Few Dubai developers ready for strata law

On Oct 13, all property developers are required to submit documents and begin setting up home owner associations, but lawyers say few companies will be compliant in time.

A requirement that all developers in Dubai be compliant with the strata regulations comes into force on Wednesday, but just a fraction of companies are ready, lawyers say.

"If I was doing a survey of developers, I'd say that the ones that are generally at the front of the pack with getting things done represent maybe 5 to 10 per cent of my clients," said Shahram Safai, a partner at the law firm Afridi & Angell in Dubai.

"The remaining [companies] fall across the spectrum from those who refuse to comply to those who have it on their list but are not hurrying." The strata law governs how homeowners deal with and pay for the upkeep of jointly owned property, such as lobbies and elevators, in buildings.

Dubai's Real Estate Regulatory Agency (RERA) has said that six months from the release of its regulations on April 13, all developers with finished buildings have to file paperwork that details the jointly owned property in their buildings and begin the process of forming homeowners associations.

The process of becoming compliant could cost Dh300,000 (US$81,600) for a small building and more than Dh1 million for a large tower, Mr Safai said, describing the cost as a burden for companies during the property downturn. "Had they dealt with this at the time of sale, they would have factored the added cost into the sales price," he said. "Now you're faced with hiring a quantity surveyor, an engineer, a lawyer, a strata manager to get compliant."

Still, Marwan bin Ghalita, the chief executive of RERA, said at an event in Dubai on October 3 that there would be no deadline extension for developers. If they failed to meet their obligations under the law, they would be subject to fines. To Mr bin Ghalita, the larger challenge was explaining to homebuyers how important the strata law was to the entire property economy. Across Dubai, hundreds of homeowners have stopped paying maintenance fees in their buildings because of the lack of transparency over how the money is used. The situation is causing buildings to fall into disrepair faster than they should and could ultimately result in greater costs for owners.

Mr Safai said the introduction of a fully functioning strata law system would mark the end of the reign of developers and the beginning of homeowner ascendancy. "It is a major power shift, and in my mind it is a dawn of a new era," he said. "We are going to see owners flexing their muscles, questioning how things were built, how they are run, the choice of subcontractors … Here is where the era [will have] shifted from developers to the owners."