Most Owners' Associations "awaiting legal status"

Common area plans must be registered with DLD to be legal

Majority of the Interim Owners' Associations (IOAs) in Dubai are not legal entities as not many common area site plans have been registered with the Land Department, says a top legal firm.
 
“Law 27 of 2007 concerning ownership of jointly owned properties says the owner association (OA) comes into existence once the first title deed is issued, however, jointly owned property is not created until the common area site plan is registered. Not many common area site plans have been registered so technically we believe the majority of the IOA's are not legal entities within the meaning of the law,” Michael Lunjevich, Partner, Hadef & Partners, told Emirates 24/7. 
 
“Therefore they cannot open back accounts unless Real Estate Regulatory Agency (Rera) is able to qualify the law in a manner that enables an entity to come into existence without the common area site plan.”
 
Lunjevich cited a combination of lack of deadlines from Rera without punishments and lack of willingness from some developers to go through with the divorce that will hand over control to the owners as reasons for delay in registration of IOAs.
 
Earlier this month, Rera said it had registered 218 interim owners associations (IOAs) and expected the IOAs to manage nearly 70 per cent of the freehold properties by year-end. The agency had set an October 2010 deadline to complete all documentation process and register owners’ associations. Industry experts believe Dubai will have almost 2,000 IOAs.
 
According to the legal expert, interim board members who sign contracts on behalf of an unregistered owners’ association might be personally liable for claims under the contract since they are signing on behalf on a non-existent entity.
 
Asked if property owners despite having an IOA were still paying service charges to the developer, he said that in the majority of the cases developers were the only one holding a bank account.
 
“It is not ideal and it leaves developers and owners in an unwanted marriage in many cases.”
 
Finally, on the issue of recovering service charges by OAs, Lunjevich said: “There are many measures that can be taken that range from a friendly chat through to withholding access to facilities or liens over the property. Law 27 allows a fast track mechanism to serve a notice through the notary and then attach a lien to the property and this may allow sale by auction which is really the end game if someone is not paying their charges.”

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