Developer cannot manage building if complaint filed

Developers in Dubai will not be allowed to manage a project if complaints of negligence or mismanagement are received against them in the first year of management itself, according to a new circular issued by the Real Estate Regulatory Agency (Rera).

In such cases, the circular states the developer’s power to manage the project will be withdrawn and an interim owners association (IOA) will have to be set up.

“In case of receiving of any complaint relating to mismanagement or negligence of the developer of the project in the management of common property during the first year of the completion of the project , which will be the developer in charge of the project management, the developer will be obliged to call for the formation of owners association for the project after the withdrawal of the powers of the project management from him,” the circular, issued on March 10, obtained by Emirates 24|7, reveals.

Rera is the regulatory arm of Dubai Land Department (DLD).

A number of developers, in fact, have been managing their projects for a number of years, having not registered the IOAs despite handing over their projects to unit owners.

Experts say managing their projects allows them to get a recurring income from these towers, mostly in form of management fees.

Mandatory to set up IOA

The circular further states developers will have to form an IOA before claiming any fees for services after the first year of operation is over.

“Developers, who have been in the management of the joint-ownership enterprises a full-one year, have to call for the adoption and establishment of owners association for that project before any claim for any fees of services in accordance with the procedures of Rera,” the circular mentions.

The circular, citing Law No.27 of 2007 concerning jointly owned property in Dubai, reiterates that the developer will have to submit a financial report to the Rera on the expenses of the service fees of previous years, which should be audited so to obtain approvals required for new fees.

Despite Law No.27 has been in place for some time, property owners are finding it difficult to take control of their community as IOA haven’t got legal status, which refrains them from opening bank accounts and signing any contracts.

In August 2013, UAE-based Hadef & Partners law firm, quoting ‘sources’ in their newsletter, said over the coming months Rera will start uploading approved owners associations into its ‘Mollak’ system, granting full registration of association boards and ability for approved association to open bank accounts in their own names.

“It now appears that progress may be made which may assist property owners. These are exciting times for the Dubai property market across a number of fronts and it will be interesting to assess the impact of this new property related legislation as and when it becomes effective,” the law firm had said.

385 IOAs

In November 2013, Rera Senior Director Mohammed Khalifa bin Hammad told Emirates 24|7 that the Land Department had registered 385 IOAs to date.

“We have registered 385 IOAs to date. We are not sure when the legal status will be accorded to these IOAs, but we are soon going to register them on the Mollak system,” the official had said.

No update is available on the total number of registered IOAs.

Rera has already inked a memorandum of understanding with Emirates NBD for opening of Escrow accounts for home owners’ associations, but bin Hammad had told this website that there were more procedures to be completed before granting of legal status to IOAs.

In majority of the cases, service charges are still being collected in bank accounts managed by developers, but a few developers have got board members of IOAs as co-signatories.

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