Supporting Sustainability: The Significance of Timely Payment of Service Charges

Timely payment of service charges by residents is the cornerstone of property management companies’ ability to initiate and launch sustainable initiatives within residential communities. These payments provide the financial stability, budget flexibility, and resources necessary to invest in eco-friendly practices that benefit both the residents and the community.

Property management companies perform a vast gamut of duties ranging from maintenance, security, landscaping, resident welfare, collection of service charges, and above all ensuring green cover and sustainability for better health of the residents and minimize the impact of the real estate operations on the environment. To initiate these duties and sustainability initiatives, property management companies are highly reliant on the timely payment of service charges by residents to ensure they have solid cash flows to initiate these initiatives. This article delves into the critical relationship between timely payments and sustainability initiatives, highlighting how residents’ financial responsibility empowers property management companies to drive positive change.

Service charges, also known as maintenance fees or homeowner association fees, are the financial lifeblood of property management companies. Management firms collect service charges from the residents on a monthly or quarterly basis and are used to cover the costs of essential services and maintenance within the community. These charges may encompass expenses related to:

  1. Maintenance: This includes funds spent on the regular upkeep of common areas, such as landscaping, pools, and elevators
  2. Security: Hiring security personnel and maintaining surveillance systems for residents’ safety
  3. Utilities: Water, electricity, and gas expenses for shared spaces
  4. Amenities: Upkeep and enhancements to communal facilities, such as gyms, clubhouses, and playgrounds
  5. Reserve Funds: Saving for future major repairs or improvements
  6. Sustainability: deploying technologies (like Building Management System) to minimize energy consumption and carbon emissions of the residential community, installing energy-efficient devices to improve efficiency and \ cost, and promoting sustainable irrigation to minimize water consumption to name a few.

The service charge is determined annually based on estimated running costs for communal areas in your development. These costs encompass various elements, including landscape maintenance (grass cutting, garden upkeep), lighting, heating, and cleaning of communal indoor spaces, window cleaning (external and internal), lift and fire equipment maintenance, upkeep of electrical and mechanical equipment, general repairs, salaries for onsite staff, buildings insurance, and bank charges plus audit fees, as required by the lease terms.

In an era, fraught with escalating apprehensions regarding climate change and the imperative need for environmental sustainability, property management firms find themselves under intensifying pressure to incorporate eco-friendly practices into the very fabric of their communities. This burgeoning concern stems from a heightened global awareness of the pressing ecological challenges we face today.

Timely payments play a pivotal role in property management, influencing various aspects of financial stability, budgeting, sustainability, engagement, and overall community impact. It provides them financial stability to execute sustainability projects, which often require substantial upfront investments. Timely payment of service charges also ensures streamlined budgeting, which allows property management firms to allocate funds for regular maintenance and sustainability endeavours. This ensures adherence to budgets, preventing disruptions in essential services. Furthermore, sustainablenitiatives typically involve higher initial costs but yield long-term savings. Timely payments provide resources for property management companies to invest in sustainable technologies and practices, ultimately reducing operational costs over time.

Some of the major Sustainability initiatives launched by property management firms to promote sustainability are as follows –

  1. Harnessing the Sources of Clean Energy

Property Management firms invest significantly in exploring innovative ways to use clean energy. They install solar panels to generate clean energy for common areas. Solar power harnesses energy from the sun and reduces the building or community’s reliance on non-renewable energy sources. This not only lowers electricity costs but also minimizes carbon emissions, contributing to a greener and more eco-friendly property management approach.

  1. Recycling Initiatives

Property management companies spend a significant proportion of services charges collected from the residents in initiating a wide range of recycling programs with an assessment of current practices and set clear goals. They also collaborate with smart waste recycling firms to leverage their expertise on the best ways to recycle waste in managed communities in an eco-friendly way minimizing carbon footprints. Property management firms also set up a well-planned criterion for the procurement process to ensure they buy only sustainable materials from third-party vendors and service providers for maintenance and renovation of the community.

  1. Installing Advanced Electric Devices to Increase Energy Efficiency

Timely payment of service charges allows Property Management firms in deploying a list of energy-efficient devices and technologies to increase the energy efficiency. This includes – installing LED lighting and smart thermostats, into communal spaces, upgrading lighting, HVAC systems, and appliances, usage of smart devices to automatically turn on and off the lights to minimize energy consumption and greenhouse gas emissions.

  1. Green Landscaping / Sustainable irrigation

Green Landscaping is an environmentally conscious approach to designing and maintaining outdoor spaces. It revolves around the use of native plants and sustainable landscaping techniques to achieve two primary objectives: water conservation and biodiversity promotion. Native plants are indigenous to a particular region and have adapted over time to its specific environmental conditions. They typically require less water and maintenance than non-native species, making them a sustainable choice for landscaping. By choosing native plants, property management firms significantly reduce their water consumption for irrigation and contribute towards the water conservation efforts and potentially lowering water bills.

Furthermore, Green Landscaping emphasizes sustainable landscaping techniques like smart & efficient irrigation systems which requires minimal water and retains soil moisture, reduces weed growth, and moderate soil temperature to reduce the need for excessive watering. Implementing efficient irrigation systems, like drip irrigation, minimizes water wastage by delivering water directly to the plant roots.

  1. Organizing Events to Create Awareness Among Residents about Sustainability

Timely payment of service charges increases the ability of the property management firms to launch education programs to create awareness about sustainability among the residents. It also allows management firms to ensure utmost compliance with the environmental regulations of the local authorities to avoid any potential fines or lawsuits from the government from harming the environment. Management firms organize timely community education events, workshops and awareness campaigns to promote sustainability in the residential community.

Kaizen AMS Wins ‘Property Management Company of the Year’ Award for the Second Time in a Row at Smart Built Environment 2023

Dubai, October 6, 2023 – Kaizen Asset Management Services (Kaizen AMS) is delighted to announce its recent recognition as the ‘Property Management Company of the Year’ at the esteemed Smart Built Environment Awards 2023, held on October 5, 2023, at the Park Hyatt, Dubai. This accolade further solidifies Kaizen’s enduring legacy of excellence at the Smart Built Environment Awards and underscores its robust commitment towards environmental sustainability and the safety and well-being of the UAE residents. 

The Smart Built Environment Awards serve as a platform to acknowledge companies within the built environment for their outstanding efforts and practices in enhancing communities’ well-being, advancing smart city initiatives, and promoting sustainability. The awards recognize excellence in four major areas of real estate: Property Management, Community Management, Facilities Management, and PropTech. The two-day forum features keynote speeches, panel discussions, presentations, and workshops, addressing key issues and trends driving real estate development and management in the Middle East.

Kaizen AMS clinched awards in three prominent categories: ‘Property Management Company of the Year,’ ‘Sustainable Community Award,’ and ‘Partnership Award – PropTech’ in collaboration with Socienta.

