Welcome to the Saudi Arabia focus edition of Law Update.
One of the key markets in the Middle East and North Africa (MENA) that continues to lead from the front is the Kingdom of Saudi Arabia (KSA). As the largest country in the Middle East and the 18th largest economy in the world, the progress KSA continues to make is underpinned by its Vision 2030 that envisions developing the country as an investment powerhouse and hub that ultimately connects Asia, Europe, and Africa. Given Saudi Arabia’s significance to the regional economy, our team of experts have prepared a range of pertinent articles that provide insights into new laws, regulations, and the legal landscape in the Kingdom.
This edition will provide you with an up-to-date guide on matters such as; the framework issued by the Saudi Central Bank on IT governance, the anti-corruption landscape under Vision 2030; we also provide practical tips for dispute avoidance. This is only a snapshot; there are many more articles within the KSA focus section for you to read, which we hope you will find valuable and enjoyable.Read the edition
Andrew Balfe - Senior Counsel - Real Estate
Sebastian Roberts - Senior Associate - Real Estate
In September 2019, Law No. (6) of 2019 Regulating Jointly Owned Property in the Emirate of Dubai (the ‘New JOP Law’) was introduced. The New JOP Law, which came into force on 18 November 2019, replaced Law No. (27) of 2007 (the ‘Old JOP Law’) and represents the first significant overhaul (in over 10 years) of the laws regulating jointly owned property.
What follows is an high level overview of some of the key elements of the New JOP Law, including key differences with the Old JOP Law.
The New JOP Law recognises three different categories of jointly owned property, being a property that is subdivided into privately owned units (or components) and jointly owned common areas (a ‘Project’), with different rules pertaining to the management of each category.
The three categories of Projects are:
The directions to be issued by the Real Estate Regulatory Agency (‘RERA’) will provide further clarity regarding the criteria for determining how a Project will be categorised.
A key difference between the New JOP Law and the Old JOP Law is the role that the owners of units in a Project will play in the administration, operation and management of the Project.
An ‘Owners Association’ will no longer be formed and a developer must appoint a RERA approved management company as managing agent for the Project (the ’Managing Agent’). The Managing Agent will carry out the functions of the now defunct Owners Association.
An Owners Committee will still play an advisory role in the day-to-day running of the Project (the ‘Owners Committee’). The Owners Committee will consist of up to nine owners who will be selected by RERA and represent the collective body of all owners in the Project.
Timely payment of service charges by unit owners is crucial to the Project being operated and maintained to the highest possible standard. This requires a balance of the rights between the Managing Agent/developer and the unit owners.
From a Managing Agent’s/developer’s perspective there needs to be clear mechanisms in place for dealing with defaulting unit owners. Unit owners will desire transparency in the calculation and expenditure of service charges.
These processes complement the introduction of RERA’s ‘Mollak’ system, which re-emphasises RERA’s drive for a more transparent service charge system.
It is important to note that the Managing Agent cannot restrict an owner’s right to use and benefit from the common areas of the Project due to non-payment of service charges (nor can a developer contractually restrict such access on this basis in the sale and purchase agreement), which we are aware has been a practice sometimes adopted by developers to incentivise payment. Notwithstanding this, the rights of the RDSC to force the sale of an owner’s unit should assist in the collection of unpaid service charges.
Prior to the introduction of the New JOP Law, disputes regarding jointly owned property were handled by the Dubai Courts.
Moving forward, any disputes that are unable to be amicably resolved will now be referred to the RDSC, which has the exclusive jurisdiction to hear and settle all disputes in relation to matters arising from the New JOP Law.
Directions to be issued by RERA
The New JOP Law contemplates directions being issued to supplement the New JOP Law and provide further guidance on various matters, including:
As at the time of writing, RERA was yet to issue the Directions but we understand that the Directions are in the process of being finalised. Until such time that the Directions are issued, the New JOP Law confirms that the directions, rules and regulations issued under the Old JOP Law will continue to apply, except to the extent that they are inconsistent with the New JOP Law.
All developers and other stakeholders must ensure that their Project(s) comply with the New JOP Law by no later than 18 May 2020 (the ‘Compliance Date’), although the Director General has the authority to extend the Compliance Date.
Developers and other stakeholders will be in breach of their obligations under the New JOP Law should they fail to:
In the event of a breach of the New JOP Law, RERA is provided with a discretionary power to impose a fine of up to AED 1,000,000, (US$ 272,000) with the potential for this fine to be increased to AED 2,000,000 (US$ 550,000) in the event of a repeat offence within a twelve month period.
We strongly recommend that all developers and stakeholders undertake those steps currently available to ensure that their existing Project(s) and any future Project(s) comply with the New JOP Law – for example, appointing a Managing Agent that is licensed and approved by RERA, finalising registration of the Project on the ‘Mollak’ system and opening a designated account for the Project(s).
Al Tamimi & Company is in regular contact with RERA regarding the issuance of the Directions and matters generally pertaining to the New JOP Law and can assist developers and other stakeholders by:
Al Tamimi & Company’s Real Estate team provides a comprehensive range of legal services across the Middle East including Dubai, covering all areas relevant to the property industry. For further information, please contact Tara Marlow (email@example.com), Mohammad Kawasmi (firstname.lastname@example.org), Andrew Balfe (email@example.com) and Sebastian Roberts (firstname.lastname@example.org).