Real estate developments are comprised not only of a number of units, but also of common areas that are designed for common use by unit owners and occupiers.
Dubai's Jointly Owned Property Law (Law No. 27 of 2007) (the JOP Law) establishes a framework for the development and subdivision of developments into units and common areas. This subdivision is known as jointly owned property (JOP).
Various Directions have been introduced to enforce the JOP Law. Among other things, the Directions provide that an association of all the unit owners (the Owners Association) is responsible for the management, operation and maintenance of the common areas.
For each development, the developer must file a Jointly Owned Property Declaration (the JOPD) at the Dubai Land Department.
The JOPD sets out all the property information relating to the JOP. It will include a plan showing the common areas, a list of all unit numbers, arrangements for the delivery and use of utilities and details of easements or covenants that burden or benefit the common areas. The JOPD binds and benefits all unit owners and occupiers.
Where a development was constructed and occupied as at April 13 2010, the JOPD had to be filed by the earlier of (a) October 13 2010 or (b) the date which is 30 days after receipt of a notice from three or more unit owners. In relation to any other development, the task must be completed upon an application for registration of the first sale of a unit in the JOP.
If a developer fails to comply with this timetable, then the unit owners are entitled to take steps to register their own JOPD. The developer would not be able to de-register that document and register the developer's own JOPD in its place. The developer would also be responsible for the unit owners' costs in this regard.
Each unit in the JOP is allocated an entitlement. Each entitlement is that unit's share of the ownership of the JOP. Entitlement determines the weighting of each unit owner's vote at the general assembly of the Owners Association. Entitlement also determines the proportional share of the service charge that each unit owner must pay.
The JOPD will contain a statement of the criteria used for allocating entitlements among and between the units. The standard position would be that entitlement is determined by unit area. On the other hand, if entitlement is determined by reference to the extent to which the respective units draw on the financial resources of the Owners Association, the JOPD must contain an explanation of how such allocations were determined.
The Directions make clear that an Owners Association cannot impose a service charge without approval from Dubai's Real Estate Regulatory Authority (RERA). RERA may take legal action against any party in breach of this obligation. If a developer has not completed the registration of the Owners Association for one of its projects, but wishes to levy a service charge, RERA's approval is required. Additionally, the developer must submit to RERA an audit report prepared by an approved auditor in respect of all moneys collected under the service charge.
If a unit owner fails to pay the service charge on time, the Owners Association may impose a penalty at the rate of 12% per annum calculated daily. The Owners Association is a legal entity which has the right to sue non-paying unit owners for service charge debts.
Pursuant to the JOP Law, the Owners Association has a lien on every unit for unpaid service charges. The effects of the lien are not certain. For example, it is not clear whether the lien would prevent the unit from being sold until the arrears are paid. Guidance on this matter is expected from RERA and from the Dubai Courts in due course.
The JOPD will contain a set of rules (the community rules) that apply to the entire development. Among other things, the community rules will include restrictions on use of the units, use of the common areas and alterations to both.
The community rules can be changed by a vote passed by simple majority at a vote of owners held during an Owners Association general assembly. Where a unit owner has failed to pay his allocated service charge, the unit owner is not entitled to exercise his vote.
In addition to the community rules, a further set of rules and obligations (the additional rules) binding the unit owners and occupiers can also be included within the JOPD. The additional rules may only be varied by special resolution.
Accordingly, if a developer is especially keen that a certain obligation is not varied, the developer may seek to include it in the additional rules instead of in the community rules.
The difficulties that can be encountered in drafting, altering and submitting a JOPD highlight the importance for developers, unit owners and occupiers of preparing the document correctly on the first exchange.