In the ‘Property Management Company of the Year’ category, Kaizen AMS emerged victorious due to its consistent investment in pioneering technologies, which have been implemented across its portfolio of 130+ managed communities in Dubai. These innovations have resulted in reduced operational costs, minimized energy and water consumption, enhanced resident satisfaction scores, and the creation of memorable experiences for over 40,000 residents. This recognition came after competing against industry giants such as Asteco, Aeon & Trisl, Banke International Properties, and Metropolitan Group.

The ‘Sustainable Community Award,’ introduced for the first time at the Smart Built Environment Awards, acknowledged Kaizen AMS for its exceptional dedication to sustainable building projects and its positive impact on occupant well-being and the environment in 2022. This recognition holds special significance as it aligns with UAE President HH Sheikh Mohd. Bin Zayed Al Nahyan’s declaration of 2023 as the Year of Sustainability’. Kaizen AMS faced stiff competition from Ejadah, LOAMS, Provis, and Sharjah Sustainable City in this category.

Furthermore, Kaizen AMS was honoured with the ‘Partnership Award – PropTech’ for its collaborative work with its technology partner – Socienta in driving digital transformation within Dubai’s real estate sector and addressing complex industry challenges with cutting-edge technology and expertise.

Notably, Kaizen AMS’ experienced Facility Manager, Mr. Anas Gahshan, was a Runner-up in the ‘Next-gen Personality of the Year’ category, recognizing his outstanding contributions to the built environment and his promising future as an industry leader.

Speaking on this occasion, Kaizen AMS’ Founder and CEO, Mr. Fadi Nwilati, stated, “Yet again, we Kaizeners have proven that people with great passion can make the impossible happen. Our monumental success is attributed to our unwavering focus on creating memorable experiences, deploying innovative property technologies to reduce energy consumption and operational costs, and launching sustainability initiatives to mitigate our environmental impact.”

Kaizen AMS Welcomes Esteemed RERA Delegation at Headquarters

Kaizen AMS, a leading property management company, had the distinct honor of hosting a delegation from the Real Estate Regulatory Authority (RERA) at its headquarters located in Marasi Drive, Business Bay, Dubai. The visit, which took place on Tuesday 4 April at 1 pm, aimed to provide RERA’s esteemed leadership with a comprehensive understanding of Kaizen AMS operations and discuss sustainability initiatives to propel Dubai’s real estate industry forward.

The distinguished RERA delegation, led by H.E Eng. Marwan Ahmed Bin Ghalita, Chief Executive Officer of RERA, along with Mr. Mohammed Khalifa Bin Hammad, Senior Director, and Mr. Abdulrazzaq Saeed Bin Mes’har, Senior Manager, was warmly received by Mr. Fadi Nwilati, CEO of Kaizen AMS, Mr Alex Voytov, COO, Mr. Tariq Arisheh, Director of Sales Development, and Mr. Ghassan Talhouk, COO of Socienta. Kaizen AMS’s leadership expressed their gratitude to RERA for the visit and emphasized the significance of collaboration between Kaizen AMS and RERA in driving growth and efficiency within the real estate sector.

From the left. Miss. Sara Nwilati (Head of Global Performance and Culture- Kaizen AMS), Mr. Abdulrahim Al Khayat (Head of Finance – Kaizen AMS), Mr. Alex Voytov (COO-Kaizen AMS), Mr. Fadi Nwilati – (CEO-Kaizen AMS), Mr. Tariq Arisheh (Director, Sales Development – Kaizen AMS), H.E Eng. Marwan Ahmed Bin Ghalita, (Chief Executive Officer – RERA), Mr. Mohammed Khalifa Bin Hammad (Senior Director – RERA) and Mr. Abdulrazzaq Saeed Bin Mes’har, (Senior Manager-RERA)

During the visit, the RERA delegation was provided with insights into Kaizen AMS’s partnership with Socienta, which aims to streamline and automate building operations, as well as the service charge and rent collection processes across their 130+ managed communities. The delegation was also briefed on the range of initiatives introduced by Kaizen AMS to minimize energy consumption and carbon emissions within their communities, aligning with the UAE’s ‘Net-Zero by 2050 Strategic Initiative’. Sustainability and effective utilization of technology emerged as focal points of discussion.

The RERA delegation praised Kaizen AMS’s state-of-the-art and innovative approach to property management. Notably, the Snag report, a comprehensive site monitoring tool designed to identify and address unit snags, garnered appreciation. The Snag report provides live updates to all relevant parties, ensuring a flawless handover of properties to homeowners or tenants. This emphasis on delivering snag-free properties enhances the homeowner’s experience, boosts the developer’s reputation, and contributes to the brand’s image.

Mr. Fadi Nwilati – CEO-Kaizen AMS) presenting the list of initiatives launched by Kaizen AMS to streamline our operations and boost tenant experience to the RERA Delegation

Furthermore, the RERA delegation had the opportunity to witness Kaizen AMS’ advanced technology and proven practices in streamlining property operations, enhancing tenant experiences, and optimizing resource utilization. This included – automated systems for maintenance, energy management, and tenant communication. RERA’s leadership commended Kaizen AMS’s firm commitment to leveraging technology to achieve operational excellence.

The visit concluded with a mutual appreciation for the fruitful exchange of ideas and a shared commitment to ongoing collaboration. The RERA delegation expressed confidence in Kaizen AMS’s capabilities and expertise, acknowledging the company’s pivotal role in shaping the future of the industry.

Mr. Fadi Nwilati, CEO of Kaizen AMS, expressed his honor in hosting the esteemed dignitaries, HE Eng. Marwan Ahmed Bin Ghalita, Mr. Mohammed Khalifa Bin Hammad, and Mr. Abdulrazzaq Saeed bin Mes’har. Fadi stated, “We are honored to have had the opportunity to host such esteemed dignitaries and engage in productive discussions. This visit further solidifies our commitment to contribute to the growth and sustainability of the UAE’s real estate sector. We look forward to future collaborations and working together towards a more prosperous future.”

How is Technology Driving Sustainability in Real Estate?

Digital transformation is the catalyst for building resilience and improving the efficiency of the real estate industry.

Author – Mr. Fadi Nwilati, CEO – Kaizen AMS

The real estate industry has grown at an exponential pace in the last two decades and become a key contributor to the UAE economy.

Sustainable construction practices are of great importance to the UAE as the region derives a vast proportion of its GDP from the built environment. Dubai accounts for the highest GDP from real estate among all seven emirates. According to the 2021 annual report released by the Dubai Land Department titled ‘Dubai Real Estate Sector Performance,’ the sector’s contribution has reached up to 14%. Real estate is empowering the UAE economy to reduce its reliance on oil and diversify into more sustainable sources of revenue. However, this monumental success of Dubai has come at a hefty price. Real estate is a major contributor to carbon emissions and energy usage. The story remains similar across the globe.

According to the World Economic Forum report titled, Environmental Sustainability Principles for the Real Estate Industry,’ the real estate sector generates 20% of global greenhouse gas emissions and consumes more than 40% of global energy each year. The built environment consumes over 40% of the world’s raw materials.

