United Arab Emirates

By Shahram Safai, Silvia Pretorius, Anna White, Zeina Al Oraibi El Zein, Emad Maghsoudi and Karl Unwalla

The Authors

Shahram Safai
Partner
ssafai@afridi-angell.com
Tel: +971 4 330 3900

Silvia Pretorius
Senior Associate
spretorius@afridi-angell.com
Tel: +971 2 610 1010

Anna White
Associate
awhite@afridi-angell.com
Tel: +971 4 330 3900

Zeina Al Oraibi El Zein
Associate
zeina@afridi-angell.com
Tel: +971 2 610 1010

Emad Maghsoudi
Associate
emaghsoudi@afridi-angell.com

Karl Unwalla
Paralegal
karl@afridi-angell.com
Tel: +971 4 330 3900

Tel: +971 4 330 3900

What’s happened?

After much media coverage regarding the potential change in the law concerning properties owned in common in Dubai, Law 6 of 2019 was introduced on 4 September 2019 (the New Law).

The New Law is an important development for Dubai as most real estate is held by way of property owned in common. That is, a real estate development that has been subdivided into apartments, offices, retail units and/or common areas.

We expect that the New Law will have a positive impact on the real estate market in Dubai as increasingly disputes under the Previous Law (including those between unit owners and association managers) were effecting property values.

The New Law repeals Law 27 of 2007 Concerning Ownership of Jointly Owned Property in the Emirate of Dubai (the Previous Law). However, developers, management companies and owners committees have been given a six month transition period from 4 September to comply with the New Law.

In this InBrief we look at the major changes that will impact owners of units in Dubai.

New management system

Under the Previous Law all owners of units automatically became members of the owners association of their building when they purchased their unit. The owners association, through its board, was then entrusted with the management, operation, maintenance and repair of the common areas of the building, and they could delegate these responsibilities to an association manager to perform.

The New Law replaces this management system with a three tiered system set out in Article 18 as follows:

First Category – Major Projects:

For real estate projects that are considered to be major projects by the Director General of the Dubai Land Department (DLD), the New Law provides that the developer shall now be responsible for the management, operation, maintenance and repair of their common parts and the utility services (Article 18(a)(1)). The developer may appoint a management company to carry out these responsibilities on its behalf (Article 18(c)). The management company must be approved by the Real Estate Regulatory Agency (RERA) (Article 2).

An owners’ committee must be formed for each Major Project withits members selected by RERA which shall not exceed nine members (Article 18(a)(1)). The functions of the owners committee are set out in Article 24 and include:

  • verifying that the management company manages the common parts;
  • reviewing the annual budgets for the maintenance of the common property and making recommendations; and
  • receiving complaints from owners and submitting them to RERA if the management company fails to address them within 14 days of being notified.

If the developer is found to be incompetent or unable to manage the common property under this first category in a manner that ensures their sustainability and serviceability, the Executive Director of RERA may appoint a specialised management company to manage and operate the common property (Article 37).

Second Category: Hotel Projects:

For real estate projects that are licensed for use as a hotel establishment, the New Law provides that the developer shall appoint a hotel project management company approved by RERA to manage the common parts (Article 18(a)(2)).

If the hotel project management company wishes, an owners’committee may be formed for each Hotel Project with its members selected by RERA which shall not exceed nine members. However, Article 18(a)(2) provides that even if an owners’ committee isformed, it is not entitled to interfere in the management of the hotel project or the common areas thereof.

If the hotel project management company is found to be incompetent or unable to manage the common property under this second category in a manner that ensures their sustainability and serviceability, the Executive Director of RERA may appoint a specialised management company to manage and operate the common property (Article 37).

Third Category: Real estate projects other than the major projects and hotel projects:

The common parts in these projects shall be managed by specialised management companies, which shall be selected and engaged by RERA in accordance with the controls and regulations set by a decision to be issued by the Director General in this regard (Article 18(a)(3).

An owners’ committee must be formed for each real estate project with its members selected by RERA which shall not exceed nine members (Article 18(a)(3)). The functions of the owners committee are set out in Article 24 and include:

  • verifying that the management company manages the common parts;
  • reviewing the annual budgets for the maintenance of the common property and making recommendations;
  • receiving complaints from owners and submitting them to RERA if the management company fails to address them within 14 days of being notified; and
  • importantly, this owners committee has the power to request RERA to replace the management company and provide RERA with advice on the selection and appointment of the new management company (Article 24(5)).

