Real Estate, Construction and Hotels & Leisure Focus
Noor Al Rayes Head of Litigation - Bahrain, Litigation
Bahraini Court Precedent: the Owners Association has the authority to operate, manage and maintain the common areas insofar it the areas are not prescribed otherwise in the scheme of the project.
The factual background of the case starts when an Owners Association filed a claim before the Courts of Bahrain requesting to oblige a Real Estate Project to hand over the common parts of the project along with the entrance and public roads to the Owner Association. The Owners Association justified the claim stating that the Management of the Project seized the entrances to the residential complex and its public roads by setting up barriers in the internal road, which prevents the Owners Association from undertaking its responsibilities according to the Law No. 27 of 2017 with respect to promulgating the Real Estate Sector Regulation (the “Law”). The Courts of first instance and appeal approved the claim of the Owners Association and decided to oblige the Real Estate Project to hand over the common area.
However, the Cassation Court had different view in its judgment No. 2018 of 1083. In this regard, the Cassation Court decided to revoke the judgment in the appeal filed by the Real Estate Project against the ruling on the basis that the documentation lacks the evidence, which would normally prove and specify the common parts as well as its registration on the original plan of the project registered with the Real Estate Regulatory Authority.
In light of the above, the Court has addressed an argument that the Owner Association’s registration should be invalidated along with the representation in the case as the registration has expired with the fact that the Owners Association has a distinct legal personality that will be created once the register of the first unit take place in the joint property. As a result, the Owners Association will have the right to pursue legal claims and to be represented in that sense by his manager before the judiciary and administrative authorities. The Owners Association will further have the right to deal with third parties in a distinct capacity than its owners. Further, the Cassation Court emphasized that the expiry of the terms of the board of directors of the Owners Association does not result in the expiration of its legal personality. In this regard, Articles 63 and 62 of Law provides that the General Assembly have the right to appoint a director licensed by the Real Estate Regulatory Authority, and to renew the current director or to authorize the Board of Directors to do so.
The Law further provides that unless agreed otherwise, the owner of each unit and the developer of the unsold units shall have an undivided share in the common parts in accordance with the percentages specified in the Bylaws. The percentages shall be determined on the basis of the area of the unit from the total area of the Common Property, nature of the use of the Units and any other criteria provided for in the Bylaws.
In addition, the Cassation Court has emphasized that the Owners Association has the right to operate the common parts of the joint property in accordance with Article 66, which allows the Owners Association to manage, operate, maintain and repair the common parts. The same is unless the projects plan or its nature exclude said areas from the prescription of the public and/or common areas. The plan in this regard will be the plan registered with the Real Estate Regulatory Authority that would show the units along with their common parts.
The Cassation Court added that in the event where the documentation lacks the evidence that would indicate the inclusion of a copy of said plan to consider the extents of the common parts within the joint property. This is required as the Owners Association authority will be limited to the registered common areas only, which identifies the borders of the private properties.
Generally, the Court was of the view that insofar the common areas are registered the area will be handed over if proved before the Court.
Generally, the Court was of the view that insofar the common areas are registered the area will be handed over if proved before the Court. In this regard, we note that Resolution 7 of 2018 Regulating the Owners’ Associations and Joint Properties which came into force on 26 September 2018 (the “Resolution”) has outlined the documentation and registration obligations on the developers relating to the common areas which includes the following:
the Joint Property By-Law in an acceptable form;
the base plot title deed and the consent of any mortgagor;
a plan identifying the common areas, property boundaries, the units, accessory units and easements affecting the common areas (known as the Property Location Plan);
a schedule listing the units, accessory units, their numbers, both the interior and exterior sizes, the entitlement of each; and
the articles of association of the Owner Association in compliance with Article 7 of the Resolution.
In light of the above, we are of the view that the judgment represents a landmark precedent relating to the nature of the common areas as well as the means of evidencing the common parts of the joint property. In this regard, failing to establish that the common parts are contemplated within the plan of the real estate project, shall result in lacking authority to run the common area by the Owners Association.
For further information, please contact Noor Al Rayes.
Published in July 2022
