What is a Jointly Owned Property?
Jointly Owned Property (also known as Strata Title Property) means the sub-division of land and buildings into small components and common property. Jointly Owned Property includes the constructions such as high-rise apartments, retail developments, office towers, villa communities as well as industrial buildings. Usually, these buildings contain common facilities plus common property.
What Laws and Regulations apply to Jointly Owned Properties?
The following documents elucidate the laws and regulations which are applicable to Jointly Owned Property:
• Law No. 27 Concerning Ownership of Jointly Owned Property.
• Direction for General Regulation.
• Direction for Jointly Owned Property Declaration.
• Direction Association Constitution.
• Directions for Surveyors.
What is a shared facility?
Hallways, entrance lobbies, swimming pools, tennis courts, golf courses, gymnasiums, elevators, vehicle parking and pathways are the perfect examples of shared facilities. The maintenance and operation of these shared facilities and the common area is carried out through General and Reserve Fund that are jointly known as service charges. All the owners within the development contribute to General and Reserve Fund.
What are common areas?
Common areas shown on the site plan of Jointly Owned Property Declaration include those parts of property nominated for common use of unit owners and occupiers as well as generally areas that do not belong to any particular individual unit. The areas may comprise of (but are not limited to) hallways, lobbies, stairwells, lifts and lift wells, roof, driveways, common area car parks (as opposed to individual allotted car park spaces for unit owners). Service utilities and associated equipment such as air conditioning, cabling, electrical, telecommunications, computer and data service utilities, security systems, plumbing, drainage systems, mail delivery systems also form part of the common areas. Undoubtedly, the systems intended for the enhancement of the utilities of units and or common areas – such as gardens, pools, gymnasiums, and recreational rooms – also form part of common areas as all have equal right to get benefit of these systems.
What is an Owners Association?
An association comprising of all owners within a Jointly Owned Property is called as the “Owners Association” and is entirely a separate legal entity from the individual owners just as a company is a separate legal entity from its shareholders.
What is the primary purpose of an Owners Association?
The primary objective of an Owners Association encompasses the management, operation and maintenance of the common property as well as facilities within the Jointly Owned Property.
How do Owners Associations operate?
An Owners Association functions in a similar way as a business. The rules as regards to the use of common property and units that are binding for the Association, unit holders, tenants and visitors are framed by the Owners Association. It should be kept in mind that rules implemented by an Owners Association must not violate the Jointly Owned Property Law.
What are service charges?
The funds provided by Owners Associations in the form of contributions by all unit holders are termed as “service charges”. The General Fund means annual service fee that takes care of the cost of maintenance, repair and management of the common areas for the budgeted year and consists of building insurance, utility services and administration costs. Unit holders are obliged to pay a service charge to the Reserve Fund which is meant to provide funds for maintenance and renewal of long-term structural and capital items of the building such as elevators. The contributions made by the unit owners in the form of General Fund and Reserve Fund are jointly termed as “Service Charges”
What is unit entitlement and how is it allocated?
Each unit holder has to contribute a particular amount towards the maintenance funds which is calculated keeping in mind the ‘unit entitlement’. The unit entitlement is allocated according to the ratio of the floor area of a particular unit to the total area of all units forming part of the Jointly Owned Property development.
What are the legalities covering service charges?
All unit holders provide a guarantee for the payment of liabilities of their Owners Associations. Debts of Owners Associations are paid by recovering a tariff from the owners. This tariff can be approved by a majority vote of a general assembly. On approval, it becomes a legally recoverable debt. The unit owner is supposed to pay this debt to the Owners Association by a fixed date of each month. The recovery of this amount is legally enforceable in case the owner does not pay it to Owners Associations on or before the agreed date.
What are the duties of an Owners Association?
It is the responsibility of the Owners Association to ensure that the residents follow the community rules and ensure harmony within their community. An Association manager must be appointed by the Owners Association to accomplish various management and supervisory tasks of the Owners Association.
What is an Owners Association constitution?
The functions and powers of the Owners Association are described by an Owners Association constitution. It also defines the procedure for managing the financial and administrative affairs. The processes required for the protection of the integrity of the common areas and the rights as well as the responsibilities and obligations of owners and occupants are also defined by the constitution. It aims at ensuring the fair and equitable management of the common areas for the peace and quiet enjoyment of the owners as well as tenants.
What are the key roles in an Owners Association?
