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Sun 24 Jan 2010 03:39 PM

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Dubai residents mull plan to withhold service fees

Discovery Gardens group also seeks to replace Nakheel as maintenance provider.

Dubai residents mull plan to withhold service fees
REPAIR ROW: Hundreds of tenants are in dispute with Nakheel over maintenance contracts at Discovery Gardens.

Tenants in Dubai’s Discovery Gardens have launched a bid to replace developer Nakheel and appoint a third-party maintenance firm in an effort to cut service fees, Arabian Business has learned.

More than 25 building representatives, each acting for 66 apartment owners, met on Saturday to mull over a plan to withhold service fees and outsource the development’s maintenance to an outside firm.

The group is also considering placing cash gathered from service fees - which cover building and community repairs - in trust with a legal firm, to be drip-fed to Nakheel on a case-by-case basis.

Michael Aldendorff, the unofficial head of the residents’ group, said initial enquiries revealed outside maintenance firms could shave up to 80 percent off Nakheel’s current service charges of between AED13-14 per sq ft, or up to AED14,000 for a 1,000sq ft apartment.

Tenants also pay cooling fees of approximately AED11 per sq ft.

The group expects to meet with Nakheel this week to present its findings, Aldendorff said.

“All the building representatives have asked for is a meeting with Nakheel, where we will be presenting the quotations from other contractors. We will present back to them and say, if a contractor who is prepared to do the same job at 20 or 15 percent of what you’re charging, please can you explain why?”

Nakheel was not immediately available for comment.

The news is the latest in a long-running dispute between Discovery Gardens residents and the state-backed developer.

Tenants have accused Nakheel of delivering substandard maintenance, despite service fees being among the highest of any Dubai project, and of failing to complete promised facilities such as swimming pools more than a year after handover.

Service fees were reduced from AED18-19 per sq ft last April, following widespread protests by residents.

A tenant in building 88, who spoke on condition of anonimity, told Arabian Business: “The corridors of our building have mould in the ceiling, our lifts don’t work and our fire alarm beeps constantly. This should all be covered by our service charges, but you log the complaint and no one comes out.

“I’ve complained to security [about the fire alarm] but I’ve been told that the contractor won’t come in to fix it, because he hasn’t been paid by Nakheel.”

Nakheel has yet to announce 2009-2010 service charges for the development.

Dubai World, Nakheel’s parent company, surprised global markets on November 25 when it requested a standstill on $26bn of debt, linked to its main property units, Nakheel and Limitless.

A last-minute support package from Abu Dhabi in December helped Nakheel avoid default on a $4.1bn Islamic bond.

Arabian Business: why we're going behind a paywall

Ali 10 years ago

I am the resident of DG and have to pay even to get the bulb changed or to fix a leakege in the washroom on top of paying AED 29k on account of service charges. Still we are far from getting the handover of community swimming pool, basketball/ tennis courts etc. NAM has arranged the meeting of the homeowners without informing anyone and without putting any notice. We came to know about it when we receive an email from NAM rep. re. the minutes of the meeting. this is utterly disgusting and totally unacceptable. Where to go and whom to complain, we are clueless ... even I have personally tried to approach RERA, but as usual no success. I, myself, have personally decided no to pay the service charges anymore and second the step taken by other residents. Michael Aldendorff is doing a great job and his efforts are really commendable. I have attened some of the meetings and really supports the views of other homeowners.

Amira Smith 10 years ago

If Nakheel is utterly failing its tenants on maintenance because of its debt issues, then RERA should step in and allow them to find a maintenance firm who really will do the job. it is unacceptable for a developer to cream off huge service fees- and then not have to answer to anyone when it isn't doing its job. How can it still not have finished the pools more than a year after handover?! RERA needs to show it has some teeth, whether it's a standalone developer or a state-backed developer. Nakheel can't carry on like this- particularly when tenants are still being made to pay.

Hamid 10 years ago

"Maintenance Fee" is daylight rubbery, plain and simple. Most developers are charging 3 to 4 times of what it really cost them to maintain the building. It has turned into a new source of income and a windfall to many greedy developers at the expense of the people. The amounts charged are ridiculous, absurd and outrageous. It is not only happening in Discovery Garden. This problem is pandemic of most free hold high rises. The reason are delays in issuing common property laws, where the owners association could accept bits for maintenance from several qualified companies and award to the lowest bidder. Meanwhile, I wish all the best for Discovery Garden residents and wish them well in this ordeal.

Amira Smith 10 years ago

@Hamid - I completely agree with you. I think service fees have ceased to be anything to do with maintenance, and are simply a new source of income for cash-strapped master developers like Nakheel. It's a key problem in the real estate market here - developers hold all the cards, and take complete advantage of that fact. Until RERA shows it has some teeth on these issues, we'll continue to have a third-world real estate market in Dubai, where transparency is just a term banded around by the latest state-sponsored think tank.

Dan 10 years ago

With the prices going down I was thinking of buying a house or apartment in Dubai as I visit the city so often. But with the increasing interest rates (opposite rest of the world) and banks being allowed to increase the rates as they wish (Mashragh bank) I have second thoughts. And now the maintenance fees…

Toby James 10 years ago

In The Gardens, the green version not the carpark version, the contractor, Serco, has stopped all overtime service and only concentrates on emergencies, I got the impression that they are not getting paid. Surprise surprise, whilst Nakheel has forced the hand of the contractor to provide limited service the service charge rates have not reduced.

Subhan Ahsan 10 years ago

Discovery garden will be yet another International City if the maintenance continues to be poor. Even if the prices falls another 50% no point buyin them if the legal framework continous to be unavailable and not in the interest of the investors/property owners. RERA for most part of this crises was no where to be found. In boom time they were all over the places with the Media.

Joe 10 years ago

It is good that the Dubai tenants of Discovery Gardens have decided to withhold service fees. This may be a drastic action, but I am afraid this is the only option left with the totally arrogant Developers who take the tennants for a ride. If other contractors can provide the same service for a fractionof the price as charged by the Master Developer, there has to be something wrong. As has been mentioned, the Master Developers simply do not know the meaning of Service. They abuse their position to generate a continuous stream of income from these developments. Rera, well, that is another story. Go on Discovery Gardens. We aare behind you. Perhaps the tennants from other Developments should take the lead.

Jon 10 years ago

It's a scandal how Nakheel can continue to extract these fees and not do very little in return; surely this is tantamount to theft? It doesn't end there though, I have friends living in the Downtown area, Emaar hasn't cleaned the windows in some of the high rise buildings for nearly a year - almost to the point you can't see out of the windows. ...the landscaping around the Burj looks nice though (if you can see it).

Syeda Khan 10 years ago

Being a resident of Discovery Gardens, I would like to request the residents to maintain traffic discipline, as coming out from there has become a nightmare with haphazard & rash driving, butting in between lanes impolitely has been prevalent, where every one is in a hurry, agreed: But being in a hurry does not have to break traffic rules' one can be rest assured if everyone follows simple traffic rules & be considerate & polite there won't be much Traffic chaos. Hope everyone thinks about it & understand