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Abu Dhabi, UAEFriday 5 March 2021

Strata law may cut homeowners' costs by millions

Change to allow owners to appoint their own management companies likely to see maintenance fees slashed.
Homeowners' associations would be able to pick their own maintenance companies under the proposed new law.
Homeowners' associations would be able to pick their own maintenance companies under the proposed new law.

Dubai homeowners could save hundreds of millions of dirhams in service fees after the introduction of a strata law as the emirate's big developers lose their control of the lucrative maintenance market. The Dubai Land Department said on Tuesday that guidelines paving the way for the long-awaited law had been released, although the details are yet to be revealed. It is expected to allow owners to appoint their own management companies for the first time.

A spokesman for the department said the Dubai Real Estate Regulatory Authority (RERA) was preparing copies of the regulations that would be available to the market soon. The law will mean that homeowners associations will be able to choose companies to maintain shared areas such as lifts, foyers, swimming pools and gardens, taking that decision out of the hands of developers and potentially reducing residents' costs.

"The implementation of the strata regulations could yield savings for homeowners of as much 20 per cent on some developments," said Jim O'Hare, the chief executive of the strata law consultancy Place Strata Management. "But it is important to remember that currently many buildings are being under-serviced. It means that buildings are decaying from lack of maintenance and thus future service charges will have to factor in the repair and replacement of a plant that has become worn out due to lack of proper maintenance."

Such savings could translate to almost Dh1 billion (US$272.2 million) for owners of the 300,000 houses and apartments in the emirate, Place Strata's estimates show. Adrian Quinn, the chairman of Essential Community Management, a strata management company that set up an office in Dubai in 2006 in anticipation of the law, said savings would probably be made through the renegotiation of contracts with service companies, although he expected them to fall by between 5 and 7 per cent.

"The law is very specific in that contracts will only have a maximum life expectancy of 12 months," Mr Quinn said. "So a strata management or facilities management company can be appointed, but after a year all contracts will be open for negotiation. This will sort out the issues of developers locking in management contracts for more than a year." The law could also give owner associations the right to sell the properties of owners who are in arrears of their service charges to recover the costs, although it is not yet clear how this would work.

A Land Department spokesman said such a clause had been in place since the strata law was first announced. A blacklist has been pinned to the wall of one tower block in Dubai Marina naming owners who have not paid, a person living in the building said. Mr Quinn said some developments had lost between 30 and 50 per cent in service fees because owners had not paid. "RERA will first of all send out three warning notices," he said. "If [the non-payer] doesn't comply then the owner association can take the matter to court to ask for the property to be sold.

"Nobody's property will be sold instantaneously. It might take six to nine months to go through the RERA process but at the end of the day, if you haven't paid, the owner association will sell." Developers including Cayan, Emaar Properties and Union Properties have said they are happy to relinquish control of building management to owners. But a major challenge will lie in the creation and co-ordination of what is understood to be a "significant number of owner associations" to manage the properties, said Ron Hinchey, the vice chairman for the UAE at the Royal Institute of Chartered Surveyors (RICS) and a partner at the property consultancy Cluttons.

"We offer our full support to RERA in the further roll out of the strata law," Mr Hinchey said. "In the meantime, we look forward to reviewing the guidelines in more detail to broaden our understanding."

Published: May 26, 2010 04:00 AM


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