To: Internal Memo

DATE: October 10, 2023

A. Brief Overview

1. This memorandum aims to offer a comprehensive overview of the legal framework overseeing mixed-use
developments in Dubai, UAE. It outlines the relevant Legislation and Regulations crucial for undertaking
such development projects.

2. The document explores key aspects under the joint ownership property law and the general regulations
issued thereunder, including the concept of components, the management structure for common parts, the
registration process for jointly owned properties, the function of owner’s associations, the regulation of
service and usage fees, the legal documentation associated with Managed and Service Apartments
("MSA"), and the governance of MSA arrangements.

B. Relevant Law

3. The Legislation reviewed for the purposes of this memorandum is:

a. Law No. (6) of 2019 Concerning Ownership of Jointly Owned Real Property in the Emirate of
Dubai (“JOP Law”);

b. Law No. (7) of 2006 Concerning Real Property Registration in the Emirate of Dubai
(“Registration Law”);

c. The General Regulation – Concerning Jointly Owned Properties under the JOP Law in the
Emirate of Dubai (“General Regulation”); and

d. Dubai Directions No. (1) of 2010, Direction for Jointly Owned Property Declarations (“JOP
Declaration Law”).

C. Analysis

Registration of jointly owned properties

4. According to the JOP Law, the rules and conditions outlined in the Registration Law apply to the
ownership of jointly owned properties. Article 6 of the JOP Law mandates that the title deed for jointly
owned properties must encompass Plans, Main Complex System, Statute, and Building Management
Statement (“BMS”). The Dubai Land Department (“DLD”) retains the original copies, and occupants must
adhere to these systems concerning the developer, owners, other unit occupiers, and the owners committee.

5. Upon completing the jointly owned property and obtaining the completion certificate, the developer must
submit the necessary documents to the Real Estate Regulatory Authority (“RERA”) within sixty days.
Failure to comply may prompt RERA to engage another entity for document provision, with the developer
covering associated costs.

6. In line with the JOP Law, RERA is tasked with issuing and updating maps related to common parts, and
common facilities. Moreover, the Registration Law requires that all transactions impacting real property
rights be recorded in the property register for validity. Title deeds are then issued by the DLD based on the
data recorded in the property register.

Legal documentation pertaining to MSA Arrangements

7. The legal documentation governing the creation of an MSA scheme centers around the Sale and Purchase
Agreement ("SPA") between the developer and investors. Ideally, the SPA should offer full disclosure or
sufficient references to various documents, including the jointly owned property declaration detailed in the
 JOP Declaration Law. This declaration is a constitutional document required for the registration of the
initial sale of a unit in a jointly owned property. It must provide information on property type, plot or
building number, common areas site plan, owner’s association name, unit numbering, entitlement details,
staging plans, utility services, easements, covenants, waste management, and environmental condition.

8. The hotel operator's rights, including providing ameliorated services, operating the rental pool, and
offering branding and consulting services, are typically outlined in a framework agreement (“MSA
Framework Agreement”). This agreement is separate from association manager's or facilities
management agreements, and it involves aspects such as a la carte services.

9. Hotel operators are usually appointed through separate operational and technical services agreements with
the hotel owner. If the MSA development is part of a larger hotel development, measures should be in place
to enable the removal of the hotel operator from the branded apartments. This involves establishing a hold
company to enter into the MSA Framework Agreement and separate operational and technical services
agreements with the hotel operator.

10. The use of hold company is crucial to avoid direct contracts between the owner’s association and the hotel
operator, facilitating the hotel owner's ability to manage the hotel operator's presence in the branded
residences. The unit owners, having jurisdiction over their units, must independently engage with the hotel
operator for unit management.