The major roles involved in an Owners Association encompass:
• The Owners who are authorized to cast their vote in the meetings of the Owners Association.
• The Boardof Directors (usually termed as ”the Board”). They are elected out of owners through a democratic process by a majority vote of owners annually on the eve of each Annual General Assembly. The constitution and the Jointly Owned Property Law clearly define and govern role of the Board.
• In some cases, subcommittees,which may comprise of members other than Board members, may be constituted to provide assistance to the Board on a particular assignment with to the aim of providing recommendations to the Board.
Subcommittees can be predominantly useful when some owners possess particular skill and expertise in the areas of management, maintenance and repair but have not been elected to the Board. They can perform the role in these areas for the owner who has been elected to the Board but do not possess such expertise.
• An association managermust be appointed by the Owners Association through contract and the services to be rendered by association manager to the Owners Association are clearly described in the Regulations. An individual or a company on payment or a volunteer administrator can be an association manager and the appointed manager must not have a conflict of interest in the affairs and/or business of the management of the Owners Association.
• Service providers mean the individuals or enterprises that are responsible for the provision of goods or services to the Owners Association for the advantage of the owners.
• The property developer means the person or company that possesses useful ideas about the development and is ready to invest and carry out development work.
• The property builder means the person or company that carries out construction work of the development according to the vision of developer.
• The Real Estate Regulatory Authority(RERA) supervises that all the law, rules and regulations of Dubai are observed for all above mentioned works.
What is the role of the Board of Directors?
The Owners Association comprises of all the owners or the representatives appointed by them. The Owners Association’s Board of Directors (“the Board”) provides the guidance and direction to the owners of the building or community for the management of Owners Association.
The Board consists of minimum five and maximum seven members and the developer cannot be represented by more than one member on the Board. No payment is made to the Board members for the services rendered by them. They must make sure that the functions of the Owners Association are performed according to the law and the constitution. The Board is nominated by owner members and elected annually through a majority vote at the Annual General Assembly.
What is the role of the association manager?
The General Assembly appoints the association manager. He may be an owner performing duties in a voluntary capacity (that is, the owner receives no payment for the assigned duties) or a specialist company licensed and registered by RERA.
The association manager is an individual who has to accomplish the day-to-day administrative, financial and secretarial tasks of the Owners Association, besides undertaking the maintenance and upkeep of the common areas and facilities owned by the Owners Association.
Jointly Owned Property Law Regulations provides comprehensive details about these mandatory obligations of the Owners Association.
What is the role of the developer?
The property developer is responsible for the construction of the building. Besides construction, he has additional responsibilities in a Jointly Owned Property development. After completion of the construction and on obtaining all the necessary approvals for the authorities, he hands over the building to the owners.
With regards to a Jointly Owned Property development, the responsibilities of the developer are listed below:
According to Escrow Law, 5% of the property purchasers’ funds must be withheld in Escrow for the project for a period of one year after the registration of units in the name of the buyers is completed and title deeds are issued in their names.
• Decennial Warranty
The Jointly Owned Property Law provides that according to the provisions of the construction contract in the civil transaction code, the builder, (not the developer), remains liable for a period of ten years from the date the completion certificate of the building is issued.
Upon notified by the Owners Association or a unit owner regarding any defects in the structural elements of the Jointly Owned Property, the builder but not the developer (unless they are the same person or organisation) is responsible for its repairing and curing.
From the date of the completion certificate of the building, or that part of a development undertaken by the builder in the Jointly Owned Property, the builder of a development remains liable for one year for repair or replacement of defective installations . The defective installations may include mechanical and electrical works, sanitary and plumbing installations and the like.
• Obligation to form an Owners Association
The formation and registration of the Owners Association with RERA is the responsibility of developer of the Jointly Owned Property.
Besides registration of the Owners Association, the developer must:
• Establish the books and records required to be kept under its constitution by the Owners Association;
• Effect in the name of the Owners Association insurances that must be maintained according to Law ;
• Prepare all the documents required for some decision or approval at the First Annual General Assembly of the Owners Association;
• Convene and hold the First Annual General Assembly within a period of three months after the establishment of the Owners Association;
• Until the First Annual General Assembly, manage the Owners Association and the common areas (including repair and maintenance); and
• Hand over all manuals, utility service guarantees and warranties on installations, full plans of the building, a schedule of finishes of the building, statement and inventory of removable assets, furniture, furnishings in the development to the Owners Association.
