Commonhold: A Primer
The concept of freehold is new in the UAE and purchasers of property, especially expatriates, may understandably feel ill at ease about the whole issue of buying property. There is, however, a pent-up desire among residents to own as opposed to rent and many of the new developments are so tantalizing that both residents and non-residents feel drawn to enter the market. The fact is that the developments committed to thus far are of such a scope and scale that to rule unfavorably in regard to freehold ownership by expatriates or non-residents is almost inconceivable.
Alongside the question of freehold, however, is the equally unfamiliar concept of commonhold. It is interesting to note that it is not only new to the UAE but has only been in practice in the UK since 2004. In deed, commonhold in the UAE is modeled on the British formulation and the concept itself is rather easy to understand:
The common use areas of a complex such as an apartment tower are owned and managed in common (collectively) by the owners of the complex’s individual units. Although they may need to task someone else with the actual management and maintenance of the property, the group of owners are in effect the landlord, with full powers of decision and delegation in regard to all common use areas
Although an inherently simple concept, it requires that the group of owners act as a collective, and this is where a bit of complexity enters in. Individual owners, perhaps, will not have equal say in management and control decisions. Rather an individual’s voice may be weighted by the percentage of property units he holds. Therefore, owners of larger units or multiple units may have more say than single and especially smaller unit holders. In fact, a single entity like a company may own several floors of units or even a majority stake in the tower. How would its leverage as a majority owner compare then with that of an individual who owns but a single unit? In whatever scenario, there will need to be sufficient communication and cooperation among owners so that the owners may effectively function as a group with a single voice. Whether decisions will be made on the basis of simple majority or other formulae will need to be determined.
Simple but not Sweet
A simple concept then, but rather complex upon implementaton. It represents a favorable option from the perspective of the apartment owner, which puts control of the entire property into the hands of the unit holders as opposed to a perhaps disinterested landlord or one who is motivated by self-intersts alone. The challenge will be for the new owners and owner-residents in Dubai’s multitude of developments to work together as a community to effectively implement a successful model of commonhold. Again, to do so may be complicated by the fact that some owners will be non-residents who are at times unavailable when crucial decisions need to be made. Alternatively, a larger entity like a company may hold a sufficient number of units to effectively silence the voice of single-unit owners. Potentially even worse are scenarios where units have been purchased solely as instruments of speculative investment. The owner in this case may have no interest in the long-term value of the property nor in the day-to-day concerns of residents and resident owners.
Whatever the case, commonhold presents both a challenge and opportunity for Dubai’s new property owners. On the one hand it empowers them, to greater or lesser extent, to better control the condition and quality of their surroundings. On the other hand it begs of them to take a more active role in the building community to which they belong.
See also What is Commonhold?
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