Regulation of MSA arrangements

11. It is crucial to highlight that allowing developers to bind the owner’s association to long-term contracts
poses a significant risk to the freehold nature of the investment. To address this concern, MSA
arrangements are appropriately regulated in the General Regulations. The following provisions may be
applicable, subject to determination by RERA

12. A supply agreement under the provisions of the General Regulations, is defined as an agreement for a term
of not less than one year for the supply of goods or services, including utility services, to an owner’s
association either directly or through a BMS. There are limitations on the duration of all supply
agreements, including the MSA Framework Agreement, with the owner’s association. These restrictions
limit the contract length at no more than 3 years as per Article 15 of the General Regulations.

13. Pursuant to Article 17 of the Direction for General Regulation, all Supply Agreements, including the MSA
Framework Agreement, must ensure that their content is fair, clear, and includes appropriate mechanisms
to guarantee quality. This provision emphasizes the need for transparency and equitable terms in such
agreements.

14. Article 34 of the General Regulation might impose restrictions on the developer's ability to unilaterally
enter into supply agreements on behalf of the owner’s association. This ensures that the owner’s
association retains control and is not unduly influenced by the developer in contractual matters. These
regulatory measures are designed to maintain the integrity of freehold investments, prevent undue
influence by developers, and safeguard the rights and interests of owner’s associations in MSA
arrangements.

15. Article 8 of the General Regulations outlines the requirements for filing a BMS in accordance with the law,
regulations, resolutions, and directions issued by RERA. Key points include:

a. A BMS is required to be filed as per the conditions specified in Article 27(2) of the General
Regulations. It must adhere to and comply with resolutions and directions issued by RERA. All
buildings subject to volumetric subdivision must have a BMS. If a developer wishes to make a
volumetric subdivision, they are responsible for bearing all relevant costs, including but not
limited to preparation of the BMS, consulting, and preparation of the Joint Ownership Property
Declaration.

b. The BMS can be used to authorize the opening of a bank account in the name of the owner’s
association, determining signatories, specifying the operational details, and allowing the bank to
comply with the terms of the BMS. Article 10 of the General Regulations states that the BMS
 shall have a binding effect on component owners, including owners’ associations, unit owners,
occupiers, and persons with an interest in rem in a unit.

Concept of Components

16. In a mixed-use development, various functions, such as residential, office, hotel, and retail, are
accommodated within distinct volumetric areas known as ("Components"). The JOP Law classifies these
Components into two categories, relating to common parts (Article 7) and units (Article 9).

17. Article 7 of the JOP Law details the components of common parts in jointly owned properties, includes
structural elements such mainstays, foundations, and facades. Shared spaces such as corridors, parking
paths, and recreational facilities are incorporated, along with equipment and systems of main facilities like
generators, heating systems, and utilities such as water pipelines and communication towers.

18. Article 9 of the JOP Law outlines the components of each unit within a building or part of a building,
unless otherwise specified in the Site Plan. These components comprise flooring, ceilings, walls, windows,
doors, bathrooms, and annexed facilities. Additionally, the unit encompasses internal connections,
installations, fixtures, and any subsequent additions or improvements.

Management of common parts

19. Article 18 of the JOP Law outlines the management structure for common parts in jointly owned
properties, classifying them into three groups.

a. Major Projects, defined by Director General standards, are managed by the Developer, responsible
for operations, maintenance, and repairs. An Owners Committee, chosen by RERA from property
residents, oversees tasks based on the Statute and Director General's outlined conditions.

b. Hotel Projects entrust management to a hotel project management company, with RERA selecting
the owners committee if desired by the hotel project management company.

c. Real estate projects outside the first two categories are managed by specialized management
companies, chosen by RERA based on specific rules and principles.

20. Article 26 establishes a regulatory framework for ensuring proper maintenance of common areas in jointly
owned properties, granting RERA authority to intervene and enforce corrective measures, including
appointing temporary administrators and imposing penalties.

