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- DLD's real estate escrow account system for JOPs enhances regulatory, supervisory roles
DLD's Real Estate Escrow Account System For JOPs Enhances Regulatory, Supervisory Roles
Muhammad Irfan 5 months ago Tue 23rd March 2021 | 04:30 PM
DUBAI, (UrduPoint / Pakistan Point News / WAM - 23rd Mar, 2021) In 2019, the Real Estate Regulatory Agency (RERA) at Dubai Land Department (DLD) adopted and activated the bank escrow account mechanism of jointly owned properties (JOPs) using the electronic Mollak system, which constituted a quantum leap in helping JOP owners easily manage and run their projects.
It also contributed to preserving their rights by providing a direct deposit service in their bank accounts, without any relationship of the project developer with these accounts, thus enhancing their trust and transparency.
DLD continues to employ modern and advanced electronic means in strengthening its governance, regulatory and supervisory role, and raising the level of customer satisfaction and happiness in the services provided; the innovative system was met with demand from several local banks. Since its adoption, RERA signed agreements to manage escrow accounts for JOP management companies with nine local banks, which are Abu Dhabi Islamic Bank, United Bank Limited, Commercial Bank of Dubai, Abu Dhabi Commercial Bank, Arab Bank for Investment & Foreign Trade (Al Masraf), Dubai Islamic Bank, Emirates NBD, First Abu Dhabi Bank, and Mashreq Bank.
The nine banks, under RERA’s supervision, will open escrow accounts for JOP management companies to help protect JOP owners. Under government legislation, including Law No. (6) of 2019, property owners, or approved real estate management companies that work on their behalf, will bear responsibility, instead of developers, to ensure greater transparency and governance through the nine approved banks.
In accordance with the agreement, the account trustee is obligated not to change, cancel or amend the terms and conditions for the account creation without RERA’s prior written approval, with the exception of modifying the fees for the account’s services. They also commit to not paying, transferring or executing any money deposits in the accounts except in accordance with the duly edited and signed approved authorisation, or with RERA’s written approval. The account trustee must receive a copy of RERA’s written or electronic approval that shows the approved budget and the service and maintenance charges, explaining the suppliers’ contracts.
They should also not allow any payment or cash withdrawal from the escrow account if it exceeds the limits of the allowable amount for any particular service provider or service, except with RERA’s approval. The account trustee is obligated to notify RERA in writing and immediately upon submission of evidence indicating that the account trustee has received any requests related to the escrow account from an entity other than the management company registered with RERA.
The agreement also stipulates that the account trustee must keep an up-to-date record with the Names and signatures of the authorised persons at each management company. They should also ensure that the authorisations issued to those represented to sign on behalf of the management company were issued according to official documents duly certified and registered by RERA. They should not allow any person not duly authorised or registered with RERA to act alone in escrow accounts. The account trustee may not be the owner of any real estate project, whereby the management company manage the facilities in that project submits an application to open an account with the account trustee in order to avoid a conflict of interest. The account trustee is also obligated to maintain an accurate and up-to-date record of the management company’s account and allow RERA to review those records and take copies of them when needed.
In addition, the agreement confirms the necessity for the account trustee to abide by the legislation and regulations regarding the ownership of JOPs in Dubai and the executive regulations and circulars issued by DLD and RERA. The account trustee should also provide RERA with a periodic financial statement of the movement of accounts or a monthly financial audit report upon request, issued by the manager of the escrow account for the project at the bank, requesting a copy of all supply contracts, maintenance contracts, services and others from the management company and auditing them by the account secretary before disbursing payments due to suppliers, according to the applicable system or as specified by RERA. The management company must obtain RERA’s approval to disburse any amount from the reserve account with the reasons being stated, and the account trustee must commit to not disbursing any amount from the reserve account without RERA’s approval.
Marwan bin Ghalita, CEO of RERA, commented, "The introduction of the electronic Mollak system has ensured further transparency and trust in Dubai’s real estate market. Our partners in the nine banks play a crucial role in the smooth management of this digital process that is of great benefit to the owners. We expect that the total services charges that will be audited via the Mollak system will exceed AED 4 billion, which will increase customer satisfaction and happiness, while also save time and costs. We are pleased that these banks have joined us to help us achieve the desired results."