Embracing sustainable practices

The role of technology will be pivotal in exploring innovative and sustainable ways to minimise the adverse impact of the sector on the environment.

Integrating sustainability and climate considerations into the real estate sector will lead to major short and long-term economic and financial payoffs. Technology has enabled the real estate sector in building resilience and maintaining business continuity. Digital technologies are enabling transformation and greater efficiency in real estate.

Here is a look at the major technologies which will play a decisive role in leading the UAE real estate towards net zero.

1. Internet of Things (IoT)

Emerging technologies such as IoT and AI will encourage the culture of sustainable construction in the UAE real estate sector. The article titled, How IoT Can Make Buildings Efficient & Sustainable by smart technology firm – Metrikus reveals that the implementation of IoT makes buildings responsive, and intelligent, bolsters their performance, reduces defects, monitors performance, and makes timely adjustments based on the dynamic environmental conditions. In this way, IoT improves the building’s efficiency and reduces its energy consumption to make it more sustainable.

2. Big data

Like any other industry, the real estate sector also goes through ineffective usage and storage of data. A vast majority of data lies in silos due to the involvement of multiple systems and stakeholders. Lack of data impedes the ability of real estate leaders in executing their sustainability goals and strategies effectively. Big data assists developers in evaluating bulky data and uncovering behaviour patterns and upcoming trends in sustainability or in real estate.

Big data allows firms to track the use of sensor inputs from the machines and devices used on construction sites. This helps in bolstering their efforts to improve fuel efficiency and reduce construction costs and the adverse impact of business activities on the environment.

The article titled, ‘How Big Data Has Transformed the Dynamics of Real Estate Industry reveals that in real estate, 90% of the decisions are made based on data. The presentation of data determines the future of an organisation, which may offer a business lead or lead to the closure of the deal. Holiday homes and apartment rental firms such as  Airbnb are leveraging AI-enabled big data analytical tools to improve their customer engagements and create unique experiences for them.

The implementation of big data will enable organisations to harness their existing database and empower their C-suite executives in making key decisions to drive sustainability for the greater good of their business and the environment.

3. Smart sensors

The implementation of smart sensors in buildings can significantly minimise energy and water consumption and make the building more energy efficient. The output of installing smart sensors in office buildings is even more favourable. Global research reveals the instrumental role played by smart sensors in leading the real estate sector towards sustainability. For example –  A study conducted by the American Council for an Energy-Efficient Economy (ACEEE) titled, ‘Smart Buildings: A Deeper Dive into Market Segments’ found that the average office can save 18% on its annual whole-building energy consumption by installing smart sensor technology.

Intel’s building named PTK1 based in  Petah Tikva is fitted with more than 14,000 sensors and produces more than 100 terabytes of data per day. The studies suggest that the installation of Smart sensors has allowed PTK1 in becoming 40% more energy efficient and in consuming 75% less water compared to an average office building. IoT sensors enable management firms in knowing the current occupancy rate of the community by providing them with real-time data on the building.

This allows them to monitor the energy usage and level of emissions, helping to design strategies to optimise the building’s performance.

4. Robotics

Robotics has bolstered the culture of automation in the real estate industry.  Robotic automation solutions have empowered the real estate sector in addressing its top challenges such as environment-friendly housing, energy efficiency, talent shortage, robotic welding, and enhancing the quality of construction.

The launch of the UAE Sustainable Initiatives, UAE Energy Strategy 2050, UAE Vision 2050, and Clean Energy Strategy 2050 reflect the true commitment of the UAE government to make the built environment more sustainable and environment-friendly. Robotics can play a decisive role through its array of automated and digital solutions which developers can use to minimise waste, reduce cost, foster energy efficiency, and develop more sustainable and environment-friendly building designs and construction processes.

5. Sustainable building materials

The usage of sustainable building materials like bamboo, solar tiles, smart glass windows, solar panels and others will lead to the construction of more sustainable buildings. Sustainable building materials will also increase the lifespan of the buildings and make them more adaptable to climatic conditions. For instance, the usage of heat-reflective paints will minimise the buildings’ energy consumption by keeping them cool in the humid climate of the UAE. The installation of smart glass windows will adjust their transparency and will optimize their cooling capacity.

Researchers across the globe are testing self-healing concrete used for making safer buildings and infrastructure and countering the effects of natural disasters.

Conclusion

The world is leveraging the power of technology to drive sustainability in its built environment. The consistent usage of technology and sustainable practices helped Dubai reduce its carbon emissions by 21% in 2021. The city is expected to reduce carbon emissions by 30% by the end of 2030 under its ambitious Dubai Carbon Abatement Strategy 2030.’ A lot of credit for this goes to the honourable UAE Government for launching numerous projects and programmes focusing on increasing the share of solar energy, improving the operational efficiency at factories and facilities, waste treatment, waste recycling in power and water production, industry, and ground transport.

The implementation of sustainable practices will further minimise carbon emissions and empower the UAE real estate sector in addressing the challenges of climate change and in aligning its goals and objectives in line with the UAE’s Net-Zero by 2050 Strategic Initiative’.

Tenancy Contract Renewal in Dubai: 7 Essential Tips for Tenants

Looking to renew your tenancy contract in Dubai? Discover top tips to safeguard your interests during the renewal process. Understand rent increase regulations, know your rights, and follow key guidelines. Read now!

Dubai’s real estate market offers diverse rental options, making it crucial for tenants to navigate the tenancy contract renewal process. This article provides essential tips and advice for Dubai residents to ensure a smooth and beneficial renewal experience.

1. Understand Rent Increase Regulations

Learn about Dubai Land Department (DLD) regulations and utilize the rental calculator to determine permissible rent increase limits. Gain concrete data to support your case against substantial rent hikes.

2. Know Tenancy Contract Basics

Familiarize yourself with essential aspects of tenancy contracts, including rights, obligations, and registering agreements through Ejari. Ensure access to vital utility services.

3. Dubai’s Tenancy Laws: Ensuring Fairness and Protection for Tenants

The rental contracts in Dubai are governed by the Dubai Rental Law No. 26 of 2007, along with its amendment Law No. 33 (2008). These comprehensive laws play a crucial role in establishing the rights and obligations of both landlords and tenants in Dubai’s real estate market.

Decree No. 43 of 2013 further enhances the regulatory framework by providing clear guidelines for rent increases. This decree ensures that rent adjustments align with the prevailing market rates, protecting tenants from exorbitant hikes.

To resolve rental disputes, Dubai has established the Rent Disputes Settlement Centre under Decree No. 26 of 2013. This center acts as an impartial authority, facilitating arbitration or court proceedings when disputes arise. It ensures a fair and transparent process for both parties involved.

To ensure proper registration and monitoring of rental contracts in Dubai, the Real Estate Regulatory Agency (RERA) administers the Ejari system. Ejari serves as a mandatory registration platform for both landlords and tenants, formalizing their rental agreements in a format approved by the government. This process enhances transparency and accountability in the tenancy market.

