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Wednesday, March 26, 2008 - Dubai

Dubai Land Department & RERA Simplify Strata Law Complexities at Dubai Property Group Meeting

Developer to remain liable for 10 years from the date of completion for jointly owned property

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The new strata law which was issued in Dubai on 31st of December 2007 is expected to bring rules, regulations and governance to the fast growing property sector. The law, however, is still causing quite a stir in the real estate sector, as popular knowledge and understanding of the law is still vague.

To spread more awareness among real estate professionals and specialists, the Real Estate Regulatory Authority (RERA) and Dubai Land Department, today took up the issue at Dubai Property Group’s (DPG) monthly networking event which hosted Marwan Bin Ghulaita, RERA CEO, Emad Eldin Farouq, senior legal counsel at Dubai Land Department and Gary Bujde, the Executive Director of the ISS Consulting.

RERA presented to over 250 DPG members the provisions of the law and its impact on property owners, developers, communities and investors. They also discussed the law’s stipulations in relation to Owners’ Associations (OA), the registration process and maintenance fees.

“The law is designed to handle the day-to-day management of buildings and to overcome the complexities of owners’ association and master community declarations by introducing a simple but comprehensive system of rights and responsibilities,” said Bin Ghulaita. “The introducing of the new laws and regulations in Dubai will further protect real estate investors and the community at large, as well as deter potential violators from committing irregularities to achieve profits at the expense of the city.”

“The strata law relates to the management of common property and shared facilities such as parking, fire services, air conditioning, lifts, pools, gyms, walkways, roadways and gardens, collectively referred to as ‘strata’ in some countries,” explained Emad Eldin Farouq. “Under the law, an association of owners should be established to as a regulatory framework to maintain the quality of the shared facilities environment of any development, which as a result will improve the overall quality of life and the community environment.”

In response to the question of how to determine maintenance fees and determine the responsibilities of the Owners’ Association," Farouq explained, “Under the law, the developer will remain liable for 10 years from the date of issuing the property’s completion certificate for building repairs and curing any defects in the structural elements property. The developer also remains liable for 1 year from the date of completion for the mechanical, electrical, sanitary and plumbing installations.”

An Owners’ Association is a special not-for-profit entity made up of unit owners and formed upon registration of first unit sale. It has a board elected by a General Assembly (3 to 7 members) and is responsible for the management, maintenance and operation of common areas (such as parking areas, recreational facilities, gardens, lifts, tanks, pipes, generators and water mains, bridges, lakes, fountains and water features.)

“The law, which clearly defines the relationship between developers and owners through the Owners’ Associations will help remove ambiguities about who is responsible for common property management and reduces skepticism among investors,” argued Gary Bujde. “Under the law, owners through their OA will be able to participate in the budgeting of the common property management processes. Subsequently, this process will elevate the confidence owners have in their investment, in that it is more protected, organized and better managed.”

Freeholder property owners in Dubai have to pay service charges under the new law. The charge will be paid to the Owners’ Association and another fee will be paid to the developer. “The charge will be set by the OA General Assembly and should be paid on its due date. A 20 percent discount may be allowed for payment on time, but anyone who fails to pay could face stiff penalties,” added Bujde.

The Owners’ Association will have to pay the service fees into a dedicated account at a bank chosen by the members. The Association will then have then select a property management company to manage the monies collected for maintenance purposes and the developer will receive fees, through the association, to cover shared facilities.

“Owners who are new to or unfamiliar with the law often find it difficult to understand the different aspects of the law and the ongoing monetary liabilities associated with it,” said Adel Lootah, the Executive Director of Dubai Property Group. “The purpose of the event was to spread awareness about the new Law, its details and nuances amongst our members and give them the opportunity to interact and ask questions directly to RERA and Dubai Land representatives.”

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