The wind of change is in the air as owners start taking control of their buildings. With the introduction of the directions relating to the Jointly Owned Property Law, developers are now obliged to form Owners Associations for their buildings and the owners cannot wait to get involved. But where to start?
To ensure a smooth transition from developer to owner and to prevent future heartache, both the owners and the developers must work together to complete the following steps:
- Hold an Interim General Assembly
- Form an Interim Board
- Select an Association Manager
- Understand the Building Operation – Seek Advice
- Prepare & Lodge Jointly Owned Property Declaration and Common Area Site Plan
- Register the Owners Association
- Post Registration Activities
Below is a brief explanation of steps above:
1. Hold an Interim General Assembly
The first step on the road to forming an Owners Association is to contact the building developer. Owners should request the developer to convene an Interim General Assembly for the building. A General Assembly is a meeting of all owners within the building. The purpose of the Interim General Assembly is to form the Interim Board for the building; however other matters can also be considered at an Interim General Assembly such as reviewing the financial statements of the building or approving the forthcoming budgets and service charges.
2. Form an Interim Board
The Interim Board comprises of a minimum of 5 owners and a maximum of 7 owners and 3 reserve members. The Interim Board is not a legal entity and therefore cannot make binding decisions or enter into contracts. The purpose of the Interim Board is to liaise with the developer to gain an understanding of the building, to appoint an Association Manager to assist during the transition phase, review the existing service contracts and to prepare to take over the control of the building from the developer.
In order to register the Interim Board at RERA, each member must provide certain documents to the developer for the developer to forward to RERA. These include:
In order to register the Interim Board at RERA, each member must provide certain documents to the developer for the developer to forward to RERA. These include:
- Passport and visa copy;
- Title deed;
- Authorization from owner if the unit owner is a company; and
- A certificate of good conduct from the Police.
Interim Board members must also sign a statement agreeing to comply with the Board Member Code of Conduct outlined in the directions relating to the Jointly Owned Property Law. The developer will provide all of these documents to RERA so that the Interim Board can be registered.
3. Select an Association Manager
One of the first tasks that a new Interim Board should undertake is to communicate with the owners in the building to introduce themselves and to seek feedback on the wants and desires of the owners for the building. With the assistance of the developer, the Interim Board should start the process of selecting an Association Manager to manage the handover process from the developer and then the ongoing management of the building. It is important that the Interim Board understand the owners needs when tendering for an Association Manager, so that the Interim Board can ensure that the selected Manager meets the requirements of the owners. A clearly defined tender document that stipulates the required services will ensure that the tenders received can be easily compared and that the owners expectations can be met.
For example the Interim Board should define its requirements, including requirements for onsite staff such as a full time manager, facility supervisor or a concierge. The more information that is provided in the request for tenders, the more likely the Association Manager will meet the Interim Boards and the owners expectations.
4. Understand the Building Operation – Seek Advice
Once the Interim Board has selected an Association Manager, the hard work is done. The Association Manager can start acting on behalf of the Interim Board. The Association Manager has a number responsibilities when commencing an appointment, particularly so during the transition phase. These include conducting a condition survey of the building, tendering service contracts, establish service charge collection procedures, managing the cash flow of the building including the Owners Association bank account (or establishing a separate account if not done by the developer), preparing facility management strategies and the preparation of a service charge budget. The Association Manager and the Interim Board may meet several times during this transition phase. The transition phase may take several months depending on the availability and condition of the existing books and records supplied from the developer. It is important for the Interim Board members to be patient during this transition phase and ensure they have a full understanding of the building operations. If due process is followed during this time, the strong platform will be set for a smooth operation in the future.
5. Prepare & Lodge Jointly Owned Property Declaration and Common Area Site Plan
While the Association Manager is working hard at the transition (and getting more grey hairs!), the developer has its own work to do. The Jointly Owned Property Law outlines the obligation of the developer in regard to the registration of the Owners Association. These include the preparation of a Jointly Owned Property Declaration and Common Area Site Plans. The Jointly Owned Property Declaration is the governing document for the Owners Association. It documents the rights and obligations of the owners and the developer; it contains a schedule of the entitlements (or contribution and voting rights); outlines easements that are applicable to common area; contains architectural codes which stipulate minimum maintenance standards; and contains the community rules relating to the building. The Common Area Site Plan is a plan that is prepared by a surveyor registered with the Dubai Lands Department and it identifies the common areas within the building. Both of these documents must be prepared by the developer; however the documents should be reviewed by the Interim Board before it is lodged with the Dubai Lands department for registration. The Association Manager can assist the Interim Board by providing advice on the proposed documents.
6. Register the Owners Association
Once the above documents are finalized and the Interim Boards comments are incorporated, the Developer can lodge these documents with RERA for registration. If RERA is satisfied with the documents and has received all the personal documents from the Interim Board members, RERA will register the Owners Association. At this point in time the Interim Board becomes the Board of the new Owners Association. The Board with the assistance of the Association Manager, should now fully understand the operations of the building and be confident to take control of the building.
7. Post Registration Activities
Even at this point the developer is not off the hook. After the registration of the Owners Association, the developer must arrange for a transition audit of all service charges collected and all expenses paid. The scope of this audit has been prepared in conjunction with RERA and therefore the audit should satisfy the most skeptical of owners. The developer must also convene the first General Assembly of the new Owners Association. This is the first meeting of the new Association. The agenda for this meeting should include the confirmation of the current budget and service charges and the formal appointment of the selected Association Manager.
Following the first General Assembly the Board, with the assistance of the Association Manager, should work to establish the strategic direction for the Owners Association. Like any organization, an Owners Association must plan for the future and develop long term goals. These goals can relate to the maintenance and future upgrades of the physical building structure, communication with owners or creating community spirit within the building. Examples of goals could be to install sub-metering for chilled water, creating a web site for the Owners Association or establishing a fund to contribute to a charity.
The whole process of establishing an Owners Association requires the mutual cooperation of the owners and the developer. The owners and developer need to work together to complete the process and sometimes both parties need to compromise to move forward. By working together the owners and developers will ensure a smooth transition to owner control. Once the above steps are completed, owners will then have full control of their buildings and will be able to make the community that they want.