If RERA finds that the management company is incompetent, inefficient or unable to manage the common property under this third category RERA shall appoint an alternative management company to manage the common property (Article 38).

Obligations of Master Developer

The Master Developer is required to manage and maintain the common facilities in the Master Project through a written agreement with a management company that has been approved by RERA (Article 19).

If the master developer is found to be incompetent or unable to manage the common property in a manner that ensures their sustainability and serviceability, the Executive Director of RERA may appoint a specialised management company to manage and operate the common property (Article 37).

Responsibility of Developer to rectify defects for ten years (Article 40)

Similar to the Previous Law, the Developer is still under an obligation to:

  • repair or correct any defects in the structural parts of the common property for a period of ten years from the date of the certificate of completion for the project; and
  • repair or replace defective fixtures in the common property for a period of one year from the date of handing over the unit to the owner. Fixtures are defined as including mechanical and electrical works, sanitary fittings, sewerage and others.

Removal of JOPD – New bylaws / building management system

Under the Previous Law, a Jointly Owned Property Declaration was required to be registered with RERA which governed the use of the common areas and units, and set out the duties and obligations of the owners, occupiers, and the developer.

The New Law has now removed the concept of a Jointly Owned Property Declaration and replaced it with thefollowing: the “bylaws of the complex”, the “bylaws” and the “building management system”.

Bylaws of the complex

The bylaws of the complex are defined in Article 2 as “the terms and conditions governing the development and operation of the master project and the common properties and common facilities therein, including the planning and construction standards of the complex.”

Bylaws

The bylaws are defined in Article 2 as “the rules and provisions governing the owners’ committee, which shallbe established and adopted in accordance with the provisions of this Law.”

The building management system

Prior to selling any units, the developer must establish a building management system for major projects and hotel projects which must be approved by RERA (Article 20).

The building management system is defined as “The document prepared in accordance with the regulations issued by the Department and recorded in the Common Property Register, which state the procedures for maintenance of the common parts, and the percentage of owners’ contribution in the costs related thereto, including the equipment and services existing in any part of another building”.

Legal effect of bylaws, bylaws of the complex and building management statement

These documents all form part of the title deed and must be complied with by every occupant, owner, owners committee and the developer of the project (Article 6).

Filing requirements

The developer must prepare and file the bylaws and the bylaws of the complex within 60 days from the date of the certificate of completion for the project.

However, the building management system shall not be filed by the developer – instead it will be filed by RERA.

Service charges

Similar to the Previous Law, owners are required to pay to the management body his share of the service charge to cover the expenses of the management and maintenance of the common parts (Article 25(a)).

However, the management body may not collect any service charges unless they have obtained the prior approval of RERA to the budget allocated for the service charge (Article 27). RERA will appoint a legal auditing officer accredited by it for this purpose (Article 27).

Utilisation charges

For prefabricated, under construction buildings or vacant land plots, the Master Developer may collect a utilisation charge from the owner or sub-developer of such land, subject to the approval of RERA.

New common property register

A new “common property register” shall be established by the DLD which shall contain the following (Article 4):

  1. “Land plots owned by the developers, on which the common properties shall be constructed;
  2. units allocated for independent ownership in the common property sold by the developers, and the

    names of the owners of these units;

  3. members of the owners’ committee;
  4. building management system;
  5. plans;
  6. management body;
  7. management contracts of the common property or the common parts;
  8. area of common parts and private common parts and their percentage out of the area of units in the

    common property; and

  9. areas owned by the developer in the common property.”

New dispute resolution mechanism

The Rental Dispute Settlement Centre in the Emirate of Dubai shall have exclusive jurisdiction to hear and settle all disputes and differences relating to the rights and obligations stipulated in the New Law, in accordance with the rules and procedures of the Rental Dispute Settlement Centre. ■

If you require more detailed information or advice on the impact of this new law, please contact us.

