Homeowner draft law in Dubai stirs control issue

A draft law to protect Dubai home buyers is sewing confusion in the property industry amid fears it may cede control of common areas to developers.

A draft law gives property investors in Dubai entering into off-plan purchases greater security. Christopher Pike / The National

A draft law to protect Dubai homebuyers has raised concerns in the industry that it may give control of common areas to developers.

Although the draft gives property investors entering into off-plan purchases greater security, a clause that relates to shared ownership of buildings has raised questions among property lawyers and analysts.

The draft has been circulated among lawyers in Dubai for their informal consultation before it takes the next step towards any implementation, for which a date has yet to be set.

Article 11 of the draft Investor Protection Law suggests developers will retain control of common areas where such rights are contained in the original sales and purchase agreement, according to Michael Lunjevich, a property lawyer at Hadef & Partners in Dubai.

"The law may not have the intended effect of strengthening the market and [instead] threaten to undermine a recovery," said Mr Lunjevich.

The draft law says that if a developer retains the right of management of the common parts of the building in the contract of sale, then it should provide buyers with "estimated information on the value of the facilities services and an indication of the entity that shall manage such facilities".

Jeremy Scott, a senior associate at Al Tamimi & Company, said that the clause may relate only to managed apartments rather than all residential property.

The Real Estate Regulatory Agency was not available for comment. Developers and owners have been at loggerheads over control of completed developments in the past year as thousands of properties have entered the market and owners associations have been created.

A high-profile dispute between Nakheel and property owners on the Palm Jumeirah about access to the beach culminated in police being called to the development in January.

Emaar Properties, the country's largest listed developer, has also had a face-off with owners in the Arabian Ranches development over the way service charges are calculated.

Property experts have welcomed the aims of the planned legislation, but point out it will do little to help investors who have already become victims of delayed or abandoned projects.

"Clearly lessons are being learnt and although the provisions of the law would have been welcomed during the peak, it is nonetheless a further sign of a maturing market place," said Matthew Green, the head of research and consultancy at CBRE Middle East.

"With a level of ambiguity still surrounding the existing Strata Law and the role of owners associations, we would welcome more clarity."