Application forms are likely to be issued by the Real Estate Regulatory Authority (RERA) in Dubai, for property owners wishing to be members of “Owners Committee” (OC) associated with their developments. Each OC will have nine members, who will have to be pre-approved by RERA.

The application forms, when they are released, would be available through the Dubai Land Department’s website.

This follows the passing of Law No. (6) of 2019 by Dubai last week, which covers all jointly-owned (freehold) properties in the emirate. The law comes into effect in full on March 4, 2020.

By this date, the “management bodies” approved by RERA would have control to operate the common areas at freehold developments in Dubai, while under the direct supervision of RERA.

This removes the earlier regime where “owners associations”, through its board, were entrusted with the management of common areas, and they could then delegate these tasks to corporate association managers to perform.

There were also developments where Owners Associations functioned as an extension of the developer and could not take any executive decisions on their own. This was a consequence of the restraints contained in the earlier “jointly-owned property declarations” and “building management statements”.

Transition

Until the OC is formed, the law provides that during the six-month transition period, “The [OA] Management Body shall be substituted for the Owners Committee in the rights and obligations that have arisen before entry into force of the provisions of the Law.”

So, who will be able to apply to be on the OCs?

Anyone who has bought a unit in a project and is actually resident in that property can be a candidate. Ideally, he or she must also be punctual in paying the service and utility charges associated with that property and also be a regular attendee of previous owners association meetings.

“The new Law does not yet provide for a specific tenure of the Owners Committee,” said Shahram Safai, Senior Partner at Afridi & Angell. “However, we expect regulations will be issued regarding this. As previously the law provided that elections for membership to owners association board were to be held once a year at the annual general meeting.

The new Law does provide that “Membership to the OC shall terminate if he or she no longer meets the criteria to membership conditions (set out in Article 22(c)). And RERA has the power to reconstitute the Owners Committee at any time.”

But one thing has been made mandatory — the developer cannot be a member of the Owners Committee unless they own unsold units in the common property.

Landmark move

Real estate industry and legal sources unanimously agree that Law No. (6) of 2019 has completely rewritten the rules of engagement between developers, homeowners, and all those who are engaged in the management of a project once it is delivered. And RERA — and the Rental Dispute Settlement Centre (the judicial arm of Dubai Land Department) — will now play an active and central role in regulating all such activity, first by issuing a legal road map on what should be done and by whom, and, two, in delivering solutions if problems arise in the future.

Extent of rights

Under the Law, the OC has prescribed functions, including the right to review annual budgets, which includes the “sinking fund”, and make recommendations. (The sinking fund is cash set aside for any future upkeep of a property.)

“The management body will be responsible for collecting service charges from owners and depositing them into the service charge and cash reserve accounts (i.e., sinking fund), as the case may be,” said Safai. “These accounts must be held with a bank approved by RERA. The funds in these accounts can only be used for the limited purposes set out in the Law.

“We expect further regulations governing the deploying of the funds will be released. This reserve [fund] is to be used for replacement of equipment and devices in the common parts, and may not be disbursed for any other purpose without the prior consent of RERA … except for emergency cases that cannot afford a delay.

“And in the event that cash reserves are insufficient to cover emergency cases, the management body may request property owners to cover such expenses. But again, only after obtaining the prior consent of RERA.”

Putting together an Owners Committee

By March next year, Dubai will have transitioned from Owners Associations to Owners Committees, which will function in tandem with management entities and RERA on the upkeep of their properties and developments. Each OC will have nine members, and a new committee can come into being when “not less than 10 per cent” of the total number of units in the common property are registered in the name of the owners in the register maintained by Dubai Land Department/RERA.

The six-month transition period ends on March 4, 2020.