the developer?
The property developer constructs the building but has further responsibilities in a Jointly Owned Property development. Upon completion of construction and once all the necessary approvals for the authorities are obtained, the building is then handed over to the owners.
The developer has the following responsibilities in relation to a Jointly Owned Property development:
The Escrow Law provides that 5% of the property purchasers’ funds are to be withheld in Escrow for the project for a period of one year after the units are registered in the name of the buyers and title deeds are issued in their names.
The Jointly Owned Property Law provides that, with respect to the construction contract provisions in the civil transaction code, the builder, (not the developer) remains liable for a period of ten years from the date the completion certificate of the building is issued.
The builder and not the developer (unless they are the same person or organisation) is responsible for repairing and curing any defects in the structural elements of the Jointly Owned Property notified to the builder by the Owners Association or a unit owner.
The builder of a development, or that part of a development undertaken by the builder, remains liable for one year from the date of the completion certificate of the building to repair or replace defective installations (which could include mechanical and electrical works, sanitary and plumbing installations and the like) in the Jointly Owned Property.
Obligation to form an Owners Association
The developer of the Jointly Owned Property is responsible for forming and registering the Owners Association with RERA.
In addition to registering the Owners Association, the developer must:
Establish the books and records that the Owners Association is required to keep under its constitution;
Effect in the name of the Owners Association the insurances that it is required by Law to maintain;
Prepare all the documents required to be dealt with at the First Annual General Assembly of the Owners Association;
Convene and hold the First Annual General Assembly within three months after the Owners Association is established;
Administer the Owners Association and the common areas (including repair and maintenance) until the First Annual General Assembly; and
Hand over to the Owners Association all manuals, utility service guarantees and warranties on installations, full plans of the building, a schedule of finishes of the building, statement of and inventory of removable assets, furniture, furnishings in the development.
Which management issues is the Owners Association responsible for?
The Owners Association must manage the following matters:
Maintaining essential records: Jointly Owned Property Declaration, community rules, a minute book for recording all Board meetings, a minute book for recording all minutes of general assembly meetings, a file for official government correspondences, insurance policies, the last annual report of the Board, the last report of the Association manager, the last financial statement, a file for copies of documents relating to the Board meetings and Annual General Assembly meetings other than documents to be kept elsewhere, a file for communication (inward/outward), a register of owners, a register of occupiers, a register of contracts and agreements, a register of assets, books of financial accounts, and other records specified by the Land Department.
Service charges: Establishing and maintaining a General Fund and the Reserve Fund in the name of the Owners Association, and maintaining accurate accountability of all income and expenditure for both funds in accordance with the Owners Association constitution.
Budgets must be set annually for the General Fund and a study must be prepared for the Reserve Fund budget calculated on the basis of a minimum of ten years ensuring replacement or renewal of assets of the Owners Association. Once owners have approved the budgets, the service charges shall be set in accordance with the principles and rules of the constitution. The Owners Association is responsible for collection of owners’ annual service charges and the expenditure thereof.
Insurance: The Owners Association shall ensure the building and common areas are adequately insured.
Regulation: Ensuring that the community rules are followed and not violated by owners, Board members, occupiers, residents and visitors, thus maintaining peace, harmony and quiet enjoyment for all within the building or community.
Maintenance: supervising the performance contractors and suppliers of the common areas.
What is the decision-making process for an Owners Association?
Owners Associations have strict rules and regulations as how to conduct their affairs. The decision-making process is transparent and well-documented in the form of minutes of meetings, which shall detail the voting outcome for motions passed or not passed by the owners.
Owners discuss at the pre-schedule meeting, topics for discussion and agreement. Each agenda has a clear motion put forth regarding the topic for owners’ consideration or for matters for decision by the Board members. These decisions could include such matters as the selection of a contractor such as a cleaner, gardener; fire safety equipment servicing; or perhaps to consider a number of quotes to expend the funds to obtain an in depth building report by a specialist consultant to examine the forward budget forecast for the Reserve Funds minimum ten-year plan.
The agenda must be circulated to all owners at least 21 days in advance of the scheduled meeting date.
There are several different types of meetings:
Annual General Assembly (AGA): Advance notice must be circulated 21 days in advance noting the time, date, venue and items for discussion on the agenda for the owners, plus minutes of previous meetings to be adopted as part of a true and accurate record, a report on the financial affairs of the Owners Association, election/nomination of Board members, appointment of an auditor, and the wording of any motions to be proposed for the decision/voting by the owners.
Extraordinary General Assembly (EGA): May be held on a request to the Owners Association service manager by the Board OR, if petitioned by (not less than 5% of units) of owners, can be convened by the Association manager and may include, for example, a clarification of confirmation of minutes, any item in a petition, items required by the Board, an item requested by an owner, or the wording of any motion passed. An EGA notice must be circulated 21 days in advance noting the time, date, venue and items for discussion on the agenda for the owners.
