RERA plans service charge regulation for Dubai landlords

Industry experts say it will help tenants signing a new lease for property in Dubai
By Will Milner
Wed 25 Jul 2012 12:00 PM

Dubai landlords may soon be required to declare whether or not they have paid service charges on their apartments when they are entering into a new rental agreement with a tenant, Arabian Business has learned.

“We are aware that RERA (Dubai’s Real Estate Regulatory Authority) is considering introducing such a requirement, however full details are unknown at this stage,” said Dean Cheesley, senior legal consultant at DLA Piper legal firm in Dubai.

“The introduction of a disclosure obligation on landlords is likely to benefit residential tenants in terms of making them aware of the current position at the time of entering into a lease, which is an improvement on the current situation. In theory this will allow tenants to make a more informed decision as to whether they should enter into a lease with that landlord or renew for a further term,” he added.

Matthew Green, head of research and consultancy at property consultancy firm CBRE, said information on the proposed scheme was “minimal” at present, but the industry would welcome the move.

“There have been various ongoing issues with service charges. This will help to safeguard tenants from unscrupulous landlords. It is another step in the right direction and will improve transparency,” he said.

However, Green added “more still needs to be done on the transparency in terms of service charges themselves. A lot needs to be done to improve transparency for investors when they are purchasing properties.”

The issue of service charges has become a hot topic in Dubai and real estate agents told Arabian Business last month some tenants were shunning apartments on Dubai’s Palm Jumeirah developments as a result of confusion over service charges.

Master developer Nakheel’s long running battle with its customers on the Palm Jumeirah started last December, when it banned more than 1,300 residents from using the beaches and gyms at its Shoreline Apartments residences and claimed it was owed US$20m in unpaid service charges.

The row escalated last month when Nakheel drained all six swimming pools at another development, its prestigious Marina Residences towers after it was revealed over US$4m in service charges remained unpaid.

While Nakheel has since begun refilling the pools, real estate agents said the ongoing negative publicity has meant renters are now shunning its developments on the Palm and some existing tenants are demanding a rebate on their rent or are seeking to relocate.

“The articles written recently about the problems of service charges or lack of payments to properties on the Palm are, I am sure, having a negative effect,” said Mario Volpi, head of residential sales and leasing at Cluttons.

“When we are offering a wide selection of properties there does now appear to be a reluctance [towards] the Nakheel properties on the Palm. The questions from prospective tenants are mainly along the lines of whether the landlord is up to date with his/her maintenance payments,” he added.

Patricia Fernandes, assistant manager of residential sales and leasing at Better Homes, echoed this sentiment and said tenants were now “being extremely cautious” about renewing leases on the Palm.

“It’s been noticed that quite a few tenants who have been renting on the Palm for a while now are extremely frustrated and no longer wish to renew their leases, or are looking to break their lease for the obvious reasons of limited or no access to on-site amenities," she said.

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