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While disputes over service charges have been reduced when the Dubai Real Estate Regulatory Agency (Rera) took charge in approving the fees, owners’ associations (OAs) and developers are facing problems
Disputes arise when developers ask purchasers to pay an estimated service charge at handover instead of the amount approved by Rera, says Ashraf Sayed, Head of Commercial Property at Hadef & Partners.
Both parties usually don’t agree whether to use the title deed or the sale and purchase agreement when determining the size of the unit. Other points of contention are the size of terraces or balconies, the number of instalments and the difference in rates between commercial, retail and residential units within a development.
“Rera is now requiring all developers to include estimated service charges in their off-plan property’s marketing material,” says Sayed. “However, service charges are unlikely to be finalised until the project is completed, as fees for contractors and service providers are subject to change and the actual services may differ at the time of completion.
“We have seen the least disputes in projects where developers are transparent in their books and allow the owners to voice their opinion on the services and service providers.”
With OAs unable to get a licence from Rera, it is difficult to enforce regulations, says Sayed. “To the best of our knowledge, very few OAs have been licensed by Rera,” says Sayed. “The lack of legal recognition creates legal challenges in terms of enforcing owner’s rights.”
For example, an OA could not enter into contracts with a service provider and there are risks if a board member signs a contract on behalf of an OA. The lack of legal recognition also makes it difficult for an OA to enforce service charges, says Sayed. “If an owner fails to pay service charges, the OA may have difficulty pursuing the defaulting owner. This may result in a domino effect and reduced collections, which in turn results in reduced service quality.”
In the absence of a legally recognised OA, interim OAs have been established. “The authority and powers granted to the interim OA is largely dependent on the relationship between owners and the developer, and a key aspect is whether the developer really wishes to allow the owners to deal with the project as they deem fit,” says Sayed. “We are aware that over the last 12 months, Rera has increased pressure on developers of ready property to call a general assembly to elect an interim board and appoint an association manager to manage a project.
“There are also rumours about changes in the law whereby OAs would not be legal entities, but would have to act through an management company. This raises various legal concerns and it remains to be seen whether OAs will finally become fully legal as promised in the law, or whether that will be amended or repealed.”
Source: Nicole Walter, Special to PW