Bahrain developers in dispute over Reef Island delays

Master developer LuLu Tourism Company has imposed fines on subcontractors for late delivery of projects
Bahrain developers in dispute over Reef Island delays
By Sarah Townsend
Sun 12 Jul 2015 10:11 AM

A row has broken out among developers building a $1.5 billion man-made island off Bahrain.

LuLu Tourism Company (LTC) is the principal developer behind the Reef Island scheme near Manama.

There are around 22 sub-developers building on individual plots of land within the scheme.

A handful of them have accused LTC of imposing “unfair” penalties for late completion of work, it was reported this month.

However, the company has hit back by accusing investors of failing to meet construction deadlines and comply with rules on scheme design, layout, quality and landscaping, as well as overall zoning requirements across the site.

There are also thousands of Bahraini dinars of outstanding service charges, LTC claims.

According to a report in Gulf Daily News, LTC general manager Charbel Sarkis told journalists during a press tour of the site this week that investors were contractually obliged to pay fines for late delivery of projects.

He claimed LTC has invested more than a reported $1.5 billion in the island development, which is around 50 percent complete and has around 3,000 residents.

A 100-villa beach resort is scheduled to open in two months, and there are plans for a five-star hotel, luxury shopping mall, medical centre, marina and yacht club.

However, Sarkis told reporters LTC was not expecting to recoup its investment and claimed the company is spending hundreds of thousands of dinars maintaining the island.

He also alleged that some of the sub-developers are blocking access to the site – although one party, Marina Reef Real Estate Development, is believed to be filing legal action against LTC, arguing that the master developer itself is obstructing construction work on the grounds that Marina Reef owes it unpaid service charges.

Arabian Business was awaiting formal comment from LTC at the time of publication, but it is understood that the dispute involves only around two or three of the 22 sub-developers working on the site.

And, while LTC does not wish to quibble over a few thousand dinars worth of unpaid service charges or late penalties given the overall size of the scheme, it believes it has the contractual right to demand the payments are made.

Farouk Almoayyed, chairman of the Reef Island Owners Union, which represents Reef Island investors, told reporters the dispute centred on LTC seeking fines equivalent to 20 percent of the value of investors’ land as a penalty for late completion of projects.

This is unfair, he said, as there were extenuating circumstances – such as the global financial crisis – that prevented contractors from delivering on time.

He claimed as many as 90 percent of investors are refusing to pay the late completion penalty and accused LTC of using pressure tactics, the newspaper said.

“There is a service charge – for cleaning the roads, collecting the garbage, drainage, etcetera – that every community has to pay and everyone is willing to pay, but this penalty that LTC wants to pocket is unacceptable,” he was quoted as saying.

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