In terms of Article 32 of the JOP Law, the Chairman of the Land Department was entitled to implement regulations as required to ensure a comprehensive strata title regime.

The implementing regulations were published as "Directions", effective from 13th April 2010 (the "Effective Date").

In terms of the Direction for General Regulation Concerning Jointly Owned Properties (referred to herein as the "General Direction") a new disclosure regime has been established with a view to enhancing consumer protection. In this article we briefly discuss the disclosure regime, to whom it applies and the requirements thereof.

Who must comply with the requirements of the new disclosure regime?

  • Developers selling Proposed Units in an Existing Project; and
  • Purchasers on-selling Proposed Units in an Existing Project.

What is a Proposed Unit?
A Proposed Unit is defined as a unit:

  • In a project under construction or proposed to be constructed which will upon completion of construction become the subject of a Jointly Owned Property
    Declaration; or
  • In a completed project where the title to the unit has not been issued by the Land Department and the seller of the unit is a developer.

What is an Existing Project?
Any project on the Effective Date in respect of which:

  • One or more Proposed Units have been sold by the developer or a purchaser; or
  • The developer has existing arrangements in place, which are reasonably achievable, to release the project to market within a period of 3 calendar months calculated from the Effective Date (also known as the "First Period").

First Period Requirements
During the First Period where a developer or a purchaser is on-selling a Proposed Unit in an Existing Project, a 'Notice to Purchaser' in the form approved by the Real Estate Regulatory Authority ("RERA") must be attached as a schedule to the sales contract.

What are the legal consequences for failure to attach a Notice to Purchaser to the sales contract during the First Period?
If a developer or a purchaser on-selling a Proposed Unit fails to comply with these requirements, the sales contract to which the Notice to Purchaser should have been attached is void and of no effect.

Second Period Requirements
The Second Period is defined as the period commencing upon the expiry of the First Period and ending 6 calendar months after its commencement.

During the Second Period, where the developer is selling a Proposed Unit, the developer must:

  • Attach to that sales contract a Notice to Purchaser in the form approved by RERA; and
  • Give to the new purchaser an Interim Disclosure Statement.

During the Second Period, where a purchaser is on-selling a Proposed Unit, such purchaser must:

  • Attach to the sales contract a Notice to Purchaser in the form approved by RERA; and
  • Give to the new purchaser a complete copy of any Interim Disclosure Statement that they received when they purchased the Proposed Unit.

What are the legal consequences for failure to comply with the Second Period Requirements?
Failure to comply with this requirement by either a developer or a purchaser on-selling a Proposed Unit, renders the sales contract void and of no effect.

What information should be disclosed in an Interim Disclosure Statement?
The information to be included in an Interim Disclosure Statement is prescribed in Article 31 of the General Direction. An Interim Disclosure Statement must be signed by the developer and we set out hereunder, by way of example, some of the information that will be disclosed therein:

  • A description of the building or project of which the Proposed Unit will be a part;
  • The intended land uses within the building or project e.g: residential, furnished apartment, commercial;
  • A description of features pertaining to ecological sustainability;
  • Facilities on Common Areas available for use by all owners and occupiers as of right;
  • Facilities on the development available for use on a user pays basis;
  • Furnishings that the developer intends to make available without charge (if any);
  • A draft unit plan prepared in accordance with the Directions;
  • A schedule of materials and finishes for Common Areas and the Proposed Unit;
  • Information on the Supply Agreements it is proposed the Owners' Association shall enter into and details thereof;
  • Arrangements for the supply of Utility Services;
  • Whether construction has commenced, and if not, specifying the estimated date for commencement of construction;
  • A reasonably estimated date on which the property will be handed over to the purchaser; and
  • A statement directing purchasers to their obligations under Law No. 13 of 2008 and related laws.

Developer Warranty
In terms of Article 32 of the General Direction the developer is deemed to have warranted the information in an Interim Disclosure Statement and if within 2 years of the date on which the Proposed Unit is transferred from the developer any of that information is found to be inaccurate or incomplete in a material way, the developer will be liable to the purchaser to whom the Proposed Unit is transferred for damages whether the purchaser purchased the Proposed Unit from the developer or another purchaser.

After expiry of the Second Period
Once the Second Period has expired, in respect of all Proposed Units sold in Existing Projects the following shall apply:

  • Before a purchaser signs a contract to buy a Proposed Unit from a developer, the developer must give to the purchaser a written statement signed by a representative of the developer setting out all the information described at Article 4 of the General Direction; and
  • Before a purchaser enters into a contract to on-sell a Proposed Unit that they purchased from a developer or another purchaser, they must give the new purchaser a copy of the statement they received upon buying the Proposed Unit.

By way of example, we list below some of the information that will be included in a Full Disclosure Statement:

  • A Full Disclosure Statement will comprise all the information described above relating to Interim Disclosure Statements; and
  • Any ecological sustainability ratings applying to the building or project;
  • A copy of the Jointly Owned Property Declaration;
  • A copy of any Building Management Statement;
  • A budget prepared on a reasonable basis having regard to the Association Constitution for both the general fund and reserve fund for the first two financial years of operation of the proposed Owners' Association;
  • An estimate, based on that budget, of the service charges payable in respect of the Proposed Unit to each of the general fund and reserve fund during those 2 financial years.

What are the legal consequences for failure to provide the Full Disclosure Statement?
In terms of Article 5 of the General Direction, where a developer fails to give a Full Disclosure Statement to the purchaser, the sales contract to which the statement should have been given is void and of no effect. If a purchaser on-selling a Proposed Unit fails to comply with this requirement, then the contract in respect of which the copy statement should have been provided is void and of no effect.

Missing, Inaccurate or Incomplete Disclosure Statements
Pursuant to Article 5 of the General Direction, the developer is deemed to have warranted the information in a Full Disclosure Statement given under Article 4 within 2 years of the date on which the Proposed Unit is transferred from the developer and if any of the information is found to be inaccurate or incomplete in a material way, the developer will be liable to the purchaser to whom the Proposed Unit is transferred for damages, whether the purchaser purchased the Proposed Unit from the developer or another purchaser.

Conclusion
Dubai property laws and regulations have developed significantly over the past few years along with the expansion and maturity of the Dubai real estate market in accordance with Dubai Government's drive to increase transparency, develop the property sector legislation in line with international standards and enhance legal protection for purchasers of off-plan property.

The disclosure regime further enhances consumer protection and increases transparency in line with international standards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.