Preparing for all eventualities

Preparing for all eventualitiesImage Credit: Supplied

From the flames that consumed entire buildings, to the blaze that ripped through the higher floors of several Dubai skyscrapers, the pattern has become disturbing. In 2014 alone, 220 fire accidents were reported throughout the city's residential buildings, according to Dubai Police, and these follow similar incidents that took place over the previous years.

Although other types of disasters, such as floods and earthquakes, are less common in the UAE, accidents such as burst water tanks and leaking air conditioners, which can cause serious damage to properties, are quite common in the country. Now comes the big question: what recourse do you have as a tenant or an owner when your building suffers a calamity?

What is covered?

In the UAE, three main areas are coverable by home insurance: buildings, contents, and personal belongings. Home contents, including appliances, furniture, and other goods that remain in the property, and personal belongings, which cover valuables carried or worn that go outside of the home, are both optional insurances. In the absence of these protections, tenants and owners are responsible for replacing their own possessions.

Moreover, neither of these insurances cover an alternative accommodation, unless a specific provision is added to cover this risk. Nor is the landlord obliged to refund the rent that was paid in advance, as the Landlord and Tenant Law does not expressly deal with this situation.

So unless such a scenario is specifically addressed in the lease contract, claiming back the rent will depend on the willingness of the landlord or Owners Association (OA) to cooperate – and in many cases they offer to help.

For instance, an owner association management company recently provided 20 studios and one-bedroom apartments to house fire victims in one affected building, some for up to two months. If the landlord refuses to cooperate, however, and the matter is referred to the Rental Dispute Centre, in such circumstances, it would likely find in favour of the tenant.

Owners' responsibility

The third type of insurance covers buildings and is mandatory for OAs, which are independent legal entities that have to be registered with the Real Estate Regulatory Agency (RERA).

OAs must insure their buildings through a fund to which owners contribute annually. The owners could also agree to extend this insurance to include loss of rental income, or to cover rental payments needed during the period in which the building is being reconstructed. Therefore, an owner should find out if the building insurance taken out by the OA covers the loss of rental revenue.

That said, if the insurance company determines that the OA failed to comply with health and safety regulations, it could render the policy void.

You might wonder whether the developer has a role to play in all of this, especially if the accident relates to the way the building was constructed or to the materials used by the contractor. As a general rule, once the developer hands over the first unit to a buyer, the OA comes into existence and all responsibilities of the building pass on to it. The developer then steps out of the picture.

Nevertheless, under the UAE Civil Code Articles 880 – 883, developers, contractors and architects are jointly liable for any structural defect threatening the building's safety for 10 years from completion of the project. The developer is also responsible for faulty installations related to plumbing, mechanical and electrical works for up to a year after project completion.

Therefore, losses could be shifted back to the party that specified a certain type of material. This is a crucial consideration, especially since the use of fire-resistant exterior cladding on new buildings only became a legal requirement in 2013, when the UAE updated its Fire and Life Safety Code.

This means that the revised law does not apply to the hundreds of existing buildings, the majority of which were built using potentially dangerous flammable cladding.

Mortgage dilemma

When it comes to owners who are paying mortgages, they should already have property insurance in place as it is compulsory with all home loans. This type of insurance covers the property's structure, including walls, roof, and windows – and could include alternative accommodation if the home becomes unliveable.

At times of natural disasters like fire, explosions, earthquakes, storm and floods, banks will typically cover 100 per cent reinstatement of the sum of the property insured. In other words, the mortgage provider would pay the cost of returning the property to its original state, but the loan itself remains valid.

In light of these events, it's good to know authorities have stepped up efforts to increase safety in buildings and regulate insurance procedures. Earlier this year, Dubai Land Department revealed it was studying new measures for real estate insurance in the emirate, with the goal of identifying the responsibilities of the various parties involved and expediting settlement of receivables in the event of accidents.

Soon after, Dubai Civil Defence announced it had equipped 40,000 buildings with ''Life Safety Dashboards'', an amount that would increase to 70,000 buildings within three years. The system will allow the authority, along with other government departments and even residents, to view the safety status of buildings in real time on smart devices.

At the end of the day, ensuring the safety of our property is a collaborative duty, especially considering that many of the fires in Dubai's buildings started in kitchens and balconies. Could any of them have been avoided?

Ask the agent on how to be sure of your investment

Source: Porush Jhunjhunwala, Special to Property WeeklyPW

The author is Director of Banke International Properties


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