Dubai's small developers join service fees crackdown

Interim home owners associations (OA) and facilities management companies across Dubai are reissuing access cards for car parks and swimming pools in a bid to block residents with outstanding service charges from using facilities.

While large-scale developers such as Nakheel and Dubai Properties have been blocking defaulters from communal areas for some time, many smaller developers and OAs are now following suit.

Several buildings built by independent developers in Dubai Marina and Jumeirah Lakes Towers have started to reissue access cards, concerned tenants told Arabian Business. 

“If [smaller] developers see the big developers doing this type of thing successfully, then they will start following their example. A lot of people have been telling me this is happening in their building,” said Brent Baldwin, partner at Dubai-based Hadef & Partners.

“More are starting to do it. It’s getting a bit desperate in some buildings where people are substantially behind on service charges. A lot of buildings you are hearing about some quite serious services being cut off and situations where DEWA has cut off the water,” he added.

Many developers do not have any choice but to block tenants from using a building’s amenities, said Mazen Falhout, general manager of MAGme Property Solutions. “They have to do something in order to maintain the building and blocking access to the amenities, parking and [issuing new] access cards are one of those tools that force payment.”

Service fees have been a particular bone of contention between developers and homeowners, with buyers accusing developers of charging inflated fees for building upkeep.

In projects such as Nakheel’s Discovery Gardens and Palm Jumeirah, default rates on service charges among homeowners are estimated to be as high as 50 percent. Nakheel banned more than 1,300 residents from using the beaches and gyms at its Shoreline apartments in 2011 after it claimed it was owed US$20m in unpaid service charges.

The row escalated after the master developer drained all six swimming pools at another development for outstanding charges mounting to US$4m. Similar tactics are now being used by interim OAs, left saddled with debt and struggling to make payments.

“Most of the interim OAs are employing external association managers to assist with the management of the building and those association managers know the tricks they can use to recover service charges,” said Baldwin.

The popularity of buildings in well-located areas means owners are typically quick to pay outstanding charges when tenants are faced with threats to block access to buildings. But buildings in less-desirable locations are struggling amid significant declines in rent, said Falhout.

“There are some areas where there isn’t much demand on the rent so the landlord doesn’t care that much but if the landlord is in a good area – Marina, JLT and Downtown – they are maintaining their service charges.”