Homeowners a step closer to 'strata law' power

By next month, owners' associations will be allowed to open their own bank accounts, independent of developers.

A for sale sign sits outside a property on an Emaar Properties PJSC residential development called "Arabian Ranches" in Dubai, United Arab Emirates, on Wednesday, Jan. 13, 2010. Dubai's housing rout sent prices down 52 percent in the past year, prompting some homeowners to abandon their cars and mortgage payments and flee the country. Photographer: Charles Crowell/Bloomberg *** Local Caption ***  617909.jpg
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DUBAI // Homeowners in Dubai have moved a step closer to full control of managing their own properties and resolving the thorny issue of service charges.

By early next month, owners' associations will be allowed to open their own bank accounts, independent of developers.


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The move is almost the final stage in the lengthy process of creating owners' associations with the legal authority to negotiate contracts for upkeep, cleaning, security and other services in all freehold property in Dubai.

Such contracts are otherwise handled by property developers, some of whom have been accused by owners of overcharging and lacking transparency.

The new bank accounts will be available "within 30 days", said Emad Farouq, the senior legal adviser at Dubai Land Department.

The banks would act as trustees to prevent rogue owners from misusing funds, said Marwan bin Ghalaita, the chief executive of the Real Estate Regulatory Authority (Rera), part of the Land Department. "You want to make sure that the withdrawal from that account is only going to the owners' association business," said Mr bin Ghalaita, who was elected last month to the FNC.

Three banks have signed agreements to handle such accounts, he said. Setting them up could take a month or longer, as old accounts need to be audited, approved by the developer and closed. "There is a transition period," he said.

The handover of control from developers to owners was supposed to have been completed a year ago, according to the Dubai strata law. Since then, many interim associations have been given de facto oversight of their property.

Since they are not yet legal entities, however, some have used bank accounts in the name of their developer.

In the past year, 230 interim associations have been registered with Rera, Mr bin Ghalaita said. These have received a certificate of recognition for completing certain steps, for example, the developer provided a list of commonly owned spaces such as lobbies and pools, and the owners elected a board.

Some have taken effective control of their properties, even if they still rely on their developers to make payments or handle other business.

They oversee the budget for the upkeep of common spaces, and negotiate prices with service providers.

They also collect maintenance fees from fellow owners – often with greater success than the developers, whom some owners did not trust with their money.

Alastair McCracken, whose firm Novus Community Management works with about two dozen associations, said they had reduced fees by up to a third since taking control from the developers. Fee collection rates have also topped 95 per cent.

With the new bank accounts – separate from developers – more owners might be willing to pay, he said.

“One thing all successful owners’ associations would like to see is the removal of another excuse for owners not to pay the service charges for their apartment buildings,” he said.

Some owners, however, are still waiting for progress. They complain their developer has ignored deadlines to form associations or help them to take control, for example, by sharing the budget or list of common spaces.

“How can we effectively represent our community and do a good job for our homeowners and our community if we don’t have information?” said one owner.

The key step will be full recognition as legal entities, said Ludmila Yamalova, a property lawyer.

Even if owners can open bank accounts, they still cannot officially make or break contracts with service providers – and thus completely control their costs, Ms Yamalova said.

"At the end of the day, who signs those contracts? It's not the owners' association, it's the developer," she said.