Which management issues is the Owners Association responsible for?
The Owners Association must manage the following matters:
• Maintaining essential records
The Owners Association is responsible for maintaining all the records regarding Jointly Owned Property Declaration, community rules, a minute book for recording all Board meetings, a minute book for recording all minutes of general assembly meetings, a file for official government correspondences, insurance policies, the last annual report of the Board, the last report of the Association manager, the last financial statement, a file for copies of documents regarding the Board meetings and Annual General Assembly meetings other than documents to be kept elsewhere, a file for communication (inward/outward), a register of owners, a register of occupants, a register of contracts and agreements, a register of assets, books of financial accounts, and other records specified by the Land Department.
• Service charges
The Owners Association is responsible for establishment and maintenance of a General Fund and the Reserve Fund in the name of the Owners Association, and maintenance of correct accountability of all income and expenditure for both funds in line with the Owners Association constitution.
Budgets must be allocated on yearly basis for the General Fund and a study must be prepared regarding the Reserve Fund budget which is calculated on the basis of a minimum of ten years ensuring the replacement or renewal of assets of the Owners Association. On approval of the budgets by owners, the service charges shall be allocated in line with the principles and rules of the constitution. The collection of owners’ annual service charges and the expenditure thereof is the responsibility of the Owners Association.
The Owners Association shall make sure that the building and common areas are effectively insured.
The Owners Association will ensure that the owners, Board members, occupiers, residents and visitors abide by all community rules and none of them violate any of the community rules. Thus, it will ensure the maintenance of peace, harmony and quiet enjoyment for all within the building or community.
Monitoring the performance of contractors and suppliers of the common areas as per the agreement.
What is the decision-making process for an Owners Association?
All the Owners Associations have strict rules and regulations for managing their affairs. The process of decision-making is transparent and minutes of meetings are prepared, the record of all the decisions is preserved, which contains the outcome of voting for motions passed or not passed by the owners.
• The Agenda
Topics for discussion and agreement are discussed by owners at the pre-schedule meeting. Each agenda point is presented in the form of a motion for owners’ consideration or for the decision of the Board members. These decisions might consist of matters such as the selection of a contractor, cleaner, gardener; fire safety equipment servicing; or perhaps to consider a number of quotes for spending the funds to get an in depth building report by a specialist consultant to assess the forward budget forecast for the Reserve Funds minimum ten-year plan.
The agenda needs to be circulated to all owners at least 21 days prior to the scheduled meeting date.
Several different types of meetings are held. They include:
• Annual General Assembly (AGA)
Advance notice needs to be circulated to all members of AGA at least 21 days in advance indicating the time, date, venue and items for discussion on the agenda for the owners, along with minutes of previous meetings to be adopted as part of a true and accurate record, a report on the financial affairs of the Owners Association, election/nomination of Board members, appointment of an auditor, and the wording of any motions required to be proposed if any for the decision/voting by the owners.
• Extraordinary General Assembly (EGA)
It is usually held on a request by the Board to the Owners Association service manager. It can also be held if it is petitioned by (not less than 5% of units) owners, can also be convened by the Association manager. It may take account of, for example, a clarification of confirmation of minutes, any item in a petition, items required by the Board, an item requested by an owner, or the wording of any motion passed. An EGA notice needs to be circulated at least 21 days in advance indicating the time, date, venue and items for discussion on the agenda for the owners.
• Board of Directors meeting
The meeting of the Board should be held on the requirement basis and accomplish their tasks by ensuring that the Owners Association performs its duty and responsibilities in a befitting manner.
Notices of a Board meeting need to be circulated to all Board members at least 14 days’ in advance clearly indicating the date, time, venue and items for discussion and agreement.
A proper record of all the meetings for Annual General Assemblies, Extraordinary General Assemblies and Board meetings is maintained in the form of minutes and is circulated. At the eve of the subsequent meeting, the minutes of the previous meeting are part of the record to be accepted as a true and accurate record of decisions made at the previous meeting.
The decision is made on a petition by accepting or rejecting it. A clear description of the topic, a clear statement of the suggested decision that is “the motion” for the proposed action is provided to the owners. The owners are also provided an option to vote YES or NO, means they can cast their vote in favour or against the proposed decision.
What is involved in buying into a Jointly Owned Property?
