Dubai property law still causing concern

DUBAI — Work on Dubai's property law is still required if buyers and potential buyers of apartments are to have full confidence that their ownership rights will be recognised and upheld. This is despite recent changes to Dubai's property law granting freehold ownership of property to foreigners in designated areas.

By Robert Flemming And Lucia Dore (Senior Correspondent)

Published: Fri 18 Aug 2006, 10:34 AM

Last updated: Sat 4 Apr 2015, 2:18 PM

Rules that might apply to villas situated on a unique plot of land cannot be applied to apartment blocks, for example. And the Lands Department has not yet released the procedures for "splitting' apartment blocks", explain Christine Walker and Michael Lunjevich of law firm Hadef Al Dahiri & Associates, speaking with Khaleej Times. Under current legislation, this means that a buyer of an apartment cannot request a title deed from the Lands Department.

"There has to be a mechanism whereby the building is recorded in detail and the details submitted to the Lands Department," said Lunjevich. 'This will need to be done by the actual owner of the plot, like Emaar or another developer. Once the department has those details together with a list of owners, they can begin to issue title deeds. But there are considerations to take into account that go with the building such as how to deal with the common areas. At the moment we cannot say that owners will get deeds."

The situation is further complicated by the lack of legislation pertaining to the creation of an association that runs the building. While there is provision in the Civil Code that gives the right to owners to form an association, the law that will put "meat on the bones" is still a work in progress. It is anticipated that issues concerning joint ownership of property will be addressed by the Strata Law, sometimes known as the Condominium Law, expected to be enacted by the end of the year.

"Currently, if you buy an apartment there is a contractual relationship that states that you will be a part of an association," explained Walker. "But there's no law to govern that." Of considerable concern is the fact that, in most, if not all cases, "each purchaser is contractually bound to a long-term maintenance agreement and could be left in an invidious position if the manager does not perform and/or charges exorbitant rates," she said. According to Lunjevich and Walker, the contract will stipulate that all owners will be party to that contract and accept the constitution as laid down by the developer. This should clearly set out how meetings are called, how facilities are managed and how decisions are taken, among other things. As the contract is an agreement between the owners, the developer may not be a direct party to it.

"The constitution should state very clearly that the developer will also submit to the constitution for the running of the building and if it doesn't say that there's a small gap," warns Lunjevich. "Very often the constitution appoints the developer to manage the building for 20 to 25 years. If the developer doesn't abide by the rules, you might have a problem. How do you make the developer perform? You've handed over the money and they've gone off to do the next project. Currently there is no law that allows the association to form an entity to enable you to sue the developer. So you have a situation where the individual owners would have to sue independently and that's not a nice position to be in because there's a risk. Risk and reward: that's the way these things always work." Not being recognised as a legal entity presents a raft of difficulties that are sometimes difficult or, more often, impossible to overcome. Inability to have power of attorney will render an association a toothless litigant and, in matters of finance, it will be unable to open a bank account. This problem is sometimes resolved by one owner opening an account but by referring to it as that of the association's. However, any liability will remain with the named individual.

Setting up a company to form an entity might also be possible through a free zone but the rules state that operations have to be restricted to that zone. And a company outside such an area would limit ownership to 49 per cent ownership by expatriates from outside the GCC.

"These are all issues that people didn't think about at the time when they were buying because there was a buying frenzy on the ones that have now been delivered," commented Walker and Lunjevich. They say these are the people who are affected the most. Even though they may have these contracts and constitutions, the practicality is that they have to rely on other people. "We have had detailed discussions with the Lands Department and new laws are imminent. Hopefully, the laws will be signed off by the time that new apartments are delivered. And we hope that among these, there will be a statute that recognises associations as entities," they said.

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