Head of Real Estate & Commercial, Michael Lunjevich and JOP Law expert, Brent Baldwin of law firm Hadef & Partners briefed over 100 delegates on topics including:
- how to deal effectively with developers during the transitional period.
- current options for recovery of service charges.
- considerations in choosing an Owners’ Association manager.
- managing Boards and Owners’ Associations and voluntary governance regimes.
- issues to consider when thinking about structures for your community.
- responsibilities and liabilities of Board members.
The seminar highlighted the opportunities and challenges faced by the boards of Owners’ Associations.
Speaking post the event, Brent Baldwin said, “During the Q&A session tonight we heard from existing interim board members of the concerns they have about what is expected of them in this interim period, especially where they want to step up and manage their development or community but do not have a legal voice yet. Many owners also expressed concerns about the ability to get bank accounts opened so they can collect service charges.”
Baldwin advises that board members should make their first task to coordinate with the developer to get the Owners’ Association officially registered. The process generally requires the legal structure of the community to be agreed, a draft JOP Declaration to be prepared and lodged with RERA and ensuring the Owners’ Association satisfies RERA’s registration requirements. Performing these tasks in coordination with the developer should assist the successful transition of control of the community from the developer to the Owners’ Association.
Michael Lunjevich commented on some of the confusion in the market, “Interim board members who sign contracts on behalf of an unregistered Owners’ Association may be personally liable for claims under that contract as they would be signing on behalf on a non-existent entity at the moment.”
Commenting on the challenges of operating Owners’ Associations which were raised at the seminar, Lunjevich continued, “Owners do not appear to have fully grasped the full extent of their liabilities and obligations as board members of the Owners’ Association. For example, for some board members attending the seminar, it was a surprise for them to learn the Owners’ Association is not a limited liability entity.”
Baldwin also cleared up some of the misconceptions between the role of the board and the role of the developer, “Board members need to collect as much information as they can about the community including all the technical, legal and financial information that is currently in the possession of the developer. This therefore means they must work with the developer on a good faith basis to ensure full due diligence can be conducted in order to ease the transition. It will not help the reputation of the developer or the community for there to be a long drawn out acrimonious disputes about access to such information and developers should provide this to the owners to help them take control.”
Finally, the seminar concluded with Lunjevich summarising some of the legal options available to board members of Owners’ Associations when recovering service charges. “This is one of the key issues with which Hadef & Partners is asked to assist Owners’ Associations. There are a number of issues associated with non payment of service charges which may force owners to reduce service levels to cover the hole in their budget. This may drastically affect property values. There are ramifications of denying access to services and facilities however this is an option provided the legal rights are reserved to the Owners’ Association through the jointly owned property declaration. In addition, legal claims can be made based on personal rights against owners and statutory liens against the property. However, Owners’ Associations currently have no legal right to go to court or sue so they are relying on the developer to assist with this,” Lunjevich stressed.
Both Lunjevich and Baldwin commented on the common theme from owners attending the seminar, “They want to get legal entities registered so they can open bank accounts and take action to recover service charges.”
The Hadef & Partners JOP Law seminar follows the firm’s recent report titled The Cost of Owning Freehold Property in Dubai where it emerged that some developers are not aware of or are willfully ignoring the current regulations surrounding jointly owned property and the collection of service charges including administrative circulars issued by the Real Estate Regulatory Agency (RERA).
Of the 350 responses received in the survey, more than 90% of respondents strongly favoured service charges being subject to the approval of the interim home owners’ committee appointed and believe RERA should penalise developers who do not provide owners with annual audited accounts for service charges for years prior to the home owners’ associations being registered. In addition, respondents felt that owners’ committees should have input into the contractors employed to provide services within developments.
Monday, June 13- 2011 @ 16:46 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.