Legal Update: Amendment to the Real Estate Sector Regulation Law
Our Associate, Fatima Alsayed explains amendments to the Real Estate Law.
Fatima Alsayed – Associate ([email protected])
The principal Law governing the real estate sector in the Kingdom of Bahrain is Legislative Decree No. (27) of 2017 on the Issuance of the Real Estate Sector Regulation Law (the “Law”). On 3 November 2022, the Shura Council along with the Council of Representatives enacted Decree No. (41) of 2022 introducing a new chapter to Section Three of the Law related to the management of the common parts other than through the owner’s union. This article aims to provide an overview of the amendments to the Law with the focus on the new provisions under Section Three.
General Amendments
There is a key general amendment we must take note of –
Increase on Total of Fines
When a violation is established, the Real Estate Regulatory Authority (“RERA”) shall order the violator to stop the violation and remedy the effects thereof immediately or within a time limit as may be specified by RERA. In case of non-compliance, RERA may impose a warning fine. Prior to the amendment, the total fine did not exceed Bahraini Dinars Twenty Thousand (20,000), however the amended text of Article 11 (a/2) of the Law now determines the total fine to not exceed Bahraini Dinars Fifty Thousand (50,000). Additionally, prior to the amendment, the total aggregated fine was twenty thousand (20,000) Bahraini Dinars, however,the amended text of Article 11(a/3) of the Law now determines the fine to not exceed Bahraini Dinars Two Hundred Thousand (200,000) ,where in the event the violation is related to a real estate development project, the fine may be at a rate not exceeding two percent (2%) of the estimated value of the project.
Chapter Three: Management of Common Parts Other Than Through Owner’s Union
According to this Chapter, the developer may undertake the management, operation, maintenance and repair of the common parts other than through the Owners Union (defined under the Law as the union established by the owners of the property units located in the common parts) if he obtains a license in accordance with the rules and procedures specified by a decision of the Board of Directors. The developer may assign a licensee following the regulations issued by the Board of Directors, making them jointly liable for managing the common parts.
In addition, an Owners Committee (the “Committee”) shall be established in place of the Owner’s Union and its members will be selected by the owners of the common parts. A decision shall be issued by the Board of Directors regulating the procedures, rules and provisions to form the Committee and any other issues. The role of the Committee is to take reasonable efforts to protect the interests of the owners and ensure proper use of the common parts by supervising the management done by the developer.
Annual Subscriptions
The developer shall set forth in the Regulation for the Management of the common parts the bases of estimating or increasing the annual subscriptions to cover the expenses of managing, operating, maintaining and repairing the common parts. The Committee may request the developer to reconsider the subscriptions if it finds that the developer did not fulfill his obligations in managing the common parts.
Dismissing the Developer from Managing the Common Parts
The competent court may, based on a request submitted by the Committee or the unit owners who own a percentage of the common units, exempt the developer from managing the common parts in the following cases:(i) if the developer lacks the necessary competence or is unable to perform his obligations and duties or fails to take due care; (ii) carry out actions which contravenes the law or the regulations managing the common parts; or (iii) gross negligence. The court may also exempt the developer based on a request submitted by the unit owners who own no less than seventy-five percent (75%) of the common property.
Developer’s Withdrawal from Management
A developer may step down from managing the common parts following the approval of the Committee one year prior to the withdrawal unless the Committee agrees to a shorter period. During this period, the developer must take all necessary measures to appoint a licensee to manage the common parts with the approval of RERA and the Committee. RERA may, at the request of the Committee, appoint an independent body to prepare a report on all the circumstances that affected the management of the common parts, analyse the duties of the developer before stepping down and the rights along with the entitlements needed to be collected and any other matter requested by RERA.
Upon the Developer’s dismissal or withdrawal from the management of the common parts, the developer shall transfer to whomever the management devolves all documents, papers, and contracts necessary for the management, operation, maintenance and repair of the common parts, bank accounts, and other matters of the common parts management.
For more information, please contact us on [email protected].