 

 

Afridi & Angell

Founded in 1975, Afridi & Angell is a full-service UAE law firm in its fifth decade at the forefront of the legal community. From the beginning, our hallmarks have been a commitment to quality, unsurpassed knowledge of the law and the legal environment, and crafting of innovative business solutions. Licensed in the three largest Emirates of Abu Dhabi, Dubai and Sharjah as well as the Dubai International Financial Centre, our practice areas include banking and finance; corporate and commercial law; arbitration and litigation; construction; real estate; infrastructure projects; energy; project finance; maritime (wet and dry); and employment. We advise local, regional and global clients ranging in size and sophistication from start-ups, sole proprietorships, family-owned businesses, entrepreneurs and investors to some of the world’s largest public and private companies, governments and quasi-government institutions. We attract and retain clients with our dedication to practical guidance focused on their business needs supported by decades of experience here in our home jurisdiction, the UAE.

Afridi & Angell is the exclusive member firm in the UAE of top legal networks and associations, most notably Lex Mundi, the world’s leading network of independent law firms, and World Services Group.

www.afridi-angell.com

 

Afridi & Angell’s inBrief provides a brief overview and commentary on recent legal announcements and developments. Comments and opinions contained herein are general information only. They should not be regarded or relied upon as legal advice.

© 2019, Afridi & Angell

Related Articles by Firm
UAE Ministry of Finance issues guidance on Economic Substance Regulations
Thirteen topics covered in the guidance that may be of interest to businesses affected by the regulations.
The private equity, venture capital and start-up ecosystem in the UAE: Recent developments
The changes will result in the establishment of new funds and attract more entrepreneurs and investors to the UAE.
SCA issues guidelines for financial institutions on anti-money laundering
The advent of AML and ATF guidance is a welcome step for businesses in the UAE.
Proposed New DIFC Data Protection Law
The DIFC Authority has proposed the enactment of legislation (the Proposed Law) to replace its current Data Protection Law.
New economic substance regulations in the UAE
The rules are a response to the UAE being put on the EU's blacklist of non-cooperative tax jurisdictions.
Keeping up with the trend: The New DIFC Insolvency Law
The New Law introduces many welcomed features and is a step forward in maintaining the UAE’s position as a world leading trade hub.
The New DIFC Employment Law: Key Changes
The new law will directly affect almost 24,000 employees based in the DIFC.
Merger clearance matters in the UAE
Despite the limited number of filings and the dearth of decisions, parties conducting M&A in or from the UAE should consider the impact of the competition regime.
New regulations offer welcome guidance to Anti-Money Laundering Law
The new AML Law has been shaped by international AML standards and provides several mechanisms to combat money-laundering.
Health data confidentiality on a rise in the UAE
A new law requires businesses that use information and communication technology for processing health data to ensure its confidentiality, accuracy and validity.
New Tawazun economic programme policy guidelines issued
It is hoped that the new programme will enable defence contractors to identify more accessible opportunities to generate offset credits.
New administrative fines imposed by the UAE Insurance Authority
Insurance and reinsurance providers should review the resolution and the list of violations to ensure their compliance.
Significant changes to UAE’s Civil Procedure Code
While the changes are welcome, they put pressure on litigants to plead their cases within relatively short time periods ...
New long-term residency visas in UAE
In a welcome development, the new law introduces long-term residency visas for four categories of persons.
New promotion regime for domestic funds
A new agreement could make the UAE a much more attractive place to establish funds.
Federal Penal Code amendments
The amendments are designed to make the UAE's Penal Code consistent with other recent federal legislation and current federal enforcement policies.
Netting arrangements made enforceable in the UAE
For decades, banks and other counterparties in the UAE have obtained financial services from foreign financial institutions. Industry bodies, such as the International Swaps and Derivatives Association (ISDA), the International Capital Market Association and the International Securities Lending Association, have ...
New anti-money laundering law
The new law introduces subtle but important changes to the AML landscape in the UAE.
The UAE's new Foreign Direct Investment Law
Majority foreign ownership is not yet a reality, but the framework is now in place.