Regardless of the fact that the property is completed or under construction, each potential buyer has the right to get the following information regarding the Owners Association:
- The on-going costs associated to the purchase of the property, which encompasses the amount of money (service charges) that has to be paid for the upkeep, maintenance and management of the common areas, including arrears.
- Assets and liabilities of the Owners Association.
- Particulars of any expended amount or anticipated amount that may be required to be expended by the Owners Association.
- The obligations, rights and responsibilities of owners in Jointly Owned Properties. This will include the permitted usage of the property. For example, if it is a residential building, the consumers must be made fully aware that they are not authorized to operate a home business from the premises of the building.
- In the eve of purchasing a property situated in a Jointly Owned Property, the disclosure statement has to be attached to a contract.
- The buyer is duty-bound to search the records of the Owners Association for the identification of any irregularities, matters of litigation or potential that the Owners Association may be involved in, any notices served upon the Owners Association and reports on the financial matters of the Owners Association including balances of the General and Reserve Funds.
- The buyer needs to provide advice to the Owners Association regarding their contact details.
- Get the applicable community rules of the Jointly Owned Property.
- Current insurance policies.
What is a Reserve Fund?
A Reserve Fund is a fund set up by the Owners Association meant for covering the costs of known future capital expenses. It can be expended for particular items such as painting and repairing the building structure as well as replacement of common property items such as lifts and electric motors.
The law bounds all Jointly Owned Properties to prepare a minimum ten-year Reserve Fund plan. This means that Owners Association must have specific plan to carry out repair work and ensure maintenance of common property and to raise sufficient funds to take care of the cost as the building components deteriorate with the passage of time.
The amount needed for the ten-year Reserve Fund plan will differ considerably between various Jointly Owned Properties depending upon the area of entire building. For example, newly constructed developments may need relatively less money to be allocated than an older development even if both are registered at the same time, because the older building will be invariably requiring more repair work and less time to gather the funds. Each Reserve Fund plan must indicate the individual requirements of its development.
Who develops the ten-year Reserve Fund plan?
Although there is no restriction on the members of an Owners Association from preparing a ten-year Reserve Fund plan, but for legal and litigation purposes, it is strongly recommended that the a suitably qualified expert must be hired by Owners Association who has the expertise in the preparation of Reserve Fund plans.
What is the best way to plan a ten-year Reserve Fund plan?
A series of steps are involved in a first ten-year Reserve Fund plan. These steps are repeated during each ten-year cycle after the development of the first ten-year plan.
• First year
An expert is appointed by the Owners Association for the preparation of the Reserve Fund plan. The plan needs to cover ten years starting from the date of the First Annual General Assembly.
• Second year
The finalised plan is presented to the owners. Reserve Fund contributions are determined on annual basis keeping in mind the ten-year lifetime of the Reserve Fund plan.
• Third and fourth years
Contributions (service charge) are determined on the basis of the Reserve Fund plan.
• Fifth year
The review of Reserve Fund plan must be carried out and necessary adjustments if any are to be incorporated. The Reserve Fund plan will always form basis for the determination of contributions at the subsequent Annual General Assembly.
• Final year
Some expert is hired by the Owners Association for the preparation of a new ten-year Reserve Fund plan for implementation by the Annual General Assembly in the following year.
Why do Owners Associations need insurance?
An unlimited liability is created with the establishment of the Owners Association for its members, and every member has mutual and several liabilities to the Owners Association. Owing to this reason, certain minimum amount of insurance cover is required in accordance with the Jointly Owned Property Law for the protection of the unit owners.
• Building insurance
It is meant to take care of the full replacement and reinstatement cost for rebuilding the building to its new condition in case it were damaged on the last day of the insurance policy. It is worth mentioning that the building policy does not take account of the contents and improvements made by an owner within a unit.
• Public Liability or Third-Party Liability
The Owners Association is responsible to hold insurance cover for guarding against liability for damages or bodily injury to owners, occupants or visitors making use of the common areas.
• Fidelity guarantee
The insurance policy take care of the Owners Association in case of fraudulent acts by the Board.
• Board members’ liability
It is recommended to acquire a cover for any wrongful act of Board members in any decision it makes. This contains any dishonest or fraudulent act, criminal act, or malicious act or unintentional omission.
• Machinery breakdown
The insurance money takes care of the Owners Association against accidental breakdown of electrical, electronic and mechanical plant and equipment such as a lift and swimming pool motors etc.
Here you can read through the Glossary to see the definitions of related terms