The ten big burning legal questions of The Address Downtown Dubai fire

Key legal questions arising from the new year’s eve blaze are answered by construction and property lawyers Michael Lunjevich and Anthony Edwards of Dubai-based law firm Hadef & Partners. Should apartment owners be worried about their liability for facade fires? One of the main issues we have is that the Jointly Owned Property Law has […]

Key legal questions arising from the new year’s eve blaze are answered by construction and property lawyers Michael Lunjevich and Anthony Edwards of Dubai-based law firm Hadef & Partners.

Should apartment owners be worried about their liability for facade fires?

One of the main issues we have is that the Jointly Owned Property Law has not been fully implemented. It was enacted in 2007, yet owners’ associations which give legal personality to the collective owners have not yet been widely approved and they are still “interim” which is not recognised under the law. This means there is a situation where the owners may be jointly liable to third parties, but they do not collectively have a legal personality to protect their interests against others. It’s practically impossible to bring class actions, so this highlights the need for the regulators to get on with the full establishment of owner’s associations as legal entities so the owners can protect their interests properly.

What protection is afforded by building insurance?

Owners may not be aware of the insurance put in place for their building. This means there could be gaps which might allow insurers to dodge liability. Is this caused by faulty design, faulty materials, faulty installation or a structural defect? Each possibility has a different treatment under insurance and should be investigated. As owners’ associations are not established legally, insurance may be just in the name of the developer and the owners may or may not be additional insured persons under the various policies. All interim owners associations out there need to dust off their insurance coverage and have a good look at it.

What is the regulatory response likely to be?

What will be interesting to see is how the regulators react and also the market. We’ve had situations before where multi-owned buildings have caught fire and it has taken a very long time to work through the insurers payment to allow repair work to start. I don’t think that will happen with the latest one because it’s in a different locality and a different developer. But at the end of the day the regulators, both Rera and Land Department, need to act to bring the Jointly Owned Property Law into full effect.

What are the implications for the wider property market?

This couldn’t have come at a worse time to be fair. You have low oil prices, high US dollar, regional unrest, so it’s a bit of a perfect storm for the market already and we don’t need this added uncertainty on legal rights and recourse for apartment owners. I suspect people will think twice about buying apartments in buildings that have cladding issues.

How is the litigation likely to play out?

It depends entirely on the cause of the issue of course, and one will probably chase the money in the insurance policies. Insurers will likely bear the brunt of it if the insurance coverage is in place. For example, a unit owner may sue a developer, who in turn sues the construction contractor, who sues the designer, who sues the material manufacturer and they all call on their insurers to pay up if they are found liable. Developers, consultants, contractors, material manufacturers and insurers will all play a part in this. This is not a standard building fire — here we are talking about a fire that has highlighted problems with materials and lots of it is possibly in the market.

What can apartment owners do to mitigate their risk exposure?

If this issue is truly as big as people suspect, then everyone needs to pull out their contracts, whether that be the sale and purchase agreement, the construction contract or insurance contracts and take legal advice. Each possible person that could be sued needs to make sure that risk is backed up with insurance. If not, then the absence of clear bankruptcy laws means individuals need to be especially concerned if they face civil claims, and developers, contractors and consultants have a potential reputational and liability concern. They shouldn’t wait until a crisis.

How realistic is a full scale cladding replacement programme?

This concept is really quite novel and, therefore, quite difficult to see being enforced under law, because how do you say to the owner of a building that was completed several years ago that the building has essentially to be rebuilt using new types of material including new types of cladding? We think the only way it could be done is if the law makers – in effect Government – were to impose such an obligation on owners by passing a new law making it compulsory to comply.

What is the relationship between liability and the relevant regulations of the time?

This is a complex area of the law and gives rise to many arguments when issues are debated in the Courts and other judicial forums. If – as may be argued — fire regulation standards have not been particularly certain over the last decade or so, it means that those parties who find themselves in the “firing line” when it comes to claims in Court, will be asking why should we be liable as designers or contractors when there wasn’t a very certain set of regulations put in place by regulatory authorities at the time.

Who is carrying the greatest potential exposure?

Essentially insurers will end up bearing the brunt of the major costs involved in repairing damaged properties. Claimants will only really be interested in chasing those responsible who have the deepest insurance policy pockets. Designers are usually required by developers to carry significant amounts of insurance cover. So increased numbers of claims for ever larger amounts of loss will invariably hit the market as the costs of professional indemnity insurance is likely to increase significantly. The conundrum here is, as has happened in the past, that insured parties – such as designers – may end up not carrying enough cover to meet the escalating claim losses and insurers may even decide to leave the market and so leave the designers without the ability to cover the losses.

Where will the legal arguments be heard?

Cases that involve defendants being sued who are in contract with the claimant will often end up being heard in private in arbitration hearings as a result of terms agreed in the contracts for disputes to be dealt with by arbitration. On the other hand, some claimants who have suffered losses may not have contracts with the ultimate parties liable for their losses. Those claimants will have to resort to the courts. So if any one defendant – say a designer or contractor – is being sued both in arbitration and in the courts there is the potential of different outcomes in the different cases; something of a nightmare for claimants and defendants alike.

scronin@thenational.ae

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Source: Business

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