Ask-a-lawyer: The strata law

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This week we turn to

Michael Lunjevich

, a partner at

Hadef & Partners

, to talk about the strata law. This law is of major importance because it establishes rules for the maintenance of jointly-owned areas of buildings like hotel lobbies, parks, gyms and swimming pools.

Homeowners in Dubai have already been facing the very real predicament of soaring maintenance fees. Just this week,


announced it


Mr Lunjevich explains how a home owner can deal with things like 100 per cent increases in maintenance fees. He also talks about developer-owned maintenance companies and why home owner boards should consider their options carefully when choosing the company to maintain their property.

His answers are after the jump ...


: The owner of my building has just raised my maintenance fees astronomically. How do I fight this? What can I do if the regulations on the new law aren't out yet?

Michael Lunjevich

: This is unfortunately a familiar story in Dubai. In limited circumstances this might be justified, however, some developers have forgotten that reputations stand or fall not just on how luxurious the development is but most importantly on how buyers enjoy the property after living in it. Buyers are not happy paying excessive service charges. Law No. 27 ("JOP Law") clearly places an obligation on the owner to pay services charges to the Owner's Association (Art 22). However, without the implementing regulations an Owner's Association cannot be formed so we are temporarily in uncertain times. Service charges are therefore ultimately a matter of contract between the developer and the owner and charges should be in line with that contract.

Many developers have implemented Property Management Agreements enabling them to charge what they want without any oversight by the owners. This may be an unfair contractual term and therefore under the Federal Civil Code an argument can be made to force the developer to exercise its powers reasonably. Further, an argument might be made that the developer is temporarily (pending the regulations arrival) standing in the shoes of the Owner's Association and Article 18 of Law 27 clearly states that the Owners Association should be "not for profit". At present there is uncertainty on how this matter should be approached, however, practically the Real Estate Regulatory Agency (RERA) has and will provide input to ensure that the developer charges reasonable service charges. It is unclear how RERA views this responsibility and greater clarity is required. In contrast to this scenario, some developers have taken a differing view and are leading the market such as at Le Reve, Dubai Marina. At Le Reve the developers are supporting an unincorporated Owners Association and provide it powers to run the building with oversight on all costs supported by annual audited financials made available to all owners.


: The developer of the building where I live is starting its own property management company. Should we just use this company? What should we be looking for in a company and what kind of contract should we sign with the company?

Michael Lunjevich

: This is one of those "it depends" answers. Buildings and communities are complex beasts and managing them is not an easy thing to do. One needs to ensure the property management company has the correct skills and experience. Appropriate preventative maintenance and on-going repair programs should be in place, and the administration, collection and efficient spending of service charges should be done in accordance with best industry practice. Additionally, the sinking fund needs to be managed and protected properly and appropriate insurances should be in place. On top of this, the administration and project management of owner's repairs and renovations is critical in high-rise buildings. So much can go wrong with these services leading to inefficient buildings with high service charges or very costly repairs years later.

My advice is to shy away from inexperienced providers. In addition, having a fresh pair of eyes on a building can help identify and prevent problems that a developer might not be so keen to identify during the defects liability period. In contrast, some developments are so complex that bringing in a new provider can be inefficient and very costly. Ultimately it will depend on the particular  development and the developer's experience in handling these matters. Either way, contracts should be comprehensive and cover all of the services to be  provided, accurately set out the charging mechanism and provide the right motivations for the provider to continuously improve its performance and bring costs down.