Effects of Strata Title Law are felt

Existing communities will be given 12 months from October to set up, register and licence their owners' associations.

The formation of owners' associations is one of the main consequences of the Strata Title Law. Passed in April, the law will not come into effect until supporting regulations are approved. This is expected to happen in October to coincide with the Cityscape Dubai property exhibition. Existing communities will be given 12 months from October to set up, register and licence their associations, while projects completed after October will have three months from the date the units are handed over to owners.

Owners' associations will be made up of all owners within an apartment block or villa community, but not tenants. They will elect a management board made up of five to seven members. A developer can be a member of the association if it owns a unit in the complex, but will not be able to influence decisions fully unless it owns the majority of units. By law, the management board will in turn be assisted by a professional manager from a company such as BCS, but this organisation will have no voting rights.

The association will, in effect, transfer responsibility for the management of shared common property from the developers to the owners. In addition to their individual units, purchasers will also own a share of common areas, which include swimming pools, lifts, foyers, basements, gardens, fences, side walls and roofs. Each association will be required to establish two funds; one for the day-to-day maintenance of the common property and a reserve fund to raise money to maintain it for 10 years.

Owners will have the right to vote on budgets that determine the annual service fee, to award the maintenance contract to a facilities management company and to draw up the community rules. Tenants and owners can be fined if they break the rules, while owners could even lose their apartments if they continually default on service fees. Voting will be done electronically, by sending in voting papers or by attending the annual general meeting in person.

The Strata Law will also require developers of proposed buildings and communities to disclose in the sales and purchase agreement the estimated service charges and utility charges for the first two years of operation. Strata title and home owners' association is a concept used in Canada, New Zealand, the United States and Australia, where the system has been in place since 1965. @Email:[e-mail]