By adhering to these tenancy laws and utilizing the Ejari system, both landlords and tenants contribute to a secure and regulated rental environment in Dubai. These measures foster trust and provide a solid foundation for resolving any disputes that may arise during the tenancy period.

4. Utilize the DLD’s Rental Calculator

Take advantage of the DLD’s rental calculator, determining prevailing market rates for similar rentals and maximum permissible rent increases. Avoid paying inflated rents and promote transparency.

5. Notice Periods and Communication

Be aware of the 90-day notice period required by landlords for rent increases. If they fail to provide notice, the contract should automatically renew at the previous year’s terms. Similarly, landlords must give a 12-month notice if they plan to sell or use the property personally.

6. Seek Resolution through the Rental Dispute Settlement Centre

In the event of a rental dispute, it is advisable for tenants to initially adopt a friendly approach and try to resolve the issue directly with their landlord. Open and respectful communication can often lead to a mutually satisfactory solution without the need for official action.

Before engaging in any formal or legal proceedings, tenants should express their concerns, clearly stating their position and discussing potential resolutions with their landlord. This approach promotes constructive dialogue and allows both parties to understand each other’s perspectives.

By attempting an amicable resolution, tenants demonstrate their willingness to find a fair compromise and maintain a positive landlord-tenant relationship. It is important to keep records of all discussions and agreements reached during this process for future reference.

If, despite these efforts, a resolution cannot be achieved, tenants can then consider seeking assistance from the Rental Dispute Settlement Centre to mediate the dispute. This step ensures that formal procedures are followed and legal rights are protected.

7. Register and Obtain an Ejari Certificate

Register your tenancy contract with Ejari and obtain an Ejari certificate for legal recognition and protection of your rights. Follow proper procedures and provide the necessary documentation for a secure tenancy arrangement.

Conclusion

Renewing your tenancy contract in Dubai requires knowledge of regulations, rights, and proper procedures. By understanding rent increase regulations, knowing your rights, and utilizing resources like the DLD’s rental calculator, you can ensure a smooth and beneficial renewal process. Safeguard your interests and make informed decisions when renewing your tenancy contract in Dubai. For expert guidance, follow these essential tips.

Streamline Your Rental Payments with Ejari’s Direct Debit Service

As of January 2023, tenants in Dubai now have the option to use the Noqodi Ejari Direct Debit Service (DDS) for rent payments. This service provides an alternative to traditional post-dated cheques, allowing tenants to conveniently make rent payments through direct debit. With a more streamlined and automated process, the direct debit service offers ease and efficiency for tenants in Dubai.

To learn more about the Noqodi Ejari DDS and the advantages of paying rent via Direct Debit, read our blog post: How Rent Collection by Direct Debit Boosts the Revenues of Property Management Firms?

Reducing Costs and Complexities of Operations in the Built Environment

How to achieve economies of scale and minimise overall operating costs

By Alex Voytov, Chief Operating Officer (COO), Kaizen AMS

The operational costs of real estate continue to rise exponentially due to a surge in the cost of construction materials and labour, supply chain disruptions and mounting inflation. 

As the competition in Dubai’s real estate sector gets fiercer, developers are adopting innovative technologies to optimise costs. The implementation of digital technologies can automate 30-40% of real estate operations and significantly reduce costs. 

Here are the top ways to reduce operational costs in a residential community

1. Leveraging motion sensors to reduce energy consumption

Motion sensors automatically turn off electronic devices such as lights and air conditioning when no one is present in the room. The implementation of these sensors curtails electricity costs and regulates air quality and carbon emissions. 

    The article titled Benefits of using motion-sensor light switches by The Eco Guide reveals that the implementation of motion sensors can reduce energy consumption by 35-45% and can go up to as high as 75%. By reducing energy consumption, motion sensors help reduce carbon emissions. 

    Rising energy bills are increasing the operational costs of the building with lighting being the major contributor. The study titledManaging Energy Costs in Office Buildings reveals that lighting accounts for over 39% of the energy bill in the office building and shoots up the operational cost significantly. The usage of LED lighting can save approximately 70% of energy costs, as it lasts five times longer. Furthermore, installing LED lights with motion sensors in the corridors, car parking, and garbage chute rooms with relay switches in the staircases can significantly minimise the energy and operational cost in both residential and commercial buildings. 

    2. Installing smart locks, access control and CCTVs to reduce security costs

     Smart locks and access control systems, can eliminate the need for traditional keys and simplify the process of granting access to authorised personnel. Digital surveillance systems can be used to monitor properties remotely and alert security personnel of any suspicious activity. Elevator control technologies can restrict access to certain floors or areas, improving security and preventing unauthorised access. ANPR (automatic number plate recognition) systems can be used to track and monitor vehicles entering and exiting a property, helping to identify potential security threats. These technologies will play a pivotal role in reducing the costs associated with hiring, training, and deploying security personnel, while also improving overall security and safety. 

    3. Using BMS for better property management

    A Building management system (BMS) helps in monitoring and managing the mechanical, electrical, and electromechanical services in a facility. Some of these services include power, HVAC physical access control, pumping stations, elevators, and lights.

    Using BMS provides comprehensive visibility to the Property Managers (PMs) on the operational performance of the building and the areas responsible for the highest energy consumption. It empowers PMs in planning effectively and taking timely measures to reduce energy consumption and optimise building performance. 

    4. Planned Preventive Maintenance

    Preventive Property Maintenance (PPM) is the key to managing regular building inspections and repairs and ensuring that the building performs at its optimum level. It is aimed at preventing system failures and frequent repairs by analysing the problem well in advance and taking timely measures. 

    PPM increases the lifespan of the building, minimises the risk of building damage, increases the efficiency of the building’s assets, reduces unplanned downtime, reduces the replacement of pump timeline from 5 to 10 years, and in overcoming unexpected stoppages and damages. PPM prevents developers from lawsuits and legal issues which might arise due to any injury caused to the residents as the building is not maintained properly. 

    The article titled – Preventive Maintenance and Its Top Benefits by Zenatix, a Hero Electronix venture, suggests that around 82% of companies have to go through unplanned downtime in assets resulting in unnecessary costs to erect it. This significantly shoots up their operational costs and invites potential lawsuits for the developer. 

    Future Plans

    In future, Dubai’s real estate sector will witness a substantial rise in the number of developers embracing technology to enhance the quality of their services and reduce operational costs. Continuous investment in novel technologies will enable developers in differentiating their services and in maintaining competitive or lower service charges for residents, making their community attractive.

    In the coming years, we will witness real estate firms changing their approach to pricing models for service providers to reduce operational costs and offer competitive service charges to residents. The top priorities of Dubai’s real estate sector will be to achieve economies of scale in procurement and to implement best industry practices.

