RERA plans service charge regulation for Dubai landlords

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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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Posted by: anne whittingham

I am an owner in EG Rose building I have a small studio. Damac properties are charging me half my rental income on service charges. I want to contact Rera but do not know how to go about this. Damac properties were very late with the handover of their development but the service charges are outrageous it is no wonder some home owners are not paying them can anyone advise me on what to do.

Posted by: Amir

RERA is biased. RERA was formed to protect the developers and not individual investors.

Posted by: Mad at the situation

RERA is a big issue for investors as any action they take is just to squeeze them further from any possibility to stand to developers. If RERA wants to correct something, they should start by obliging developers to comply with the laws, audited books, register HOA to manage the place in full transparency and then if the landlords don't pay service charges, the HOA will deal with them as they have no excuse. What RERA is doing is standing by developers against investors and this will push back genuine investors. Same old story since 2007 and nobody is willing to do anything. The market will stay in hands of speculators and dodgy money. this will bring another market crash in the next year. The market is stll immature and not safe for long term investment. RERA should either act in the right direction or accept full responsibility for the continuous collapse of the RE in Dubai.

Posted by: alaa maha

The problem is in Nakheel and how they are handling the issue. I am sure Emaar has the same issue with landlords defaulting on their service fee but you don't hear about it as much.. Emaar can afford to survive without these payment but Nakheel are squeezing every penny they can from their investors...

Posted by: Neil

The problem is not Nakheel it is with lack of enforcement of the laws which are in place, the Landlords have to pay their maintenance charges (debts) and if they cant then their debts should be handled as other debts are handled in the Emirates!

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