Securing A Property’s Future – Property Times

While defect claims by property owners today are still negligible, legal and snagging experts reckon that there could be more coming.

By Nicole Walter/freelance writer

Buying a property is a long-term investment one issue, which could be Increasingly cropping up is it’s maintenance and minor or major construction defects, as buildings get older. While defect claims by property owners today are still negligible, legal and snagging experts reckon that there could be more coming.

“There are some cases; sporadic but increasing. This is just the beginning. Since many towers and villas in Dubai are new, it takes time for defects to be revealed and cause problems. We anticipate that claims relating to defects will significantly increase going forward,” says Shahram Safai, partner at Afridi & Angell. Defects range from the minimal to those threatening health and safety, says Douglas Ralph, managing director, Snag & Inspect. The company has inspected well over 500 individual villas and apartments, as well as completed buildings (both residential and commercial) and communities over the last four years. “Defects is a broad statement, small to significant, as well as in terms of the cost related to them. Most of the time it is cheaper to prevent then to repair. Defects cause problems for owners, tenants, Owners Associations (OAs), the developer, contractors and design consultants,” he points out. Defect challenges, whether existing ones or those caused by poor maintenance, aren’t unique to Dubai, the UAE or indeed the Middle East.

“Everyone in the world has gone through these challenges, Dubai has some excellent building codes, but like in other emerging market, sometimes enforcement is too lax and then the government is trying to play catch up, and Dubai is trying to address this. The contractors and developers are starting to realize it as well,” he explains.

Shahram also believes that it is a question of awareness, prevention and understanding liability. ”The laws and information in this jurisdiction exist and the government is trying their best; but there remains a lot to talk about the liabilities, who is responsible and so on. Construction was moving so fast that there is a lot to catch up with,” he says.

WHAT THE LAW SAYS…

The UAE Civil Code (Federal law no 5 of 1985) Decennial liability (Article 880) prescribes a 10-year liability imposed on contractors and design consultants (architects/engineers) for structural defects from the time of delivery, including if they arise because of fault in the land (plot), says Shahram. Article 881 adds, that if the architect did not supervise the project, he is only responsible for faults in the plans he made. Since then another important law emerged in Dubai, which makes the developer liable for defects- Law No 27 of 2007 (Jointly Owned Property- JOP Law) Art. 26, imposes a liability to repair building defects for ten years, as well as demands the repair of installation defects for one year, on the developer from the date of the completion certificate of any building or unit sold in Dubai. ”The law is very protective of the purchasers, before 2007, the ten and one year liability was mentioned in the contracts, but some developer s didn’t put them in and that’s why this was put into law, as the land department wanted it to be statutory whether you have it in a sales & purchase agreement (SPA) or not,” Shahram points out. In addition, developers cannot limit their liability in SAPs. “Some have tried to do that and that’s why the law makes it clear that they cannot circumvent the JOP Law by adding a clause saying that, you the buyer have waved your rights to claim defects, that is illegal warranties are guaranteed by law,” he emphasizes.

Another important piece of law to consider is the Federal Law No 18 of 2003 Article 95 (Commercial Trans­ actions Law), which prescribes what happens when the 10-year warranty has run out addressing latent defects, a claim has to be brought within three years of discovering such defects.

The law distinguishes between patent, meaning obvious defects, usually the ones encountered during snagging of a property during the handover process and rectified within a year, and latent defects. The latter are those a lay­ man couldn’t have possibly detected, or are somehow hidden in the structure, to only reveal themselves after the 10-year warranty has expired and become an issue. “If it takes an expert to see them, it is latent and one should still be compensated for it. However, one can’t expect anyone to be responsible forever, the law wants you to move quickly, so one has to bring the claim within three years of detection, after that time the law would practically say that one has waived ones rights by not doing anything about it,” Shahram alerts.

This is an important point in terms of OAs, as they are not recognised as a legal entity as of yet, and therefore can’t bring a case against a developer in court. However, Shahram points out there is no need, and one indeed shouldn’t sit on a claim because of it.

“I would suggest bringing the case as an individual owner against the developer, as if you don’t he will say you passed the time, I assume you waived your rights. If the owner wins the developer is likely to get on with repair­ing the defect affecting more than one owner, as he could expect many more individual cases to be filed cases against him for the same defect,” he advises. The timeframe in which these repairs should take place is not specified in the law, but he explains it would understand it to be a reasonable period, which can be established.

Equally, in the case of not all of the defects detected during the snagging process having been taken care of, he advises to take over the property but reserve ones rights to have them repaired, so one could still raise a claim. Before thinking of filing cases, property owners with mortgages though, must be aware that it they have taken out a conventional mortgage they can still raise claims directly, however, in the case of Islamic finance, bringing a case could be difficult.

“With Islamic finance, the bank becomes the purchaser and you’re renting it from them, so unfortunately it’s a much weaker position. You need to come to a settlement rather than taking the legal route,” he advises.

Property owners should also be careful in terms of how the defect came about and who was responsible. Douglas points towards another important issue to take into account in this respect, proper maintenance of the building.

“Insurance companies will eventually dispute claims in case of fire for example. If they find out that the building’s sprinkler system was faulty, you have not met the maintenance requirements for fire prevention and caused mass destruction of the building, it could be something as little as the fuel missing in the tank to power the sprinklers and they will reject the claim,” he says.

An engineer by profession, Shahram highlights a specific defect – the incursion of water into the foundation level or basement parking, an issue he has been tracking for the last two years.

“It is actually only now that this problem has started to reveal itself. I am not advocating panic but prevention by rectifying the issue before it becomes something that threatens the structure,” he says.

Prevention is the best cure and inspections are becoming more common place, says Douglas. “There are thousands of buildings and communities in Dubai. We at Snag & Inspect have seen the number of inspection jobs increasing year by year and expect to see a substantial growth in inspections as word of mouth spreads among purchasers and developers’ understanding of inspections increases. It’s about quality of life and safety, one inspects ones car regularly, right,” he remarks.

Some of the defects the company found during inspections included, fire stops and thermal padding missing, which could become a fire hazard, mould due to water leakages which could cause respiratory issues, curtain walls in danger of falling and with that sucking out windows, faulty wiring, electric junction boxes missing, as well as rust setting in where it could become an issue, most though can be remediated at low cost if found early. Reasons for defects could be bad workmanship, or lack of maintenance, says Douglas.

“Structures with these defects simply don’t meet the buildings codes. For example, in one building we found walls, which were not completed all the way up to the slab above. You get people complaining about hearing their neighbours, or smelling the cooking, that usually is because there are gaps,” he adds.