Board of Directors meeting: The Board shall meet as frequently as required and fulfill their function by ensuring the Owners Association carries out its duty and responsibilities.
Notices of a Board meeting must be circulated to Board members with at least 14 days’ advance notice stating the date, time, venue and items for discussion and agreement. Board meetings may be by electronic means.
Minutes of meetings for Annual General Assemblies, Extraordinary General Assemblies and Board meetings are documented and circulated. At the following meeting the minutes of the last meeting form part of the record being accepted as a true and accurate record of decisions made at the prior meeting.
The process of decision-making involves a clear description of the topic, a clear statement of the suggested decision that is “the motion” for the proposed action, and an option for owners to vote YES or NO, either supporting or withholding their support for a proposed decision.
What is involved in buying into a Jointly Owned Property?
Regardless if the property is under construction or it is a completed property, every potential purchaser has the right to know the following information about the Owners Association:
The ongoing costs associated with purchasing the property, which includes how much money (service charges) that must be paid for the upkeep, maintenance and management of the common areas, including arrears.
Assets and liabilities of the Owners Association.
Details of any expenses incurred or anticipated to be incurred by the Owners Association.
The obligations, rights and responsibilities of owners in Jointly Owned Properties, including the approved use of the property. Thus if it is a residential building, for example, the consumer needs to be made fully aware they cannot operate a home business from the premises.
The disclosure statement must be attached to a contract if purchasing a property situated in a Jointly Owned Property.
The buyer should search the records of the Owners Association to identify any irregularities, matters of litigation or potential that the Owners Association may be involved in, any notices served upon the Owners Association and reports on the financial matters of the Owners Association including balances of the General and Reserve Funds.
The buyer must advise the Owners Association of their contact details.
Obtain the community rules of the Jointly Owned Property in force.
Current insurance policies.
What is a Reserve Fund?
A Reserve Fund is a fund set up by the Owners Association to cover the costs of known future capital expenses. Examples of the types of items for which Reserve Funds are set aside include matters such as painting and repairing the building structure and replacement of common property items such as lifts and electric motors.
All Jointly Owned Properties are required by law to have a minimum ten-year Reserve Fund plan in place. This means that Owners Association must plan how they will repair and maintain common property and raise sufficient funds to cover the cost as the building components deteriorate over the lifetime of the building.
The amount required for the ten-year Reserve Fund plan will vary significantly between different Jointly Owned Properties. For instance, newer developments may require relatively less money to be set aside than an older development which are both registered at the same time as the older building would invariably have more repair work due and less time to accumulate the funds. Each Reserve Fund plan should reflect the individual needs of its development.
Who develops the ten-year Reserve Fund plan?
While members of an Owners Association are not prevented from preparing a ten-year Reserve Fund plan themselves, for legal and litigation purposes it is strongly recommended that the Owners Association engage a suitably qualified expert that specialises in the preparation of Reserve Fund plans.
What is the best way to plan a ten-year Reserve Fund plan?
There is a series of steps repeated during each ten-year cycle following the development of the first ten-year plan.
First year: The Owners Association appoints an expert to prepare the Reserve Fund plan. The plan must cover ten years from the date of the First Annual General Assembly.
Second year: The finalised plan is presented to the owners and is the basis for determining Reserve Fund contributions on an annual basis over the ten-year lifetime of the Reserve Fund plan.
Third and fourth years: The Reserve Fund plan is to be used as the basis for determining contributions (service charge).
Fifth year: The Reserve Fund plan must be reviewed and any necessary adjustments made. The Reserve Fund plan continues to be used as the basis for determining contributions at the following Annual General Assembly.
Final year: The Owners Association appoints someone to prepare a new ten-year Reserve Fund plan for adoption by the Annual General Assembly the following year.
Why do Owners Associations need insurance?
The establishment of the Owners Association creates an unlimited liability for its members, and each member has joint and several liability to the Owners Association. For this reason, the Jointly Owned Property Law requires a certain minimum amount of insurance cover to protect the unit owners.
Building insurance Is required to cover the full replacement and reinstatement cost to rebuild the building to its new condition in the event it were destroyed on the last day of the insurance policy. It should be noted that the building policy does not include the contents and improvements made by an owner within a unit.
Public Liability or Third-Party Liability The Owners Association has a responsibility to hold insurance cover to guard against liability for damages or bodily injury to owners, tenants or visitors using the common areas.
Fidelity guarantee This insurance policy covers the Owners Association against fraudulent acts by the Board.
Board members’ liability It is advisable to procure cover for any wrongful act of Board members in any decision it makes. This includes any dishonest or fraudulent act, criminal act, or malicious act or unintentional omission.
Machinery breakdown Covers the Owners Association against accidental breakdown of electrical, electronic and mechanical plant and equipment such as a lift and swimming pool motors.