Complex Made Simple

The recently implemented UAE Owners Association law comes with greater responsibilities, improves quality of service

Law 6 of 2009 on the Ownership of Common Property has been issued by HH Mohammed bin Rashid Al Maktoum, Ruler of Dubai which repeals Law 27 of 2007

The previous Law 27 of 2007 was never fully implemented to provide the Owners Association Board a legal status - They (owners) have been classed as interim The Management Agent will be required to submit a bank guarantee for the common areas they manage and face fines of up-to AED1,000,000 for failures in management The introduction of Mollak and 3rd party auditors means that Service Charge rates are scrutinised like never before

By: Garry Murray, CEO of PLACE Strata Management LLC

Law 6 of 2009 marks a substantial change in the operation of Jointly Owned Property and the roles and functions of the Owners Association Board.

Firstly, the previous Law 27 of 2007 was never fully implemented to provide the Owners Association Board a legal status – They (owners) have been classed as interim since this law came into force. This caused some confusion and grey areas of legality and authority on making decisions in relation to the Owners Associations. It meant that Management Companies were working within a guideline but having to manage expectations of an interim board, owners, tenants and the regulators to do our daily job. It is something that we all adapted to but which still required clarity.

Video: Transforming a city… and the lives of millions

Here are the changes

That is one of the main advantages of the new law. It has clarified who is the responsible party and also clarified the authority of the Owners Association Board, now being referred to as a Committee. The onus is on the Management Company to ensure that the project is compliant with regulatory and local authorities. I know that within the Management Community this has caused a discussion as the liability is falling onto the Management Agent. My personal opinion is that this is a good thing. It will increasingly raise the standards of operation in the market due to this extra liability and will force all of us, as an industry, to increase our performance.

Some owners may feel that not having a board will be a disadvantage, however as more clarifications come out as to how the new Committees are formed and operate. I believe that this will become a positive, mainly as not all Boards currently have the expertise to operate the various legal, financial and technical requirements or to operate the assets they own. Time consuming administration is now handled by the Management Agent and the Land Department via 3rd parties to allow the Owners and the Committee to focus on what they should be focusing on – the enjoyment of living or working in the project.

Read: New ‘retail logistics’ industry creating wave of alternative investment opportunities in Dubai 

Huge Fines

Another big takeaway from the law is that the Management Agent will be required to submit a bank guarantee for the common areas they manage and face fines of up-to AED1,000,000 (around $272,480) for failures in management. This will be a disadvantage to companies who haven’t invested in staff training, company infrastructure and compliance development.

There needs to be clarification on these amounts and the process for implementing the fines however, as mentioned above, it should drive the quality of Association Management higher. This in turn will force the Facility Management (FM) companies to maintain the assets as any risk to the Management Company will be factored into agreements with the FM. The end result is a win/win for the end user and owner.

This doesn’t mean that Service Charges are going to rise. The introduction of Mollak and 3rd party auditors means that Service Charge rates are scrutinised like never before and with the responsibility on the Management Company to comply will allow us to work closer with the regulator to develop the vision of Dubai Government.

Read: New real estate committee leads to 134% increase in Dubai property transactions

Project classifications

On the whole, the new law is clear on roles and responsibilities but there will still be requirements for clarification via the Agency. One of the biggest takeaways is the classification of projects now:

  1. Major Projects
  2. Hotel Project
  3. Other Real Estate Projects

Due to the nature of Dubai’s Real Estate portfolio, I can understand the need to develop these categories as not everyone can manage all types of projects. 

Again this will improve the quality of service delivery as standards improve to allow these projects to be managed by certain management agents.

As CEO of a large Association Management company I am looking forward to developing our systems and operations towards the new law in this exciting evolution of Dubai Owners Association Industry.

Garry Murray is Chief Executive Officer (CEO) of PLACE Community Managers and joined the company in 2011.  His role involves formulating the company strategy, supporting his leadership teams, liaising with shareholders, generating new business and, most importantly, and developing every staff member from office persons to C-level executives in line with PLACE’s vision