Strata laws would cover shared areas of Abu Dhabi buildings

Abu Dhabi's new financial free zone is set to introduce the emirate's first strata property laws and owners associations.

The draft strata laws for Al Maryah Island, above, are among a raft of new measures for the free zone. Mona Al Marzooqi / The National

Abu Dhabi’s new financial free zone is proposing the introduction of the emirate’s first strata property laws and owners associations.

According to a set of draft regulations published yesterday by Abu Dhabi Global Market, the capital’s first financial free zone on Al Maryah Island will include strata laws as part of a set of new real estate laws aimed at attracting big-name overseas investors to the capital.

The proposed laws could also allow property owners to form owners associations in which owners of individual units would be able to appoint cleaners and maintenance teams for their own buildings.

Strata laws, which were implemented in Dubai during the previous property boom, allow developers to sell off chunks of buildings with a greater security of tenure than provided by existing laws in Abu Dhabi.

Owners associations have also been implemented in Dubai and, in theory, allow apartment owners to take charge of financial decisions governing maintaining their own apartment blocks.

However, legal technicalities mean that associations are still not able to operate in practice.

Strata buildings received negative publicity after developers rushed to sell offices off-plan to investors during the property boom, leaving some buildings with dozens of landlords who squabbled over the ownership of common areas and making it unattractive for larger organisations to take space and negotiate with each owner.

“Strata law only got a bad reputation because it was sold off-plan by developers and bought by investors, neither of whom realised how it would affect tenants,” said Ben Crompton, the managing director of the property firm Crompton Partners in Abu Dhabi. “These draft laws are likely to provide more security of tenure for potential investors.

“The draft laws also enable developers on Al Maryah Island to set up owners associations for the first time in Abu Dhabi,” he said. “However, like in Dubai, whether they will actually be able to do so still remains to be seen.”

Previous plans to introduce strata law across Abu Dhabi nearly a decade ago have not progressed.

“These regulations have been comprehensively drafted on a similar basis to those applicable in the DIFC and appear to be common-law based. Conceptually they do not sit alongside UAE law at all and are a series of bespoke regulations,” said David Nunn, a partner at Berwin Leighton Paisner.

“If what you want to do is to put together a series of laws that closely resemble those of sophisticated legal systems in the West, which superficially look attractive to international investors, then you would probably come up with something like this,” he said.

Lawyers said that the draft strata laws for Al Maryah Island are among a raft of new measures for the free zone, which also include regulations providing for “mortgages over leases”, a power of sale for mortgage lenders by private treaty, an ability for mortgagees to take receipt of rents and profits and the appointment of a receiver by a mortgagee. The regulations also provide for purchasers of land to make priority searches and lodge a caveat on title as a protective measure.

“The property regulations contain some features that are new to Abu Dhabi and that will be broadly welcomed, subject to seeing how the systems for implementing and enforcing them are set up,” said Duncan Pickering, a partner at DLA Piper.

“The strata title regulations seem comprehensive and, interestingly, also provide for mandatory escrow accounts to be set up by developers filing strata plans to offer protection to unit purchasers.”

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