The chairman of Nakheel has defended the developer’s “right” to increase its application fees last year for villa extension by up to 233 percent, claiming it did not breach any contractual agreements and the surge in fees was introduced to stop residents abusing the system for commercial gain.
Under the terms and conditions laid out in Nakheel’s ‘Guidelines and Procedures for Villa Extension Applications’, residents are required to pay an application fee as part of the approval process before they can start construction.
Up until around September last year, the fees ranged from AED150 ($40) per square foot in Jumeirah Village, up to AED600/square foot in Palm Jumeirah.
In September, residents were informed that the government-owned developer had increased the fees by up to 233 percent, effective immediately, and any applicants whose paperwork had expired would be required to reapply under the new terms and conditions and pay the higher fees.
In Palm Jumeirah, Nakheel’s flagship manmade island project, the increases were the steepest, increasing from AED600 to AED2000 per square foot, an increase of 233 percent. This puts the fee for a 1,000 square foot extension at over half a million dollars, even before a single brick of construction has been paid for.
“Nakheel’s propaganda, when we all bought the properties, was that major extensions up to three additional bedrooms were allowed thanks to the big plot area... All of us are obviously now reconsidering the possibility of extending our villas. We feel our rights [have been] completely ignored and trampled on… We feel deprived of our rights of ownership,” one resident told Arabian Business.
As a result of the surge in charges, many disgruntled residents were forced to scrap their plans.
However, Nakheel chairman Ali Rashid Lootah has defended the surge in fees, claiming the increases were not a breach of any contractual agreement and the original fees in place were already “reasonably low” and it had resulted in residents abusing the system in order to make their property more valuable on the resale market.
“I look at it in a contractual way – did we breach any contract? No. We are within our right – there is nothing in our contract about fees and it is our call,” Lootah was quoted as saying in an interview with Gulf Business.
“We have a contractual commitment with the owners, and it’s up to the developer whether to allow extensions or not. We see the bigger picture – every community has been master-planned for a certain capacity of people. If we allow people to increase rooms right and left, the size of the community increases, which is not good,” he added.
“We wanted to control the situation since it was getting out of hand. Since our fees were reasonably low, people wanted to expand their property because they think they will gain more when they sell.
“Other companies don’t even allow extensions. It was accepted in Nakheel before and we don’t want to say no. Hence we decided to hike the fees. If it [the extension] is for a serious need, people will pay. If it’s for a commercial benefit, they will not go for it,” he said.
He added: “We looked at the benefit of the whole community and a lot of people were actually very happy with our policy.”
Walter Candelu, a representative for a group of disgruntled homeowners on Nakheel’s Jumeirah Village development, told Arabian Business in November homeowners were planning to launch legal action and were currently consulting with lawyers to prepare a case against Nakheel. They claim that the increase in fees has negatively impacted the value of their properties.
Candelu also confirmed that the group had met with Marwan Bin Ghalita, CEO of the Real Estate Regulatory Authority (RERA), to discuss the issue. “We have shown him the petitions related to the fees but, unfortunately, RERA cannot control the regulations of the development,” Candelu said.
The fees charged by Nakheel are in stark contrast to rival Emaar Properties, the developer behind the Burj Khalifa, the world's tallest building. It states in the terms and conditions of its ‘Alternations & Home Improvement Fact Sheet’ that, in addition to submitting the standard paperwork, homeowners are only required to pay a refundable deposit of AED5000 to cover any damages to common areas and a flat fee of AED2000 per application.
The residents Arabian Business spoke to said about 60 to 70 homeowners planning extensions to their properties in Nakheel developments had been impacted and had been forced to downsize or reconsider their plans as a result of the surge in fees.
Candelu confirmed representatives from the residents group had met with Nakheel to discuss the fees, and the need for community maintenance work to be completed at Jumeirah Village.
They have also compiled a petition highlighting the lack of work at the development, covering items such as signage to landscaping and security, and calling for work to be urgently completed in line with what was expected when they bought the properties. Around 327 residents have so far signed this petition.
* Nakheel no longer responds to media enquiries from Arabian Business, nor does it grant Arabian Business access to any of its media events or announcements.For all the latest GCC news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.