Resources for Real Estate Developers and Owners Association Board Members on Governance, Financial Management and Facility Management.
Law No 6 of 2019 Concerning Jointly Owned Property
Beginning of September a new Law was issued that effectively repeals Law No 27 of 2007 concerning Jointly Owned Property.
The new law replaces Owners’ Associations with Management Companies, assigning them all rights and obligations previously resting with Owners Associations. At the same time protects the rights of Owners through several new checks and balances, and an Owners’ Committee.
There are lost of interesting new things in the Law. Please enjoy the translation which is the most correct in terms of context and jargon.
Feel free to Download the PDF below
Emergency Response Plan
Owners Association Managers in Dubai are under the spotlight whenever there is any unfortunate incident involving Fire. Most managers do not realize that they have the responsibility of ensuring Fire Safety and Emergency Response Planning.
A few years ago I hired a consultant on behalf of an owners association to prepare an emergency response plan, what we received was more of a plan to make a plan rather than practicable plan that could be followed. Hence I thought I would just use the principles I learnt in OSHAacademy.org course in Fire Action Plan prepare one Emergency Response Plan for the benefit of all.
Click this link to download PDF emergencyresponseplantemplate-1
If you like it or have any comments please let me know.
Potable Water Quality Testing
Association Managers should go into the details of facilities management to ensure the scope of services are set in line with recommended health and safety standards. Leaving all affairs in the hands of FM companies with broad and vague scope of services is an extremely dangerous practice that paves the way for disasters.
This article is aimed to educate Dubai’s Owners’ Association Managers and Boards on the subject of preventing water borne diseases and familiarize with recommendations of Dubai Municipality. Water storage tanks cleaning and disinfection is one of the items most Owners Association Managers and Facility Managers do not give the importance it deserves. The reason this topic is being written about is because water borne diseases pose a serious health risk. A recent example of 5 people losing their lives in Portugal due to legionella is enough to jolt any professional responsible for health and safety of communities. Knowledge of most professionals is limited to Dubai Municipality’s recommendation that Water Storage Tanks should be cleaned and disinfected once every six months by a Dubai Municipality accredited service provider.
Dubai Municipality’s Public Health and Safety Section has issued recommendations to prevent legionella. This includes monthly visual inspections of water distribution system and water features for any organic growth or accumulation of dirt.
Types and Frequency of Lab Tests
Testing of water quality at Dubai Municipality accredited laboratories is very important in ensuring delivery of water that is free from harmful bacteria and chemical contamination. Bacterial Analysis should be done every 2 months. Test for presence of Legionella should be performed once every 3 months.
Moreover World Health Organization recommends performing Chemical Analysis once every 6 months.
Number and Location of Samples
At least 4 to 6 Samples should be collected at different locations in the distribution system including from the ends of the system. Samples can be collected from consumer’s taps or designated sampling taps can be installed in parts of the system. There should be fixed as well as random sampling. Fixed points could be in common areas such common rest room, or taps at storage tanks. Random points could be selected from inside units, such as kitchen/pantry faucets.
When taking a microbiological sample, or sampling for chemical contaminants in the source water, the sample tap should be flushed for 2–3 minutes before the sample is taken.
Labeling of Samples
Immediately before or after collecting a sample, ensure the the container is labelled clearly with information below, the same information should be stored on sample collection acknowledgment:
- where – the sampling location, with sufficient detail to be able to repeat the sample from the same location, including the site code where possible.
- why – the reason for sampling (complaint, routine test, process control or compliance)
- when – the time and date of collection
- who – the name of the person collecting the sample (for traceability)
- how – the method of sample collection (ie, grab, first flush or full flush)
- other – weather conditions, temperature and any other useful observations
The above information should not be considered for regulatory compliance. Please refer to Dubai Municipality’s recommendations and guidelines.
Are BTU meters Required for Energy Saving?
The pressure on Owners’ Association Managers and Interim Boards of the Dubai’s Owners’ Associations to save on energy bills has created a sort of group think in the entire industry. Owners’ complain of high service charge, the OA manager explains that more than 50% is going to energy bills, the solution; install meters and transfer some cost of energy to tenants, which will directly reduce service charge, and once tenants will start paying for what they use the overall energy consumption will also decrease.
Not sure how much energy or actual dirhams are saved but a potential meter fixing will cost a couple of hundred thousand dirhams, and will bring with it an ongoing process of billing. Is meter fixing the solution to high energy consumption?
The ability to measure consumption does not guarantee any saving leave alone its ability to payback the investment done on it. However, having meters and the ability disconnect does equip the management with a tool to improve service charge collections. Meters are particularly useful in developments where occupancy levels are low and owners may argue why they have to pay a consumption charge when the unit is unoccupied. The same also applies to units with big terraces.
