RERA bans service charge hikes this year

A new system to calculate maintenance fees will be made mandatory in Dubai. 
By Joanna Hartley
Mon 09 Feb 2009 07:56 AM

Dubai's real estate regulatory agency has banned property developers from modifying their service rates this year without its permission, in the wake of accusations they were profiting from annual fee hikes, it was reported on Monday.

The Real Estate Regulatory Agency (RERA) said it would be developing a single system for calculating service charges that would be mandatory for developers to use in the future, according to UAE daily Khaleej Times.

“The services charges are no longer subject to the developers' calculations and their desire to turn them into a profit-making tool,' said CEO for RERA, Marwan bin Ghalita.

However, maintenance fees are normally required to be paid at the beginning of January every year, which in some developments have resulted in a more than doubling of service charges to owners and tenants.

It is not clear whether increases announced for this year will be forced back to last year’s rate, or whether the ruling is applicable from now.

“On the whole, this ruling is tremendous. However, there are several question marks remaining,” said Hamid Hamri, chairman of the Owners Association in Jumeirah Beach Resort, which has seen maintenance fee increases of 129 percent.

At the same time property developers defended themselves against the profiteering claims, stating that that maintenance rates were only set after consultation with property owners.

Furthermore, every property developer’s accounts were independently audited by outside firms to ensure all the figures were accurate and transparent, said Abdulrahman Kalantar, managing director of Nakheel asset management design and developments, according to UAE daily Emirates Business.

"Our service charges are based on projected costs with the accounts independently audited by a company to ensure accuracy and transparency," he said.

Other developers said that none or only minor increases had been made in maintenance charges this year.

Properties Investments, which owns and developed Green Community and Green Community West, said it had made small rises.

Meanwhile, ETA Star Properties said it had made no increases to its maintenance charges at the Belvedere project.

"We have kept the maintenance charge of AED8 per sqft, which was levied for the year 2008," reported Mohammed Ali, general manager, marketing at the firm.

However, some developers said they did see an increased role for Dubai’s governing agencies, such as RERA, to ensure property laws were enforced on a daily basis.

"Laws should be enacted to protect public interest by promoting a gradual development of the market. RERA has a key mandate in the planning and implementation of structured regulations within our market," said Hesham Al Qassim, CEO of Wasl and Dubai Real Estate Corporation.

Under the new regulation service charge increases will be calculated by RERA based on a formula that “will seek to strike a balance between the expenditure shouldered by the developers and the quality of services received by the owners”, according to state news agency WAM.

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