21. According to Article 26 of the General Regulations, if an owner’s association fails in maintaining common
areas per its Constitution or jointly owned property declaration:

a. RERA or an authorized party can inspect the jointly owned property.

b. If the owner’s association fails in maintenance, RERA issues a written notice detailing the breach,
specifying corrective actions, and providing a reasonable timeframe.

c. If the owner’s association doesn’t comply, RERA can take these actions:
i. Appoint a temporary administrator under Chapter 5 of the General Regulation.
ii. Impose a penalty on the owner’s association, not exceeding AED 100,000.

Owner’s association

22. Article 22 of the JOP Law establishes an owner’s association for real estate projects falling within the first
and third categories outlined in Article 18(a) ibid. as stated above. The owner’s association, inclusive of a
president and vice-president, comprises a maximum of nine members selected by the RERA.

23. Formation occurs upon registering at least 10% of the total units in the jointly owned property in the
owners' names. Committee members must have legal capacity, be residents in the Jointly Owned Property,
 exhibit good conduct, commit to paying services and use fees, and actively participate in committee
meetings.

24. The developer is ineligible to qualify as a owner’s association member unless they own unsold units.
Furthermore, under Article 49 of the JOP Law, the management entity assumes the rights and obligations
of the owner's association. The term "management entity,” as per Article 2 of the JOP Law, refers to the
entity managing common facilities or common parts, including the developer, management company, or
hotel project management company, as specified by this Law.

25. Additionally, Article 24 of the JOP Law specifies the limited functions of the owner’s association whereby,

a. It ensures the management entity complies with the law, regulations, and the BMS.

b. The association reviews annual budgets for property maintenance, provides recommendations,
discusses obstacles, receives complaints and suggestions, and may request the RERA to replace
the management entity for certain projects.

c. It notifies the management entity or the RERA of defects or damage in the jointly owned property,
coordinates on safety, environment, and security matters, and suggests amendments to the BMS,
subject to RERA approval.

Service and usage fees

26. Owners are required to pay their portion of service fees to the management entity for the management,
operation, maintenance, and repair of common parts, as stipulated under Article 25 of the JOP Law. The
share is calculated based on the unit area relative to the total jointly owned property area, with the
developer covering fees for unsold units. For sold units, the developer manages service fees on behalf of
the purchaser according to the sale or sequestration contract. The unit area considered is that registered in
the real estate register compiled by RERA.

27. Additionally, the main developer collects usage fees from owners or sub-developers for the management,
operation, maintenance, and repair of common facilities within the main project. The management entity is
not permitted to impose financial fees without written consent from RERA, aligned with the approved
main complex system. RERA approves or ratifies budgets for service fees or usage fees only after legal
audit office approval.

28. Owners or sub-developers must not refrain from paying approved service fees and usage fees, and they
cannot waive their share in common parts to evade fees. However, the developer or management entity
cannot take actions preventing Owners from using Common parts to coerce them into paying service fees
or usage fees, contravening the procedures established in Article 28 of the JOP Law.

29. The management entity holds a preferential right on each unit for unpaid services' fees, preventing unit
disposal until fees are settled. In case of non-payment, the management entity can issue a claim ratified by
the RERA, with the competent execution judge authorized to sell the unit through public auction if
necessary. However, under Article 35 of the General Regulations, developers are forbidden from imposing
any service charges or utility charges without obtaining prior written consent from RERA. If a developer
violates the consent requirement outlined above, RERA is empowered to initiate legal action against the
developer.

D. Conclusion

30. In conclusion, the JOP Law, classifies management structures into major projects, hotel projects, and other
real estate projects. Owner’s association and management entities play crucial roles in the management of
common components, with RERA empowered to intervene for proper maintenance, issuing notices and
penalties in cases of contravention.

31. The creation of MSA schemes revolves around the MSA Framework Agreements which outlines the hotel
operator's rights, necessitating a structured approach to prevent undue influence, MSA arrangements are
regulated under the JOP Law and the General Regulations as aforementioned.
32. Additionally, supply agreements, as defined in the General Regulations, are subject to duration limitations
where, the agreements have to be for a minimum of one year and a maximum of three years and must
guarantee fairness and transparency.