x Abu Dhabi, UAEWednesday 24 January 2018

Capital weighs property move

The Abu Dhabi government is proposing a novel solution to one of the issues facing a new strata law.

Foreigners can purchase flats on a freehold basis on Reem Island.
Foreigners can purchase flats on a freehold basis on Reem Island.

The Abu Dhabi Government is proposing to allow homeowners' associations to control common property in developments, removing one of the key obstacles to adoption of a strata law.

Typically, buyers of freehold apartments share ownership of the common areas, such as pools and recreation areas. But the Government does not allow non-UAE citizens to directly own land.

"It appears there is a mechanism now for delivering freehold interest in apartments [in Abu Dhabi], which is significant," said Stephen Kelly, the legal director for the Dubai office of Clyde & Co, a law firm.

If adopted as proposed, it would make Abu Dhabi's strata law different than the law being implemented in Dubai, where non-UAE citizens are allowed to directly own shares of land in designated freehold areas.

The provision allowing homeowners' associations to control the common areas - instead of direct ownership by the residents - was included in a draft of the law circulated recently to industry executives.

Pressure is mounting for Abu Dhabi to address the strata issues, with projects allowing foreign ownership about to be completed on Reem Island, Raha Beach and Sowwah Island.

"Many developers have purported to sell freehold interest in apartments, although it was unclear in fact what that meant and what would transfer to owners," Mr Kelly said.

The strata law is considered a key element in developing Abu Dhabi as an international market. Freehold ownership of land providing clear title is widely favoured by investors and buyers rather than 99-year leases.

"The strata law gives the highest level of security of title," said Graham Yeates, the head of ownership management at Cluttons, a property company. "The certainty of title is the thing you're aiming for."

Clearly defined strata law makes it easier for owners to borrow on property and transfer ownership. Strata laws also provide owners control over service fees and maintenance.

"The implementation of a strata law will be incredibly positive for the market," Mr Kelly said. "Owners want clear and transparent ownership and maintenance of properties."

Abu Dhabi's strata law has been in development for years. But the ownership of the underlying land in projects is one of the key unresolved issues.

If developers were allowed to maintain control of the common areas, they would be able to decide the fees charged to owners and control when and how the areas are maintained.

By allowing homeowners' associations to utilise strata law, the developments will be able to offer freehold ownership while "still preserving the fundamental principle that interest in the land will not be transferred to foreigners", Mr Kelly said.

"It certainly takes away a stumbling block developers may have had," he added.

There has been no official word from the Abu Dhabi Government on when the strata law will be adopted and implemented. Representatives of the Department of Municipal Affairs could not be reached for comment yesterday.

Some developers have already started implementing procedures based on the proposed strata law.

The Sun and Sky Towers on Reem Island is "strata title-ready", the developer Sorouh told homeowners in an e-mail on Monday confirming the handover of apartments would begin shortly.

The strata law will allow owners to "control and manage the maintenance and costs of the common areas in the development to protect your investment", Sorouh said.