    Here are the top ways to achieve economies of scale and minimise overall operational costs:

    a.) Signing long-term contracts with service providers

    In the near future, real estate developers and property management firms will be signing long-term or minimum three-year contracts with service providers to achieve economies of scale. Long-term contracts will make service providers more committed to serving the community and encourage them to invest their best resources, technicians, technology, machines, and front-line staff.

    b.) Investing in regular training

    Clearly define the Quality Level Standards and provide training to workers of Facility Management (FM) companies and other service providers on internal processes to enhance the quality of services and provide greater agility to operations. 

    c.) Pricing model management

    Firms will switch towards a resource service-based pricing model to drive efficiency, quality, and cost reduction. The lack of qualified, experienced, and trained workers is the biggest challenge for Property Management firms while dealing with maintenance companies. Soon, PM firms will prioritise hiring experienced, trained and professional staff to manage the community. This will bring down the operational costs of the community by 20-30% and improve the quality of services.

    d.) Well-planned design and construction phase

    The design and construction phase determines the operational costs and life of the building. It is important to focus not only on the GFA, but also on how these areas will be utilised, what exactly is required for the residents, and how the equipment servicing the building will operate in 5-10 years. As an example, energy-efficient chillers will reduce service charges for the unit owners significantly, proper design and installation of CCTV minimise the need of hiring additional security staff, and deploying Building Management Systems and Building Automation Software to provide timely updates to property managers on the building’s energy consumption and overall performance.

    e.) Embracing energy-efficiency practices

    Innovative technologies to control energy consumption include automating electronic appliances to reduce energy usage and minimise energy bills, implementing the controls and equipment to measure consumption through BTU meters, building management systems, and IoT sensors, focusing on improvements such as installing highly energy-efficient building systems including HVAC, lighting, and vertical transport. It is crucial to conduct timely audits to ensure all the devices are energy-efficient and operate effectively. This can be achieved by conducting a timely internal energy audit, performing regular maintenance and upgrades of the building equipment, managing occupant behavior, and ‘peak loads,’ and achieving ISO 50001 accreditation. 

    f.) Hiring management companies for budgeting

    Management companies can provide a different perspective and help developers optimise the operational costs of the building. These companies provide a detailed budget to ensure that the vision of the developers is met at optimal cost, without compromising residents’ expectations.

    Alex is Chief Operating Officer at Kaizen Asset Management Services (Kaizen AMS). His career spans more than two decades in Project Management, Investment Management, Asset Management, Development, Compliance, Quality Management and Control.

    Built Environment’s ‘Expert Talk’ series carries knowledge pieces every week by industry professionals who give their take on the key trends, observations, issues, and challenges in the built environment. The opinions in these articles are the author’s own and do not reflect that of the publication. This is a standard disclaimer.

    RERA Circular No. (3) 2021 Outlines the Responsibilities of the Developers and the Management Companies in the Collecting of Service Fees

    The collection of service charge fees has been the most pressing issue faced by management companies. Lack of timely payment of service charge fees by the owners adversely impacts the capabilities of the management companies in performing their responsibilities to maintain the property and initiate the enhancement work for the welfare of the community as well as its residents. 

    One of the primary reasons for the delays and deferrals in the collection of service charge fees is the lack of a clear mechanism for the payment of service fees among the owners. To overcome this challenge, in a historic move, the Real Estate Regulatory Authority or RERA has released Circular No. (3) 2021 which clearly outlines the mechanism for collecting service fees and procedures before heading to the Rental Dispute Resolution Center.

    What are Service Fees or Charges? 

    Service fees/charges are the recurring fees which homeowners pay for the maintenance and upkeep of the building, community, and common areas. It comprises all the fees towards cleaning, MEP services, waste collection and disposal, landscaping, gym equipment and swimming pool maintenance, security services, maintenance of CCTVs to ensure safety standards of the residents, and general upkeep of the building as well as the collection of the Reserve Fund for the future replacing of the assets and Master community fees. 

    Average Service Charges in Dubai Real estate

    According to the reports from Dubai Land Department (DLD), the service charges for a property in Dubai range between AED 3.00 to 30.00 per sq. ft. or sometimes even more, depending on the number of factors, including but not limited to the location of the building, size, and age of the building, type of the community (residential/commercial, villas or low-mid-high rise building) facilities available, cooling type (district cooling/chiller cooling) and many more. The report titled – Service charges comparison for flats and villas in Dubaiby Bayut states that the Service charges in Dubai are applicable to all types of properties. These recurring fees are charged on a square foot basis and can range anywhere between AED 3 and AED 30 or sometimes even more.

    Responsibilities of the Developer and Management Company in the Collection of Service Fees

    Here are the responsibilities of the developers and the management companies in the Collection of Service fees as outlined in Circular No. (3) 2021 –

    a.) Responsibilities of the Developers

    Documentation: The developer is obligated to deliver the documents related to the receipt and delivery of units to the buyers. These documents are considered records of the property, and service fees are calculated according to these documents.

    b.) Responsibilities of the Management Company

    Here are the key responsibilities of the management Company as per the Circular No. (3) 2021 –

    1.) Invoicing and Usage charges to Owners: The management company is obligated to send invoices for service charges and usage charges to the owners of jointly owned properties on the specified dates without delay.

    2.) Issuing Payment Notices to Owners in Case of Payment Failure: In case the owners of units fail to pay the fees due on them at the specified times, the management company has the right to issue payment notices so that the owners are given 30 days from the date of the notice to pay the amounts due from them.

    3.) Accuracy of the Data: The management company shall be responsible for the accuracy of all data contained in the notification (the owner’s address, e-mail, financial statements, etc.).

    4.) Delays in the Submission and Approval of the Budget: In case the management company delays in submitting the budget and approving it by the institution, it must pay the service fee amounts in installments to the owner and not be required to pay them in one payment.

    5.) Non-compliance by the Owners in the Payment of Service & Usage Fee: In case of non-compliance by the owners to pay the due fees for services and usage fees, the management company has the right to register a case with the Rental Disputes Resolution Center.

    6.) Prerequisites for the Management Company before registering the case with Rental Dispute Resolution Center:

    The management company must, before registering the case with Rental Dispute Resolution Center, fulfill all the necessary steps and requirements. These requirements include –

    a.) Verifying the validity of the amounts owed by the owners and their breach of payment

    b.) Checking the amounts of fees due by one of the auditing offices approved by the institution in accordance with the scope of the audit and the approved fees from the institution and the attachment in this circular

    c.) the auditor must clearly and accurately state the result of the audit and the amounts owed by the owners, with the stamp of the audit office in the report which must be attached to the case file.

    Dubai’s Real estate Performance in April 2023

    The real estate sector in Dubai stands as an epitome of global recognition, boasting a collection of state-of-the-art, luxurious, stunning, and extravagant properties. This reputation serves as an irresistible magnet, drawing investors from every corner of the world to partake in Dubai’s real estate market and bask in the remarkable benefits it offers. With an unparalleled return on investment (ROI) of 7-8%, the highest in the world, Dubai continues to solidify its position as a highly lucrative destination for discerning investors seeking remarkable financial gains. 