There are 5 typical Chilled Water System arrangements that exist in various developments across Dubai;
The OA can save energy bills by:
For arrangements 4 and 5 following additional ways may work
Can Owners Increase Rental Return by Charging Cooling Cost to the Tenants?
Consider yourself a tenant and answer if you would pay the same rent for two apartments, wherein one you have to pay for Chiller and in one you don’t. In the short run the difference may not be very obvious however the market forces will surely play their role to adjust the prices. To save energy and money HVAC systems must be efficient.
Can installation of BTU meters reduce Energy bills?
Chilled Water (BTU) meters do provide a fair and transparent process of cost allocation, however BTU meter installation is simply a means to an end and not an end in itself. Mere presence of meter does not save energy. Much more needs to be done at the equipment and awareness fronts.
If you have any questions related to the topic feel free to contact email@example.com
Why Do Owners’ Associations Need Reserve Fund?
Reserve fund in the context of Jointly Owned Property is an amount of money set aside to pay for major expenses that are expected in the long run. One of the most significant reasons for maintaining a property reserve fund is because it spreads obvious expenses evenly over a given period. This enables one to plan and meet these obligations as they occur instead of pumping into them. In this sense, the reserve is not an extra expense, but an actual and necessary expense spread over multiple financial years.
For example Car Park and Driveways of a Jointly Owned Property may require painting every 5 years. Even though the paint is done after 5 years, it is gradually used during the 5 years, hence it is but logical to keep setting aside some money every year as the paint deteriorates over the 5 year period so at the end of 5th year the Owners’ Association has enough funds to commence the painting works.
If the Owners Association asks the Owners to pay for Painting Work in the 5th year it would put an unfair burden on the Owners at that time. May be someone just bought a unit only a few weeks ago. Since the Owners are benefiting from the useful life of the asset every year, Reserve funds fairly allocate the cost to owners spreading it over the expected useful life of that asset.
Buildings, just like most assets, are subject to maintenance costs. In case a building requires major repairs or replacements; an adequately maintained reserve fund will be a relief to the owner and those who live in it. Some of the repairs and maintenance costs include roof replacements, repainting, carpet, appliance replacements, elevator equipment, chillers, pumps, and so on.
For instance, it will be extremely expensive to foot a replacement bill of a chiller in a tower building with one installment. Instead, the owners’ association will set aside a portion of funds every year over the working life of that chiller so that it will be easy to replace it when it stops working. By contributing to a reserve fund, the owners, their tenants, and the community at large will benefit when the building is kept in good condition by this fund.
For owners of property who intend to sell their property, a good reserve fund greatly enhances the resale value of the property. In the international stage, most states require associations to disclose information on the amount of the reserve fund held to potential buyers. Locally, RERA (Real Estate Regulator Agency) also stipulates that owner’s association provide adequate reserve fund information on its financial statements.
Below are some frequently asked questions concerning reserve funds that will assist owners’ association board members to fulfill their responsibility of understanding the regulations and making decision in the best interest of all owners
1. Is it Mandatory to have a Reserve Fund for Owners’ Associations in Dubai?
Yes, clause 52, Part 8 of the Directions on Association Constitution issued by RERA stipulate that the Owners Association should form two funds – the general and the reserve, as soon as it is practically possible after its constitution.
2. What constitutes a Reserve Fund?
RERA lists sources of income that constitute the reserve fund as follows;
a. Part of the Service Charge levied on the owners specified as Reserve Fund Contribution
b. Penalties imposed on owners for failing to keep up with their contributions towards Reserve Funds.
c. Income from Shariaa (Islamic Law) compliant investments made from the reserve fund
d. Donations made to the reserve fund.
3. How much should an Owners Association charge the owners as a contribution to the reserve fund?
As per regulations issued by RERA, the Association Manager should prepare and the board must approve a budget for each financial year, and present that budget with full details at general assembly for approval. The budget for general fund must be for one year and minimum ten year for the reserve fund. The ten year budget should be based on a study forecasting major repairs and replacements. Accordingly the owners association forecasts its cash flows and raises reserve fund.
4. Where can owners association invest monies received in reserve fund?
The owners’ association can invest reserve funds only in Shariaa (Islamic Law) compliant investment products.
5. Is it requirement to keep the reserve fund in a separate bank account?
No, there is no such requirement, the association can have all its funds in one bank account; however it is a good practice to keep the reserve fund in a separate bank account, preferably a savings account (Shariaa (Islamic Law) compliant) to earn a return and offset inflation to some extent.
6. Is it a must to show reserve fund as a separate item on the owners’ association’s statement of financial position (Balance Sheet)?
Yes, it is required by directions issued by RERA to account for and report the general and reserve funds separately.
If you have any specific questions regarding reserve funds feel free to leave a comment or email firstname.lastname@example.org