Owners' Associations in Saudi Arabia: Formation, Management and Owners' Rights and Duties

What is commonly called an owners' union is called an owners' association in the Law of Ownership, Subdivision and Management of Real Estate Units, which defines it as an entity set up by the owners, or those representing them, in a jointly owned property to manage all of that property's affairs (Article 1). The Law was issued by Royal Decree No. M/85 dated 2/7/1441H and replaced the Law of Ownership and Subdivision of Real Estate Units issued by Royal Decree No. M/5 dated 11/2/1423H (Article 32), and its Implementing Regulation sets out many of its rules in detail. This guide covers when an association must be set up, the owners' shares, rights and duties, how decisions are made and disagreements handled, and registering the association on the Mullak platform.

When an Owners' Association Is Required

Under the Law, a jointly owned property is one made up of separated real estate units and common parts, and a separated unit may be a house, a flat, a floor, a shop or a garage (Article 1). Where the owners of the separated units in a jointly owned property number three or more, they must set up an association among themselves to manage it and register it with the Real Estate General Authority; where units are sold off plan, the association is registered from when delivery of the second unit begins. Once registered, the association has its own legal personality and separate finances, and registration requires bylaws governing how the general assembly and the manager work, the use of the common parts, how owners' contributions are set, and the association's financial affairs (Article 12 of the Law; Article 14 of the Regulation). Owners of jointly owned properties within a real estate complex may also set up a complex association, made up of representatives of the owners' association of each jointly owned property in it, or of the owners where there is no association (Article 13).

Common Parts and Owners' Shares

The common parts are the parts of the property intended for shared use, or whose nature requires them to be jointly owned, including the land, entrances, corridors, parking, tanks, lifts, gardens and courtyards (Article 1). They also include structural elements that pass through a separated unit, and mechanical, electrical and similar systems inside a unit or shared with other units (Article 8 of the Regulation). The owners are co-owners of these parts, and each owner's share equals the area of their unit as a proportion of the total area of the separated units in the subdivision approval document issued by the Authority, or in the building permit where units are sold off plan; the owners may agree to take the unit's value into account as well as its area. The share is attached to the unit in any disposal of it, and common parts that serve only some owners are owned jointly by those owners, unless otherwise agreed (Article 7 of the Law).

The Owner's Rights and Duties

• Each owner may use their unit in a way consistent with its designated use, and each unit is disposed of independently of the others (Article 8). The owners' association may not restrict an owner's right to dispose of their unit, or to use it and the common parts within the purposes they were intended for, provided the other owners are not harmed (Article 16).
• An owner must not use their rights so excessively as to harm a neighbour, must not do anything that damages the structure or affects the facades, and may use the common parts only for their intended purpose (Article 9). The external appearance of the jointly owned property may not be changed without the general assembly's approval (Article 30).
• An owner must maintain their unit, even if they do not use it, to prevent harm to the jointly owned property, and may not object to works that are necessary inside their unit to keep the property safe or to improve the use of, or maintain, the common parts, provided the unit is restored to its previous state as soon as the works end, and the owner bears no costs arising from them (Article 27). The Regulation requires the owner to be notified sufficiently in advance, excepts from that cost rule any harm to the jointly owned property for which the owner is responsible, and requires compensation where needed for the harm caused by having to vacate the unit during the works (Article 36 of the Regulation).
• Owning a unit in a jointly owned property that has an owners' association counts as the owner's acceptance of its bylaws and commitment to the decisions of its general assembly (Article 15). An owner who leases their unit remains bound, towards the association and third parties, by the rights and duties relating to the unit and the common parts, unless agreed otherwise with the tenant (Article 23).

The Association's Bodies and Decisions

• General assembly: made up of all the owners, it deals with all the association's affairs, including approving the manager's report and the annual budget, appointing the manager and the auditor and setting their fees, discharging the manager, and amending the bylaws (Article 18). Where a unit has several owners, they choose one of themselves to represent them in it (Article 17). The general assembly keeps minutes of its meetings and detailed accounts of the sums owed by the owners and others, and every owner or their representative may ask to inspect those account books (Article 32 of the Regulation).
• Chair of the general assembly: elected by the general assembly from among its members to chair its meetings and follow up its decisions (Article 18). The Mullak platform page explains that the chair's powers depend on the general assembly's decisions, so the chair cannot approve fees or amend the bylaws alone.
• Manager: manages the jointly owned property, may be one of the owners or someone else, and is appointed and given powers under the bylaws; the manager is liable to compensate the association or the owners for harm caused by breaching the Law or the bylaws (Article 19). The manager's powers include arranging and supervising maintenance, collecting owners' contributions, spending from the approved budget and representing the association before other bodies (Article 23 of the Regulation). The manager prepares the draft annual budget for the general assembly to approve, and gives the Authority and every owner a copy of the financial statements and the report on the association's activity (Article 20).
• Appointing the manager: the owner who built the jointly owned property may appoint the manager alone, on conditions that include keeping ownership of at least ten per cent of the separated units and the property having no fewer than one hundred units (Article 19 of the Law; Article 22 of the Regulation). The Mullak platform page states that a property manager may be an individual or a company, must hold a FAL property management license, and cannot impose new fees.
• Auditor: the association appoints an auditor licensed to practice in the Kingdom in cases the Regulation sets, including where the property has one hundred or more separated units; the auditor may inspect the association's books and records at any time and presents an annual report to the general assembly (Article 22 of the Law; Article 27 of the Regulation).

