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Wed 1 Jun 2011 02:01 PM

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Dubai developers net illegal fees from buyers

Real estate firms raking in profit from illegal registration fees, ramping up service charges

Dubai developers net illegal fees from buyers
Rows between tenants and developers over maintenance have soared in the wake of Dubai’s real estate crash
Dubai developers net illegal fees from buyers
Dubai real estate, Dubai Marina, Dubai property
Dubai developers net illegal fees from buyers
Dubai office space, buildings

Dubai developers are charging homeowners thousands of dirhams in illegal
registration fees in a bid to ramp up profits, a report by law firm Hadef &
Partners said.

Dubai Land Department (DLD) is the only body legally allowed to collect fees
for registering properties, yet some developers continue to flout the law by
demanding additional sums, the report of 350 buyers and industry professionals
found.

“Some developers are a charging an illegal, blanket fee of AED5,000 for
registration and AED1,000 in handling fees,” said Michael Lunjevich, a partner
in the firm, and author of the report. “But if you have an apartment worth
AED1m for example, the DLD, who is the official body, only charges AED 2,500
for you to register the property, or 0.25 percent of market value.”

Developers are split between those who are willfully ignoring the law in
order to make a profit and those who are not aware the practice is illegal, Lunjevich
said.

The problem also extends to service charges, a particular bone of contention
between homeowners and developers, the report found. Dubai law dictates that
firms are barred from adding profit margins on to service fees and are only
allowed to charge tenants the cost-price of maintaining facilities.

Under Strata Law, developers are required to gain approval for their
maintenance fees from Dubai’s real estate watchdog, RERA, until homeowner
groups are able to take over the accounts.

“There are some developers who are taking a collaborative approach with the
new owners’ associations and some that are not, where again, they see it as an
opportunity to make some money in a down market,” said Lunjevich.

Rows between tenants and developers over maintenance have soared in the wake
of Dubai’s real estate crash. In locations such as JBR, Discovery Gardens and
Nakheel’s Shoreline apartments, scores of owners have withheld service fees in
protest at the poor upkeep of facilities.

“The jointly-owned property law is not about creating a profit centre for
the developer, it’s quite the opposite,” Lunjevich said.

Developers who once saw millions of dollars in profit during Dubai’s real
estate boom have struggled to stay afloat after emirate’s property bubble burst
in late 2008.

Many have chosen to complete projects started before Dubai’s property market
collapsed rather than canceling them and facing a legal obligation to return
all advance payments to customers.

Analysts warn the practice of illegally charging fees to buyers could have a
negative impact on Dubai’s already stalled real estate market, deterring
potential homeowners and potentially forcing house prices to sag further.

“It affects confidence in the market, which is required for the market to
recover,” said Sadalla Abed, a senior consultant at Colliers International.
“And of course if people have to pay the fees twice, it might stop some them
from entering the market because it will be too expensive for them.

“There could also be some legal implications down the road,” he added. “If
people haven’t registered their property they cannot sell it, there are so many
things that they won’t be able to do with their properties.”

 

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msnake 9 years ago

Our developer charged every owner 30 odd thousand dirhams for DEWA connection due to abusing some ambiguity in the contract.

Naturally owners figured the wording meant we would be liable for the usual 1k odd fee payable to DEWA in a similar way to if we rented.

In fact the developer split the cost of connecting the entire development to the grid between home owners.

RERA even said it's illegal but apparently powerless to get us our money back.

How can developers get away with breaking the law?

AB 9 years ago

We have been asked by Amlak for Skycourt project to transfer 2% of the property value against land registration + Administartion charges 5,000 to developer +property hand over charges + property management cgarges etc. Also they are asking huge amount for profit during construction for 24months delayed project.

Chris 9 years ago

When i purchased my property from Emaar some five years ago, I paid a fee to have the property registered in the Emaar registry. All owners paid this which equated to about 1% of value. I was informed by Emaar that this would later be formalised in a central registry at no additional cost. When RERA came along with its central registry, I had to pay an additonal 1.5% of the purchase price to have my property registered as the original registration with Emaar was no longer valid.

Barbara 9 years ago

Why are there NO protections for consumers? When I was renting in UAE, I was appalled to learn that I had to pay real estate taxes on my apartment. Also, that I had to pay a commission to rent an apartment. In the US, any commissions are paid by the owner to the agent that provides a renter to the owner. I had to pay a commission to the local guy, who did nothing to earn the fee as he simply sat in an office while I viewed the office.
When will the government realize that the consumer is the one who needs protection and that these practices must be stopped?

Ali 9 years ago

Actually service charges for apartment at Dubai marina almost equal to home rent. IS IT LEGAL?

Kumar 9 years ago

"“But if you have an apartment worth AED1m for example, the DLD, who is the official body, only charges AED 2,500 for you to register the property, or 0.25 percent of market value.”

I thought the registration fees was 2% of the property value (1% to be paid by developer and 1% by owner; actually, the 2% are paid by the owner, no developer that I know has ever paid anything, despite DLD's intructions).

"Developers are split between those who are willfully ignoring the law in order to make a profit and those who are not aware the practice is illegal, Juvenich said."

How convenient! Forget the delays and eveyrything else the onwer has to endure for HIS property and get mugged again for the registration fees and service charges.

RERA, can / will you PLEASE stop this? No wonder that property investors are not thinking about Dubai anymore.

Ibrahim 9 years ago

Nakheel are charging tenants of 2000 AED for each returned cheque!

investor 9 years ago

sorry - you understimated the charges - the legal land department fees are : pre registration is 0.25% and tittle registration is 2% of total property price and transfer fee is also 2% of total value - + additional fee for printing tittle deed and oqoud -

WONDERER 9 years ago

i just took a flat in marina and i wanted to sell it but the developer said you have to pay first registration/title fees of 2% to dubai land and then again the buyer should pay 2%, i said why pay twice we can pay once, they said no it has to be paid twice, so who is benefitting here all parties except investors, so how can you attract investors with such laws favouring developers and dubai land.

we are being charged by force service charges of aed 15/sft although its a brand new building, is anyone listening to us NO!

Burned 9 years ago

What about Housing fees vs Service charges? These are again double charge for the same things. There are many other hidden taxes. Central AC companies overcharge, I had my aprt closed for 3 month in winter and no AC, despite that I got monthly bills around AED500?????. DEWA is another one. for the same 3 month the monthly bills were around AED200????. Only in Dubai
As far as all these abuses are not dealt with, I doubt any investor will even look at any distressed properties to come in the market.

What is RERA doing about it?