    The month of April 2023 witnessed yet another testament to the city’s thriving property market, as it achieved unprecedented milestones and embarked on a trajectory of continuous evolution, marked by the introduction of groundbreaking, one-of-a-kind developments. From visionary skyscrapers to breathtaking waterfront residences, Dubai showcases an extraordinary commitment to excellence, elevating the standards of luxury living to new heights. Moreover, the prevailing governmental policies and initiatives lend substantial support to the real estate market’s prosperity. 

    Real estate transaction in April 2023

    Dubai’s real estate sector has demonstrated its resilience and attractiveness which is evidenced by the remarkable figures recorded in April 2023. According to DXB Interact, in April 2023, the total volume of residential transactions increased by 16% compared to April 2022 to reach an impressive 8,050 transactions worth AED 26.4 billion.  

    Apartments dominated with 6,175 sales worth AED 11.4 billion, followed by 1,315 villa sales worth AED 5.5 billion. Commercial transactions amounted to 254 sales worth AED 400.8 million, while plots accounted for 306 sales worth AED 9.1 billion

    Going by total property sales value by category, Apartments held the largest share at 43%, indicating their popularity and demand in the market. Plots followed closely behind, accounting for 34% of the sales, showcasing the interest in land investments. Villas constituted 21% of the total property sales, reflecting their appeal to a specific segment of buyers seeking a luxurious living. Commercial properties represented a smaller portion, comprising only 2% of the total sales. These percentages highlight the varying preferences and investment choices of buyers in Dubai’s real estate market. These figures highlight the demand for urban living, luxurious villas, and investment opportunities. Dubai’s real estate market remains vibrant and attractive to both local and international investors.

    In April 2023, the Dubai real estate market experienced a significant shift compared to April 2022. The number of apartments sold increased by an impressive 36.8%, reflecting a growing interest in urban living. However, the number of villas sold declined by 28.7%, indicating a shift in preferences among buyers.  Commercial property sales, on the other hand, surged by 11.4%, demonstrating the resilience of the business sector. In contrast, the number of plots sold decreased by 13.6%, suggesting a slight slowdown in land transactions. Overall, these trends highlight the enduring confidence and trust of investors and homeowners in Dubai’s property market.

    Off-plan Property Sales Transactions Increased by 27%

    According to DXB Interact, there was a 27% increase in Off-plan property transactions in April 2023 compared to the same month the previous year.  There were 4,251 Off-plan property transactions that took place in April 2023 worth AED 10.17 billion. This includes 3,477 apartments worth AED 6.8 billion, 749 villas worth AED 2.6 billion, and 25 Commercials worth AED 77.1 million.

    The number of apartments sold in April 2023 increased by 67.3% compared to April 2022 while the number of Villas sold decreased by 40.3%. There was a 66.7% increase in the Commercial sold in April 2023 compared to the same month the previous year.

    The prices for Off-plan apartments were AED 1.2 million in April 2023 which was a reduction of 3.7% compared to April 2022 while the prices for Off-plan villas in April 2023 were AED 2.4 million – an increase of 31.4% compared to April 2022. The prices for Commercials in April 2023 were AED 1.2 million – a reduction of 25.8% when compared to April 2022.

    Surge in Ready Property Sale Transactions

    According to DXB Interact, In April 2023, the Dubai real estate market witnessed a total of 3,799 ready property sale transactions, representing a 5.7% increase compared to the same month in the previous year. Among these transactions, 2,698 apartments were sold, amounting to a value of AED 4.6 billion. Additionally, 566 villas were sold, with a total worth of AED 2.9 billion. Commercial properties accounted for 229 sales, valued at AED 323.8 million, while 306 plots were sold for AED 9.1 billion. These figures highlight the continued growth and diverse investment opportunities within Dubai’s real estate sector.

    In April 2023, the Dubai real estate market witnessed a noteworthy 10.7% increase in apartment sales compared to the same month in 2022. Conversely, villa sales experienced a 4.1% decrease. Commercial property sales, on the other hand, showed a positive trend with a 7.5% increase, while plot sales experienced a decline of 13.6% in April 2023 compared to April 2022. These figures reflect the dynamic nature of Dubai’s real estate market and the varying demand for different property types during this period.

    Off-plan vs. Ready Property Sales 

    Going by Sales volume, 55% of the transactions that took place in April 2023 were Off-plan while 45% were for ready properties.  In terms of Sales value, 55% of the transactions were off-plan, while 45% were for ready properties.

    Rise in Mortgage Transaction

    A total number of 2,421 Mortgage transactions worth AED 11.1 billion happened in April 2023. This was a notable increase of 32.8% in terms of the number of transactions and a 48.9% increase in total value when compared to April 2022. These figures reflect the growing confidence of buyers and investors in utilizing mortgage financing options to facilitate their real estate transactions. The increase in both the number and value of mortgage transactions showcase the continued strength and resilience of Dubai’s property market.

    Property Prices Witnessed an Upward Trend

    Property prices also witnessed a rise in the first quarter of 2023. According to DXB Interact, the price per. sq. ft. for the property in April 2023 increased to AED 1,278 from 1,150 in April 2022 – a YoY increase of 11.1%. When compared to the highs of April 2014, the property prices in April 2023 increased by 23.7%.

    The median price per sq. ft. for an Off-plan apartment in April 2023 stood at AED 1,644 while the prices for an Off-plan villa were AED 1,278. The prices per sq. ft. for Off-plan Commercial property were AED 2,168.

    The median price per sq. ft. for the Ready apartment in April 2023 was AED 1,138 while the price per sq. ft. for the Ready villa was AED 983. The price per sq. ft. for the Ready Commercial was AED 927 while the price per sq. ft. for the plot was AED 500.

    Most Expensive Properties Sold in April 2023

    Villas – Emirate Living remained the top choice of ultra-rich and HNWIs in April 2023 to buy premium villas with the most expensive villas sold worth AED 150 million, followed by Palm Jumeirah (AED 76 million), Elysian Mansions, Tilal Al Ghaf (AED 44 million), Jumeirah Golf Estates – Hillside, Jumeirah Golf (AED 36 million), and Golf Place, Dubai Hills (AED 33 million).

    Apartments – The top 5 projects with the most expensive sold apartments were – Bulgari Lighthouse Dubai at Island 2 (AED 137 million), Six Senses Residences The Palm, Palm Jumeirah (AED 58 million), Orla By Omniyat, Palm Jumeirah (AED 58 million), One At Palm Jumeirah (AED 50 million), and  Bluewaters Bay – Building 2, Marsa Dubai (AED 42 million).

    Most Popular Areas in April 2023 

    According to DXB Interact, the top 5 areas in Dubai that witnessed the highest real estate transactions in April 2023 were -Jumeirah Village Circle (1027 transactions worth AED 847 million), Dubai Marina (637 transactions worth AED 1.9 billion), Business Bay (595 transactions worth AED 996 million), Dubai Hills Estate (466 transactions worth AED 969 million), Dubai Creek Harbour (405 transactions worth AED 828 million).

