Homeowners in Dubai get power over maintenance fees

In an 'extremely positive step for the industry' residents will be able to select property management firms and set maintenance fees.

DUBAI // Homeowners will be able to take complete control of the management of their buildings and communities after guidelines allowing the implementation of the emirate's long-awaited "strata law" were released yesterday.

The law will mean that homeowners associations will be able to select companies in charge of the upkeep of facilities such as lifts, foyers, swimming pools and gardens, taking that decision out of the hands of developers and potentially reducing residents' costs. "The implications of releasing these guidelines are profound and far-reaching for owners, developers and Dubai's property sector in general," said Sultan bin Butti bin Mejren, the director general of the Land Department, adding that the recommendations would "immediately transform the nature of ownership of a major slice of Dubai's total property stock while introducing a new form of ownership blending freehold and commonhold of communal areas".

The law allows homeowners to select their property management firms and set maintenance fees. It also more clearly delineates rights of ownership between owner and developer. Although the law was introduced in 2007, in the absence of the guidelines, the rights of many homeowners associations have not been enforced. The amount paid on service fees has been a bone of contention for residents in some developments in Dubai, where property prices have fallen by as much as 50 per cent since the end of 2008.

A small group of homeowners in Discovery Gardens petitioned Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, in November over long-running complaints about service and maintenance fees. They said they were spurred into action after receiving information that Nakheel, Discovery Gardens's master developer, had asked the Dubai Real Estate Regulatory Agency for permission to charge Dh21.85 a square foot in annual fees, which comes to more than Dh20,000 (US$5,445) for a typical one-bedroom flat.

Although details of the guidelines, which will also apply to commercial buildings, have not been revealed, experts say they are a major leap forward. Michael Aldendorff, who owns a property in Discovery Gardens, said he would like more clarity. "My only concern is that this has been drawn up in isolation of homeowners," he said, adding that he and fellow owners had recently received an invitation from RERA to attend a one-day workshop at which the strata law would be explained, at a cost of Dh3,000 ($816) a person. Emaar Properties, the country's largest developer, said last November that it was prepared to abandon its property management system once the strata law was in effect, adding that it would recognise "the right of the owners' associations to choose management firms and service providers".

Stephen Kelly, a strata title specialist with the international law firm Clyde and Company in Dubai, said: "It's an extremely positive step for the industry. Developers and their advisers are eagerly waiting to view the directions of the guidelines so they can start the implementation process." Ahmad Kasem, the chief development officer of Cayan, the developer behind the Dubai Marina towers Jewels and Dorra Bay, said developers and owners should work together during the first year after homes are handed over in order to deal with any nagging problems.

"After that, I believe the developer should immediately leave it to the associations," Mr Kasem said. People familiar with the regulations, which have undergone numerous modifications since the strata law was enacted in 2007, said the move would also give owner associations the right to sell the properties of members who fail to pay maintenance fees so that arrears could be recovered. [e-mail]

For the average homeowner, the strata law is about service charges. These annual fees can reach tens of thousands of dirhams in some developments in Dubai. The fees, which are often charged directly by the developer of the property, pay for the upkeep of commonly owned spaces such as lobbies, hallways, landscaping, pools and even private transit lines. The strata law, decreed in 2007 but with regulations only now being issued, sets out a framework for how owners deal with these jointly owned spaces. It provides for the creation of homeowner associations, which operate like boards of directors, to hire maintenance companies for the upkeep of their buildings and grounds. Analysts say this subtle change in the way properties are governed can lead to significant cost cuts for homeowners. Powered by self-interest, the homeowner associations are looking for a balance between low cost and high quality maintenance of properties. Without the law, property developers can charge whatever fee they wish without disclosing how the money is being used. With the new regulations in place, homeowners will be able to democratically elect representatives to make decisions. * Bradley Hope