Significant precedents from the DIFC courts
Afridi & Angell successfully defended an anti-suit injunction, an application to exclude evidence and obtained a document production order.
New services by Dubai Rental Disputes Centre
The Rental Good Conduct Certificate service is a first-of-its-kind initiative in the world.
ADGM announces tech start-up licensing regime
The licence provides access to a Professional Services Support Programme aimed at allowing entrepreneurs entry to a community of businesses, financial services and professional advisers.
Dubai relaxes rules on filing appeals before the Court of Cassation
The Decree provides that appeals to the Court of Cassation must be filed within 60 days of the judgment of the Court of Appeal.
Off-plan sales in Dubai: Risks and rewards
Whether buyers are looking to expand their real estate portfolio or buyers are simply looking to find their ideal home, great deals can be found in Dubai’s off-plan real estate sector ...
The UAE Federal Arbitration Law: A First Look
The approval of the long-awaited law by the Federal National Council was announced in March this year.
Legal reforms in Abu Dhabi
Abu Dhabi has introduced new rules governing the functioning of the Emirate’s judiciary.
UAE: Off-plan sales: risks and rewards
Great deals can be found in Dubai’s off-plan real estate sector, but it is critical that prospective buyers do their homework ...
The New UAE Pledge Law – Security Registration
UAE Federal Law 20 of 2016 introduced a new regime for registering a pledge over moveable assets which are pledged as security for the repayment of a debt ...
UAE VAT Designated Zones Defined
A Designated Zone is required to be a specific fenced area with security measures and Customs controls in place ...
Certificate of Good Conduct Required for all UAE Employment Visas
New requirement will be introduced shortly ...
Dubai: Dawn Raids – Do you have a policy in place, and is it fit for purpose?
How you handle a dawn raid will have a significant impact on the discussions and negotiations that are sure to follow.
Dubai: Changes to Law Allowing Developers to Terminate Off-Plan Sales Contracts
An important development that will assist developers who are facing a difficult real estate market ...
UAE VAT Executive Regulation Update: Free Zone Guidance
The UAE Ministry of Finance has announced the Executive Regulation for the Federal Decree-Law ...
Opportunities in Dubai’s Healthcare Sector
Dubai is the fastest growing healthcare market within the GCC and is becoming an increasingly attractive sector for investors. Afridi & Angell explain the key drivers and options available to investors ...
VAT registration in the UAE has commenced
The United Arab Emirates Federal Tax Authority has commenced accepting registrations for Value Added Tax through its online portal ....
UAE: VAT and Excise Tax
The UAE has issued substantive law on Value Added Tax (VAT) and Excise Tax ...
New Ministerial Decision brings clarity to Private Joint Stock Companies
The private joint stock company is one of the forms of company contemplated by UAE Federal Law No. 2 of 2015 concerning commercial companies ...
Be VAT ready - Tax Procedures Law is already here
Under the VAT regime, businesses will be collecting taxes on behalf of the government and will file tax returns accordingly ...
UAE – Centre for Amicable Settlement of Disputes update
Centre for Amicable Settlement of Disputes can no longer mediate disputes when a bank is a party to such dispute ....
New UAE Funds Regime
The UAE has embarked on an ambitious undertaking by introducing new business friendly mutual funds regulations to stimulate the UAE funds industry and provide the foundation for a more developed regional funds regime in the Gulf Cooperation Council ...
New UAE Pledge Law over Movable Assets
The new Pledge Law of the UAE was enacted on 12 December 2016 ...
Doing Business in Iran: Donald J. Trump; Mining Investment Opportunities
The election of Mr. Donald J. Trump as President of the United States has resulted in much consideration by corporates of existing strategies with respect to Iran...
The UAE Competition Law Clarified
Two Cabinet Decisions have been issued which provide guidance on the implementation of the Competition Law, particularly on market share thresholds and on small and medium establishments.
Potential Criminal Liability for Arbitrators and Experts in the UAE
The UAE Penal Code was amended to introduce the concept of criminal liability for arbitrators, experts, and translators who issue dishonest and partial decisions and opinions.
The New UAE Bankruptcy Law
Perhaps the most important new feature of the new Law is the introduction of a regime that allows for protection and reorganization of distressed businesses ...
Doing Business in Iran: The Momentum Builds
The momentum for doing business in Iran is expected to increase at an even greater pace after the November US elections.
