Play By The Rules

Property owners and developers in Dubai will soon have to adhere to new regulations following a Strata Law update. Graham Yeates, head of strata management for property consultant Cluttons, tells .Commerce how they will affect the emirate’s real estate industry.

What changes are being made to the Strata Law and how will these affect Dubai’s property market?
The significant event is the creation of the Owners Association (OA) as a legal entity enabling it to operate a bank account. All owners become part of the OA at time of purchase. It even covers long-term leases like those at the Green Community in Dubai. The OA will run the management of the building for the benefit of owners via an elected board. The board is governed by strata laws that are overseen by the Real Estate Regulatory Agency (RERA). It is rather like running a small or medium-sized business, with owners able to contribute ideas or give their time to improve their property

When will changes to the Strata Law be made?
We understand that the final draft is now going through the translation phase, so the release won’t be far away.

How will the Owners Associations work?
Owners will meet on an annual basis to receive financial reports and elect their board. They may also meet to discuss or approve major items of expenditure or more critical issues outside the scope of day-to-day matters, which are dealt with by the board. So the board will review the costs of running the building i.e. service charges, and the OA (owners in general meeting) will ratify this at their general meeting. The matter is put to a vote and once passed all owners must pay their share.

What are the biggest issues that the Strata Law needs to address?
Strata wouldn’t solve all of the world’s property problems, but it would provide purchasers with the strongest form of land title. Title is a document stating that the bearer has a “right of ownership”. This document is remittable and recognised by lenders and will avoid the current abyss in the present mortgage market in the UAE. Strata gives rights and obligations to the owner. He has a right to use common property and an obligation to comply with the rules and regulations spelt out in the constitution. Strata can be residential, office, retail etc.

Cluttons recently said the new laws would tie up loose ends and clarify grey areas. Could you elaborate?
Loose ends primarily relates to the nonsensical situation, which exists at present where people have bought into a freehold property but the developer still rules the roost. Owners will now be able to review their service charges and adjust those services to suit their collective needs. Hopefully, this will mean no more arguments with developers. Strata Laws will provide a legal framework enabling owners to work through their problems in a systematic manner with the assistance of RERA, knowing that the law is in place to help them.

Some owners have criticised developers for increasing service charges on their properties, so how will the laws address this?
It won’t be the law so much as the ability of owners to sit down and rationally discuss their needs and the quality of services their building deserves, so it won’t just cover what the developer wants. After due consideration of their current needs and future capital reserve fund, the owners determine their own service charges. Any developer margins, commissions and kickbacks will be eliminated forever.

Investor confidence has been hit by rising interest rates on mortgages and developers delaying off-plan builds. How secure is the UAE property market?
Once investors see the benefits of strata the property industry will respond to the security it offers, along with transparency and the personal touch of the board or helpful owners in presenting the building to the best of its potential i.e. grounds, pool surrounds other landscaping, painting and cleaning.

How can property companies and developers convince sceptics that the UAE is a good place to invest?
These are issues outside the scope of Strata such as resolving the question of residency attached to purchase. Investors don’t react well to uncertainty. They buy for the long haul. That is where the strength comes from. If you remove residency from a purchase you destroy credibility.