Disclosure deadline on Dubai's property projects looms

Developers must give clients information on facilities for tenants, estimated dates of completion, materials used in construction and any commercial elements planned.

United Arab Emirates - Abu Dhabi - March 30th, 2010:  Buildings on Al Reem Island near completion.  (Galen Clarke/The National)
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Dubai developers are facing a January 13 deadline to begin disclosing a wide variety of information to buyers under the nine-month old Strata Law.

The law requires developers to begin telling clients about details of their projects, including how their buildings will be used, the facilities available for tenants, estimated dates of completion, materials used in construction and any commercial elements planned.

"It brings into play the full consumer protection side of the law," said Peter Crogan, the chief executive of BCS Strata Management Services in Dubai. "The onus is now on developers."

The Strata Law, which went into effect in April, imposes a framework for the maintenance and shared ownership of common spaces such as pools and meeting areas in developments, similar to condominium laws in other countries. The law is considered one of the key elements in establishing legal guidelines for projects involving foreign buyers.

Under the elements due to go into effect next month, a sales agreement could be voided if the developer does not offer a disclosure statement, although "it remains to be seen how the courts will apply this in practice", Hadef & Partners, a law firm, said in a recent notice to clients.

"But we don't know what 'void' means exactly because the law doesn't clarify it," said Brent Baldwin, an associate at Hadef & Partners.

The required disclosures will give property buyers information that may have been withheld in the past, Mr Baldwin said.

But a number of developers have been slow to comply with details of the Strata Law.

"It's reasonable to say compliance is variable at the moment," Mr Baldwin said. "From our observations, a lot of developers have their heads in the sand at the moment."

Meanwhile, Abu Dhabi developers and homeowners are still waiting for details of the capital's version of the Strata Law, which has been anticipated for many months.

The law is considered crucial to establishing legal guidelines for investors in nearly completed projects on Reem Island and in other areas with freehold property. Developers and the legal community hoped the law would be issued by the end of this year, but that now appears unlikely, analysts say.

It would be "beneficial" for the new law to be issued before developments are ready for handover, "both to legitimise and empower the co-owners' associations and to bring clarity to the ongoing obligations and involvement of developers", said Tara Marlow, the head of property and hospitality for the Abu Dhabi office of Al Tamimi & Company, a law firm.

This month the Abu Dhabi Government issued Resolution 64, providing broad guidelines for the registration of property.

However, there are still no details available on how the rules will be implemented or what the parameters of Abu Dhabi's law will be. "The real issue here is it's still a bit uncertain how jointly-owned property law, as implemented in Dubai or understood in the rest of the world, will work in Abu Dhabi," said Scott Aitken, a partner at Clyde & Company in Abu Dhabi.

In Abu Dhabi, it is still unclear whether homeowners would be able to own the land their buildings stand on, "which brings into question who owns the common property", Mr Aitken said.

Some lawyers expect the Abu Dhabi Department of Municipal Affairs to issue strata law guidelines within a month.