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Could 2008 be the year for Timeshare in Dubai?
Country: Dubai, United Arab Emirates; UAE
29 February 2008
The remarkable growth of Dubai has been the subject of comment not only within the region but also worldwide, with the leisure and hospitality sector being a pillar of its success.
In line with similar high demand destinations, timeshare and other shared ownership models are an important element of Dubai’s successful leisure real estate development. However, there is a need to improve how timeshare deals are done and how they are regulated so as to boost consumer confidence.
One of the critical success factors for shared ownership is a regulatory environment that provides consumer protection to prospective buyers. In Dubai, the current legislation and regulation has been confined to the licensing of sellers without any specific rules in relation to product disclosure.
The absence of legislation has created uncertainty in recent years and the risk of poor practices has affected consumer confidence and the perception of timeshare in general. Now that all looks set to change as legal reform of the sector by the Dubai Economic Department with the Dubai Land Department and the Dubai Real Estate Regulatory Authority which is anticipated to soon come into play.
The key elements of any effective shared ownership legislation can be defined as:
· Proper information about the timeshare product and its structure enabling the purchaser to make an informed decision
· Clarity regarding the ongoing commitment of the purchaser
· A requirement to file advertising and promotional material with the regulator prior to use
· A ’cooling off’ period enabling the purchaser to change his mind
· Adequate protections to ensure that the developer delivers what has been promised at the time of sale.
New, higher standards of protection for timeshare and shared ownership might well result in Dubai being seen as an excellent model for the region. The scope of the proposed new regulation would cover all Timeshare Plans offered or marketed within the Emirate of Dubai, with a licensing regime covering all Developers, including a requirement for bank guarantees to be in place before licences are issued.
Registration will involve:
· A description of the project
· Filing of the proposed Purchase Contract and Disclosure Statement
· Evidence of ownership of the relevant real estate
There will also be minimum standards put in place requiring timeshare projects to consist of a minimum of 10 units of accommodation of at least 4 star standard. There will also be the important requirement that usage entitlement does not exceed the nights of accommodation available for use (one to one requirement). Each timeshare project will be required to have a management company in place to deal with ongoing management and maintenance.
Importantly, the legislation would also establish certain core information that has to be included in every contract for the purchase of timeshare. The language of the contract will be in both English and Arabic. Purchasers will have a 10-day ‘cooling off’ period in which to change their mind and cancel the contract without penalty.
During the ‘cooling off’ period, purchasers’ funds will be protected in escrow until Certification of Completion of the underlying accommodation has been granted. Alternatively, Developers may be allowed to provide a suitable bank guarantee.
Buyers and developers will welcome these new regulations, as they will, for the first time, offer high standards of transparency and certainty to the whole process of investing in shared ownership properties. Investors will know exactly what they are buying and the implications of entering into timeshare deals, while Developers will benefit from seeing the market grow as a result of consumer confidence in it.
By Eric Gummers, a partner at the London Law Firm Howard Kennedy.
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