No bank account for owners' body

Interim owners associations (IOAs) are still not able to open bank accounts as they are not legal entities, according to experts.

“IOAs are not legal entities until they become licensed under the Department of Economic Development (DED). Hence, no owners association (OA) will be allowed to open a bank account in its own name,” Ludmila Yamalova, Managing Partner of HPL Yamalova & Plewka JLT, told Emirates 24/7.

Graham Yeates, Head of Owners Association Management, Cluttons says that the IOA concept was created by Dubai's Land Department to get owners involved in their building so that once the OA is registered, the owners can take over in confidence.

“Unfortunately the IOA has no legal standing and the developer is ultimately responsible for all happenings at the building.”

 

Click here to find out why property developers do not want owners to take control of their buildings

According to Brent Baldwin, Associate, Hadef & Partners, most OAs are utilising bank accounts held in the name of the developer or some other third party pursuant to a contractual arrangement, rather than having a bank account in their own name.

Some developers have offered IOAs to open specialised bank accounts in the name of the developer, but for the benefit of the IOA. This arrangement is extended to the IOAs at a fee.

“These bank account are still the developer’s bank account and not IOA’s,” says Yamalova.

In the UAE for a corporate entity to be able to open a bank account, it must have a trade licence. For OAs to have a trade licence, they must be licensed by the DED under the appropriate licence category. [Although] there is now a licence category called “owners’ association, no OA appears to be registered with the DED as of today.”
 
IOAs partially successful

Asked if IOAs had been successful in bringing down service charges, Yamalova acknowledges service charges have been reduced in some developments.
 
“It is not, however, due to the IOAs renegotiating the supply and service contracts. Rather, any reductions in services charges have been mandated by Rera, undoubtedly in response to public outcry regarding exorbitant fees.”

O'Brien also believes the level of service charges has definitely come down as a result of OA boards reviewing budgets.

But Yeates has a different take.
 
“I don't think IOAs will be able to reduce service charges until they are run democratically by the owners, independent of the developer. The key to reducing service charges is to have transparency in calling for facility management (FM) tenders. This is the largest component of the budget.
 
“You would have to look at this on a case by case basis as some developers have handed over the role of calling for FM tenders to the IOA who are able to modify contracts to reflect owners' wishes and needs. Overall, these developers are in the minority,” he says.

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