    The most popular areas to buy Villas – Damac Lagoons, Arabian Ranches Iii, Damac Hills 2, The Valley, and Tilal Al Ghaf.

    The most popular areas to buy Apartments – Jumeirah Village Circle, Dubai Marina, Business Bay, Dubai Hills Estate, and Dubai Creek Harbour.

    The most popular areas to buy Commercial – Business Bay, Jumeirah Lake Towers, Al Warsan First, Mohammed bin Rashid City, and Al Thanyah First

    The most popular areas to buy Plots – Jumeirah Park, Jabal Ali First, JVT, Dubai Industrial City, and JVC

    Dubai Land Department Implements ‘Madmoun’ to Verify the Validity of Real estate ads via. QR codes 

    The Dubai Land Department (DLD) has always been at the forefront in coming up with revolutionary applications and tools to modernize and lead the real estate sector towards digitization. Whether it’s ‘DubaiRest’ app., Electronic No Objection Certificate (e-NOC),  Green List initiative, publishing transactional data, digitizing the rent collection process using the Central Bank of the UAE’s Direct Debit System (UAEDDS), or launching  ‘Instant Sale feature’, DLD has led the real estate sector to what it is today – an epitome of elegance and guiding light for the global developers to follow.

    To take this bar of excellence and passion towards digitization to the all-new level, this time Dubai Land Department through the Real Estate Regulatory Agency (RERA), has issued a circular to confirm the implementation of the new electronic service, Madmoun

    What is ‘Madmoun’?

    Madmoun’ is an application to facilitate the verification of the validity of real estate ads via QR codes. It is part of DLD’s ongoing efforts to modernize and develop real estate governance procedures and enhance investor confidence. ‘Madmoun’ is in line with DLD’s efforts to modernize and develop real estate governance procedures to make Dubai a global leader in real estate investments.

    How Real Estate Firms Can Access ‘Madmoun’?

    Madmoun’ is accessible through the Trakheesi System and is represented by a quick response code (QR Code) which is issued for any real estate advertisement permit. 

    As of April 24th, 2023, all real estate firms are expected to feature the QR code on their print and audiovisual advertisements. The code will assist customers in verifying the authenticity and validity of the advertisement and in making sure it is approved by RERA. Furthermore, using the QR code, the customers can get access to DLD’s website and view the complete advertisement information, including details about the advertising company, the property’s condition, and specifications. The link can be secured to prevent any modification to the data.

    DLD customers can scan the QR code on each real estate advertisement to find out the property’s authorized details and establish if it has been sold or rented. Real estate companies can activate the QR code through the Trakheesi system. RERA confirms that real estate companies must adhere to this service to prevent them from being subject to any violation resulting.

    With an objective to create awareness and boost investor confidence, DLD strongly advises all customers and investors to only engage with real estate advertisements that feature the QR Code to ensure the protection of their rights and prevent their exposure to any fraudulent or unreliable transactions.

    Impact on the Real estate Sector

    The implementation of the ‘Madmoun’ electronic service and the QR code system is a cornerstone for enhancing transparency and trust in the real estate sector. The app. will make it simpler for the customers to get access to information about the properties they are interested in at their fingertips and prevent them from any fraudulent activities.

    ‘Madmoun’ will further improve the level of transparency in Dubai’s real estate sector and drive more investments. ‘Madmoun’ is also in line with DLD’s mandate of achieving the goals of the Dubai Economic Agenda ‘D33,’ under which the Dubai government plans to invest significantly to develop economic infrastructure to drive trade and investments and create more demand for real estate and consolidate Dubai’s position as a global capital of the digital economy and a key player in the global digital system.

    To learn more about Dubai Economic Agenda or D33, read our blog – How will D33 – the ambitious project of HH Sheikh Mohd. Bin Rashid Al Maktoum Positively Impact the Real estate Sector

    Developers’ 10-Year Responsibility: How to Safeguard Developers & Owners from the Risks Arising from Structural Defects

    Structural defects in a building are one of the worst risks for real estate developers and owners. One structural defect can put their years of credibility and brand image at risk. Above all, it can jeopardize the safety and lives of the residents. Most structural defects start with poor construction or design. As once rightly said by famous American Author, Lt. Gordon Bitner Hinckley ‘You can’t build a great building on a weak foundation. You must have a solid foundation if you’re going to have a strong superstructure.’ The usage of faulty materials, unscientific building practices, and lack of quality control are some of the reasons for the weak foundation of the building. 

    It is of paramount importance for the developers to lay special emphasis on the structure and design of the building and conduct all required audits to overcome the potential structural defect. Some of the most common structural defects which can arise due to bad construction include -cracks & water seepage from the water table. These common structural defects due to bad construction can significantly bring down the value of the property, adversely impacts its occupancy rate, dents the brand image, and leads to hefty lawsuits for the developers.

    How Developers Can Avoid the Structural Defects in the Building?

    Some of the tips to mitigate the risk of structural defects include –

    • Working with professional designers and contractors in the building. 
    • Paying special emphasis on third-party audits during construction on high-risk factors such as waterproofing can be a good risk mitigation strategy.
    • Conducting timely audits and inspections of the building at different stages during and after the construction. A well-planned design & construction phase can avoid the vast majority of structural defects in the building and ensure that the quality of materials is not compromised throughout the construction process. 
    • Managing warranties of both main contractors and all subcontractors, especially waterproofing contractors.
    • Managing insurance for the developer, main contractor, consultant, and all subcontractors

    What is 10-year Structural Warranty?

    A 10-year Structural Warranty commonly referred to as Decennial Liability is imposed upon contractors, architects, and engineers as per the UAE law.  As per the UAE Civil Code, the designers, architects, engineers, and contractors are jointly liable to compensate for any total or partial collapse of the building and any defect which affects the safety and stability of the building’s structure.

    Articles 880 to 883 of the UAE Civil Transactions Law govern ‘decennial liability’ and provides rights to employers/developers/ purchasers against contractor/constructor / engineer/architect for the total or partial collapse of a building or any defects found in the building which threaten the stability or safety of the building. Where the architect does not supervise the construction of the property but merely designs the building, they can only be held liable for design defects. 

    • I. Article 880 (1) states that a contractor and a supervising architect (which may mean a supervising engineer if the context permits) are collectively liable to pay the employer for a term of ten years from the start of delivery of the work, provided that the building suffers
    • (a) a total or (b) a partial collapse or (c) a defect or fault which threatens the stability and safety of the building.
    • II. Article 880 (2) states that the remedy given to the employer is in the form of compensation, which is an obligation notwithstanding the fact that the defect or collapse results from a defect in the land itself, or else the employer has consented to the construction of the defective buildings or installations. 
    • V. Article 882 mentions that a supervising architect or contractor cannot contract out of decennial liability or limit his liability. This is a matter of strict liability, and no evidence of negligence is necessary. Instead, they can only refuse liability on the grounds of force majeure, or they can attempt to argue that the defect is due to an underlying reason, likely due to the actions of the employer or a third party in relation to the building.
    • Article 882 of the UAE Civil Transactions Law provides that such liability ranges for a period of 10 years, and cannot be subcontracted or lessened by means of a contract. For the right holders, it is important to raise a claim within three years of the collapse of the building or the discovery of a threatening defect.