Proposed Insurance Authority Decision Concerning Marketing of Insurance Policies by Banks in the UAE
The Emirates Insurance Authority prepared a draft regulation concerning marketing of insurance policies by banks in the UAE.
The thing about … Amjad Ali Khan
Recently in Dubai, ASIAN-MENA COUNSEL’s Patrick Dransfield photographed Amjad Ali Khan, the co-founder and Managing Partner of Afridi & Angell and also put to him a series of questions on behalf of the <...
UAE Ministerial Decision No. (272) of 2016
The Ministerial Decision No. (272) of 2016 addresses the scope of Article 104 of Federal Law No.2 of 2015, stating which articles relating to public and private joint stock companies apply to limited liability companies.
Doing Business in Iran: the banking bottleneck
With the easing of sanctions against Iran, vast business opportunities have opened up. The challenge is whether and how to participate in such a potentially phenomenal market without taking undue risks.
Doing Business in Iran: Life After (Secondary) Sanctions
The legal landscape for doing business in Iran has changed significantly since the easing of certain Iran related sanctions.
Doing Business in Iran: Life After (Secondary) Sanctions
The legal landscape for doing business in Iran has changed significantly in the past seven months ...
UAE Legal Bulletin
Updates on the possibility of a Value Added Tax, the new PPP Law and other developments which companies doing business in the UAE should know
UAE's New Labour Regulations Take Effect January 1, 2016
A number of recently announced initiatives could introduce potentially significant changes to the rules governing the workforce in the UAE.
Introducing the Dubai World Trade Centre Free Zone
Aside from its central location and its world class facilities, the Dubai World Trade Centre Free Zone offers a wide range of services for companies.
UAE Legal Bulletin July-August 2015
Insights into the new Commercial Companies Law and relevant corporate updates which can help companies conduct business in the UAE, particularly in Dubai
The New UAE Commercial Companies Law – A First Look
We highlight the changes which the new UAE Commercial Companies Law (Federal Law No.2 of 2015) introduces.
Do I need a DIFC will?
With the opening of the Wills and Probate Registry in the DIFC, it is now possible to register a will in Dubai and have a high degree of confidence that it will be enforced.
DFSA imposes record fine on Deutsche Bank
The Dubai Financial Services Authority (DFSA) imposes its largest fine to date on Deutsche Back AG Dubai (DIFC Branch), sending a strong signal that DFSA is both independent and unafraid to take on well-resourced opponents.
Abu Dhabi Global Market starts first phase of activities
Effective 15 June 2015, the Abu Dhabi Global Market began accepting license applications from existing non-financial service tenants of Al Maryah Island that have either a private limited or branch office legal structure.
Dubai Statistics Center – you may be next!
Companies in the Emirate of Dubai have recently been receiving questionnaires requesting detailed information about their business, including financial information...
Free Zones in the UAE – an overview
Strategically located between Europe, Africa and Asia, the United Arab Emirates has become a hub for trade and commerce throughout the world ...
UAE Competition Law - All bark and no bite?
Federal Law No. 4 of 2012 on the regulation of competition (the “Competition Law”) introduced a regime for the regulation of anti- competitive behavior in the UAE which previously did not exist ...
Related Articles
UAE Ministry of Finance issues guidance on Economic Substance Regulations
Thirteen topics covered in the guidance that may be of interest to businesses affected by the regulations.
The New Normal: An interview with LOD’s head of innovation and design
We speak with Anthony Wright about the development of lexvoco, joining forces with LOD and the future of legal in Asia.
Don’t suffer FOMO* for Southeast Asia LegalTech!
Avoid the 'fear of missing out' by embracing the incredible opportunities technology offers.
Related Articles by Jurisdiction
Free Zones in the UAE – an overview
Strategically located between Europe, Africa and Asia, the United Arab Emirates has become a hub for trade and commerce throughout the world ...
UAE VAT Executive Regulation Update: Free Zone Guidance
The UAE Ministry of Finance has announced the Executive Regulation for the Federal Decree-Law ...
Dubai Statistics Center – you may be next!
Companies in the Emirate of Dubai have recently been receiving questionnaires requesting detailed information about their business, including financial information...
Latest Articles
UAE Ministry of Finance issues guidance on Economic Substance Regulations
Thirteen topics covered in the guidance that may be of interest to businesses affected by the regulations.
David Miles remembered
We mourn the passing of a remarkable lawyer and dear friend.