Invest-Gate Discusses Wraps Up its Roundtable Discussion on Occupants Union

Invest-Gate Discusses Wraps Up its Roundtable Discussion on Occupants Union

Invest-Gate holds a virtual roundtable to discuss the occupants union law, suggesting amendments to preserve real estate wealth, under the title Occupants Union Law: Recommendations to Preserve Our Real Estate Wealth, in cooperation with the Egyptian Businessmen Association (EBA) on June 14, 2021.

The discussion is moderated by Fathallah Fawzy, head of the construction committee of the EBA, in the presence of the First Undersecretary and Head of the Housing and Utilities Department at the Ministry of Housing, Utilities, and Urban Communities Nafisa Hashem.

Moreover, several prominent real estate experts join the roundtable discussion, including Hisham Shoukry, chairman of Rooya Group, Ahmed Shalaby, president and CEO of Tatweer Misr, and Waleed Mokhtar, managing director and CEO of Iwan Developments.

Market leaders tackle many pivotal points are such as the definition of the occupants union, what its major responsibilities are, and how to elect the board of directors. Additionally, participants remark the importance of this law in preserving properties from collapsing, the most prominent contentious articles of the law that need amendments, as well as some important obstacles including financial fees collection for services and maintenance, and how the occupants union is authorized to impose penalties on those who don’t pay.

In this regard, Hashem comments, “Several sessions were held to amend the Occupants Union Law, in a bid to clarify the most prominent obstacles and find effective solutions to them,” adding that these amendments have not been issued yet.

She adds that these amendments include the main problems facing the occupants unions and the real estate developers, which are summarized as follows:

  • In the first 3 years of the union’s establishment, the real estate developer takes over the management under the condition that (40% occupancy and electricity services), and after this period ends, a general assembly is held to elect the board of directors, either the developer or the occupants union.
  • The law stipulates that for a residential complex, a management and maintenance company have to be established which is a problem for the non-integrated residential communities such as Marina. Therefore, the amendments indicate that either integrated or non-integrated residential communities must contract with a management and maintenance company and not create a company.
  • The chairman can be represented by one person only
  • The Occupants Union Law has neutralized the administrative authority, so it is suggested that it be a neutral party with no voice when it comes to management.
  • Amongst the amendments, adopted by Prime Minister Mostafa Madboly during his tenure at the Ministry of Housing, is that the occupants union’s responsibilities to be defined according to a contract between the developer and the occupant, as there are management and maintenance terms mentioned in the contract, without the state interfere.

On his part, Shoukry comments, “The problem of the Occupants Union Law is that it was issued before the emergence of residential communities, meaning that, it is related to residential buildings, as residential or tourist communities include a larger number of units. Thus, more obstacles prevent the law’s implementation.” He adds, “The occupants union elections highlight election professionals, not the best for management.”

Shoukry also supports the amendment to assign the residential complex’s management to the real estate developer, based on contract terms, because the developer is the best for management because he will be keen on the history of his projects, adding that the developer should manage the complex during the first 3-5 years, without heading an occupants union, and after the expiry of this period, if more than 50% of the occupants demand that the real estate developer not to manage the project, an occupants union has to be established.

Additionally, Shoukry clarifies that the developer should implement the transparency principle, by providing a chartered accountant or establishing an entity authorized to monitor and review how the occupants union’s funds are spent.

Mokhtar comments that the authorities of the responsible entity, either the developer or the occupants union, should be clarified, adding that the union’s authority is about managing everything related to the occupants union, except for the maintenance responsibility, which has be assigned to specialized companies, to ensure cost reduction and providing high-quality services, which in returns help determine the market value of the property.

Mokhtar remarks on the cruciality of financial returns diversification “because over time the maintenance deposit value will be insufficient to cover the maintenance costs,” clarifying that this diversification can occur through “converting the deposit into an asset inside the project, and its income will become a major or a minor income source to spend on the project’s works.”

He affirms that the residential complex’s management has to be assigned to the developing company especially in the beginning, as it will pay a great deal of attention to the project for better future marketing of his projects.

For his part, Shalaby agrees with Mokhtar saying, “The real estate developer is the best to manage the project for any time period as long as he manages it with high efficiency and according to a contract terms, in addition, the developer or the occupants union must have the opportunity to use the maintenance deposit in an investment manner to achieve project returns, with the importance of having a chartered accountant.”

With regard to investing the resources of the occupants union, Hashem states that Law no. 85 stipulates providing the union with investment opportunities, whether through units in the project, a service building, advertisements, or others. In other words, Mokhtar clarifies that there are replacement and infrastructure high-efficiency works, as well as maintenance works that need financial sources.

Furthermore, Mokhtar points out that one of the important tools that can be used to execute penalties on the occupants, who do not pay is to impose restrictions by controlling the technological services in residential communities that include smart units, not just cutting off utilities.

In a related context, Shalaby stresses on the importance of the Occupants Union Law to preserve the future of the real estate wealth in Egypt, so a sustainable mechanism must be provided to ensure the implementation of this law.

Moreover, Shalaby suggests the establishment of maintenance companies registered in the Ministry of Housing, and the developer or the occupants union is obliged to deal with these companies. Besides, Shalaby mentions that these companies will contribute to providing job opportunities. He indicates as well the importance of reconsidering the calculation method of the maintenance differences between villas and residential units, which are determined according to the area.

On the other hand, Hashem comments in response to speakers’ inquiries on the unconstitutionality of cutting off utilities for occupants who fail to pay financial obligations that if these facilities are provided by the state, it will be unconstitutional to cut them off; however,  if these facilities are owned by the real estate developer, either water desalination plants, solar power plants, or others, it is the developer’s right to cut off these utilities.

Another inquiry on the legality of holding online meetings of the general assembly under the current precautionary measures, and Hashem affirms that this goes under the law stipulating that the general assembly has to be held once a year.

Moreover, the roundtable witnesses a great interaction from the audience, where Yasser Ibrahim asked about whether the Occupants Union Law applies to the tourist segment, following the Tourism Development Authority. For her part, Hashem states that tourist units are not excluded from the Occupants Union Law and there are no amendments to it.

Additionally, Karim Akram, one of the attendees, suggests that “To overcome the problem of collecting financial obligations, there should be a special court for the occupants union to oblige the people who do not pay, as well as banning their units sale,” which was supported by Hashem, asking the Ministry of Justice to create a specialized court for building violations and occupants union to guarantee the judgments speed.

Finally, Khaled Abdullah, chairman of the board of directors of Little Venice at Ain Sokhna and a professor at Faculty of Medicine, Ain Shams University adds that “The real estate developer has to manage tourist village projects in North Coast transparently, without infringing on the rights of the owners or occupants, and informing them everything related to financial deposits.”




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