    Article (40) in Law 6, 2019 ‘Liability of Developers’, states – 

    1. Subject to the provisions governing contractor agreements, as stipulated in the above-mentioned Federal Law No. (5) of 1985, a developer will remain liable, for a period of ten (10) years from the date of obtaining the completion certificate of the Real Property project developed by him, to remedy or rectify any defects in the structural parts of the Jointly Owned Real Property.
    1. The Developer will remain liable, for a period of one (1) year from the date of handover of the Unit to the Owner, for repairing or replacing defective installations in the Jointly Owned Real Property. These include mechanical and electrical works, sanitary and sewerage installations, and similar installations. Where an Owner refrains from taking possession of his Unit for any reason, the above-mentioned liability period will commence from the date of obtaining the completion certificate of the Real Property project developed by the Developer.
    1. Subject to the provisions of paragraphs (a) and (b) of this Article, nothing in this Law may preclude or prejudice any rights or warranties granted to Owners as against Developers pursuant to any other legislation.
    2. An agreement which is made after this Law comes into force and which contradicts, in any way, the provisions of this Article will be deemed null and void.

    An Urge for the Developers to embrace 10-year Structural Warranty Insurance 

    Building construction projects come with a variety of risks for real estate developers. Mostly, contractors, architects, and engineers manage their risk on building and construction projects through insurance. For instance, architects sign up for a professional indemnity policy to cover any negligence in their design.

    The contractor signs up for insurance to cover risks related to property damage or third-party injuries, and also insurance covers professional liability due to poor workmanship during construction. Such insurance should cover a period of 10 years for the project, post handover, to cover for the 10-year structural responsibility and liability.  Thus, it is of paramount importance to ensure that the insurance amount is sufficient to cover a major portion of the building value and not a minor percentage. It is also prudent to obtain a list of pending insurance claims and the history of insurance premiums, beneficiaries, and claims from contractors and consultants. We find a lot of developers making the mistake of accepting low insurance coverage that covers only a minor percentage. Similarly, performance guarantees should be sufficient to cover major structural defects and should consider a portion for the 10-year period.

    Being key stakeholders, real estate developers must ensure they must be covered for all uncertainties which can arise during the construction process. It is of utmost importance for the developers to consult with their legal counsel and insurance experts to ensure protection for the developer and the customers. Signing up for a 10-year Structural Warranty Insurance can cover the developer from all major risks pertaining to structural defects.

    Key Factors to Consider for Developers While Reviewing Insurance 

    A.) Insurance

    While signing a construction contract with the contractor, developers must ensure the following points are met –

    1. Insurance Policy Must Name the Developer as ‘Beneficiary’

    While hiring a contractor for the project, the developers must ensure that they receive a 10-year insurance policy from the contractor. The policy must have the developer named as a beneficiary to cover for any structural defects which may arise during the 10 years of liability as per civil law and Law No. (6) of 2019 Concerning Ownership of Jointly Owned Real Property in the Emirate of Dubai. It is crucial to remember that decennial liability can extend for 13 years from building completion if, for example, the defects were detected within a short period of time before the completion of the 10-year decennial liability.

    2. Timely Payment of Insurance Premiums 

    It is pivotal for the developers to ensure that the premiums for all the insurance policies including those of the main contractor, subcontractor, and consultants are paid on time, and to maintain a log of evidence. We recommend hiring an insurance broker with a mandate to ensure the insurance policies of all consultants, contractors, and subcontractors remain valid during the 10-year duration. Some developers also enforce the contractors to work with the developer’s insurance broker to ensure that the policies are all in order, have the right coverage and remain valid by the developer’s insurance broker. 

    3. Ensure Insurance Policy Remains Valid 

    Developers must make sure that the insurance coverage always remains valid during the 10 years. 

    4. Maintain the Records of the Communication 

    Developers must maintain a record of all the correspondence and communication that happened with the contractor. They must also document the communication that happened between the contractor, consultant, and authorities throughout the design and construction stage. This will ensure the developer has the evidence required in case of issues or disputes in the future.

    In a case that Kaizen was involved in, it was the communication records between the contractor and the consultant that gave proof of the root cause of a structural defect, and held the relevant party responsible, freeing the developer from the liabilities. 

    Factors to consider for developers While Reviewing Warranties

    B.) Warranties

    1.) Must Name the Developer as ‘Beneficiary’

    After the construction, the Subcontractors issue the warranties to the main contractor. Developers must ensure that they are named as the beneficiary of these warranties. This is immensely important as it allows developers to utilize these warranties from the subcontractor in case the contractor goes out of business or declares bankruptcy.

    2.) Developers Must Maintain the Validity of the Warranties in writing with the Consultant and Contractor 

    Deducting final payments from contractors may also deem the warranty null and void unless contractually agreed. Developers must always maintain the validity of the warranties in writing with the consultant and contractor at each milestone and especially towards the closing of the project and especially if there are final deductions of payments. 

    3.) Must Ensure Contractors Make Timely Payments to Subcontractors

    The developer must ensure the contractor has made all the payments to the sub-contractors. This will ensure warranties don’t become null and void which may happen when final payments are not made. The developers need to maintain records of the payments of the main contractor to the sub-contractors to avoid any discrepancy in the later stage.

    Key Factors to Consider for Developers Post Handover

    1.) Notifying Defects to the Contractors & Subcontractors 

    Developers must notify and report any defect in the property to the Contractors & Subcontractors throughout the 10-year decennial liability period. It is also of great importance for the developers to conduct a third-party structural assessment every 2 years from the BCC date and a final one 6 months before the expiry of the 10-year warranty (which starts from the BCC date). This will ensure that all the issues are timely reported to the contractors and consultants and claims are made in due time before the completion of the 10 years. Claims that are not made within 3 years of detecting the defect can affect your legal stand to the claim.

    2.) Consult with the Main contractor and the Consultant before Conducting Repairs

    Developers must avoid conducting any repair work during or after the takeover without the pre-approval, and supervision, of both the main contractor and consultant. This way, they will be able to avoid being involved in cases that may deem the warranties void. 

    3.)  Share Relevant Information with the Management Company

    The developers need to share any past or ongoing construction issues with the project or the one which needs close monitoring with the management company. This will allow the property managers in laying special emphasis on the areas which require close monitoring and taking necessary action.

    Developers must also maintain an ongoing relationship with the management company. Although management companies are not responsible for detecting structural defects, however, they can assist the developer throughout the 10-year warranty period.