General assembly decisions are valid if approved by owners whose ownership represents at least three quarters of the total area of the separated units, unless the bylaws require a higher proportion, and where one owner's share exceeds half, their votes are reduced to half. The general assembly meets when called by its chair under the bylaws, and may be called at any time at the request of the manager, the auditor if there is one, or owners representing at least half of the separated units (Article 18). The Making Association Resolutions service on the Mullak platform lets the association chair, the property manager and the owners create resolutions and put them to a vote, and the service page lists, as its last step after the vote, approval of the resolution on the platform once the operations team agrees.

Owners' Contributions and Maintenance Costs

The association's resources are owners' contributions, donations, gifts, bequests and endowments, and returns on investing its funds and the common parts that can be invested, and its funds are spent on managing the jointly owned property and maintaining the common parts. Every owner must pay their contribution to these costs, and no owner may give up their share in the common parts to escape them (Article 24). Each owner contributes in proportion to the area of their unit relative to the total area of the separated units, and contributions may differ by type of use in a property with several uses; the costs of common parts that serve only some owners are borne by those owners, each in proportion to the area of their unit relative to the units that benefit, unless otherwise agreed (Article 26 of the Law; Article 34 of the Regulation). The Mullak platform page explains that association fees do not cover the units' own electricity or water bills.

Handling Disagreements Between Owners

• Going to the competent court: an owner harmed by the re-subdivision of the jointly owned property or a change in its use may go to the court (Article 3), and a co-owner seeking division may go to it if the co-owners do not agree on dividing their undivided shares in the property (Article 5). If the jointly owned property collapses, the general assembly decides what to do, and if the owners disagree, the matter is referred to the competent court (Article 29).
• Nuisance between neighbours: a neighbour has no claim for the ordinary nuisances of living nearby that cannot be avoided, but may ask for a nuisance to be removed if it goes beyond what is ordinary, taking into account public morals, custom, the nature of the property, the position of each unit and the purpose it serves (Article 9).
• The manager's decisions and contracts: without prejudice to other applicable laws, once approved by the Real Estate General Authority, the manager's decisions and the contracts the manager makes within their powers relating to the jointly owned property are an enforceable instrument against the owners under the Enforcement Law (Article 21). The conditions for approval include that neither the manager nor a relative up to the fourth degree has a direct interest in them, and that they are within the manager's powers (Article 24 of the Regulation).
• The role of the Real Estate General Authority: the Authority may, within its remit, take the action it sees fit if the general assembly cannot meet or issue decisions, and may notify the manager if it finds a failing and ask for it to be remedied (Articles 20 and 26 of the Regulation).
• Settlement between members: the Authority's website lists the Reconciliation for Mullak Program Beneficiaries service, provided by the Saudi Real Estate Arbitration Center, to end disputes between members of the association by agreement of the parties. Its published conditions include an existing owners' association whose members are the parties to the dispute, and criminal disputes fall outside the Center's jurisdiction.

Registering the Association on Mullak

The Real Estate General Authority registers owners' associations and regulates their work (Article 12), keeps a dedicated register of them, and an association acquires its own legal personality only once registered (Article 11 of the Regulation). The owners or their representatives apply for registration when the association is set up, and if they do not apply within the period the Regulation sets, any one of them may do so. Registration requires the owners' and the property's details, including the national address, the title deed number and the property's number in the Real Estate Registry, together with the bylaws and the names of the general assembly members (Article 10 of the Regulation).

The Authority provides services for these associations through the Mullak platform, which it describes as enabling owners and occupants of jointly owned real estate units to set up associations to manage properties and facilities. The services listed on its page include creating a new association, joining an association, association invoices, applying as a property manager and standing for association chair. The Authority describes its New Association Creation service as being for the owner of a whole property or a real estate developer, and explains that where the property has not been subdivided, the association is registered electronically through the real estate unit subdivision platform once the deeds or registry records are issued, and that for a subdivided property with deeds, the request starts with entering the title deed.

This is general information based on the cited laws when this page was prepared. It may change, and it is not legal advice on a specific case.