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Planning to invest in real estate: Don’t miss this landmark amendment

Planning to invest in real estate: Don’t miss this landmark amendment

With the growing urbanization and increasing standard of living, having a decent home with all the facilities has become an absolute necessity nowadays. To satiate the augmenting demands, new residential units are being constructed in the real estate sector. In the last couple of years, this sector has yielded unexpected returns and becomes a major investment area. The Federal Law No. (27) of 2007 is the comprehensive legislation governing this sector, dealing with rights, liabilities and penalties for developers as well as for allottees.

To further boost investment in this sector and strengthen the existing legal structure, a landmark amendment has been made by issuing the Federal Law No. (6) of 2019. This law mainly deals with the joint properties of Dubai, including those located in free as well as in the special economic zone. With this amendment, the rights and responsibilities of all the stakeholders has been clearly spelt out, ensuring transparency and accountability.

The highlights of the new Law has been Discussed Below-

3-Tier Management System
Before the amendment, a person becomes a member of the owner association as soon as he purchased an apartment or unit in the said building. This association was responsible for carrying out all the managerial functions, such as maintenance, repairs, etc.

However, with the amendment, this system is completely abolished, and a 3- Tier system has been prescribed

  • Category 1 – Major Project
    The projects in this category will have an owner committee of members, which shall be selected by all the persons residing in a residential building. The duties of the owner committee have been provided in Article 24 of the new law. Some of the duties are-
  1. To inspect or verify that the management company performs its work carefully.
  2. To review and approve the budget for the maintenance of common property
  3. To conduct regular meetings and resolve all the problems pertaining to the maintenance, repairs, etc.
  4. To submit complaints of the owners before the RERA.
  • Category 2 – Hotel Project
    In this category, the management of common parts is outsourced to a hotel management company by the Developer. The hotel management company may constitute an owner committee for performing its work, but that committee in no way will participate in the managerial affairs. If the Hotel management company fails to perform the work as per the prescribed standard, the CEO may appoint a specialized company and can also withhold the payment to the former company.
  • Category 3
    In this category, the common parts of the project shall be managed by the specialized management companies as per the rules prescribed by the Director-General. This category also contains a provision for constituting an owner committee of maximum 9 members.  If the committee doesn’t comply with the work standards, it can be replaced with a replacement management company to continue the project in joint property.

As per Article 19 of the new law, the master developer of the master project will have the responsibility of managing the common facilities. So, it is advisable for a master developer to outsource management companies and have written agreement in advance with them, which must be approved by RERA.

Liability of the Developer
The Developer’s liability has been provided under Article 40 of the new law. The developer will be liable to remedy any defect for a period of 10 years from the day of issuance of completion certificate. His liability will be extended to fix any issue pertaining to the installation in a jointly held property.
The Provisions of Article 40 are sacrosanct, and if any agreement violates the same, it will be deemed to be null and void.

Master Community Declaration
The developer needs to make a declaration or sign an undertaking that all the provisions made under this new law are duly complied with and in case of any default, they will be directly liable for the same.

Building Management Regulation
The Dubai Land Department will prepare a document containing the procedure of maintenance, developer’s contribution, etc. This document is known as Building Management Regulation, and it is provided under Article 2 of the new law.  As per Article 20 of the new law, the developer must produce a copy of Building Management Regulation before selling any unit.

Settlement of Disputes
The Rental Dispute Settlement Centre shall have exclusive jurisdiction to hear and adjudicate all the disputes arising from the joint property in Dubai. Further, the powers of RERA have been extended.

In Short
It is an important legislation that aims to boost competitiveness and investment in the real estate sector.  The management of joint property is divided into 3 categories, and the liability of the developer has been made very clear.

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