Dubai tenants could face threats to cut off electricity

DEWA may cut off power in communal areas as homeowners default on maintenance fees
Dubai tenants could face threats to cut off electricity
Residents in Marina Diamond II, a 274-apartment tower in Dubai Marina, were told last week that the power may be switched off in the communal areas
By Claire Ferris-Lay
Sun 02 Jan 2011 09:39 AM

Tenants
in Dubai could soon be faced with threats to cut off electricity supplies in
communal areas of residential buildings if maintenance fees remain unpaid,
property experts have told Arabian Business.

Residents
in Marina Diamond II, a 274-apartment tower in Dubai Marina, were told
last week that the power may be switched off in the communal areas and lifts unless
an outstanding electricity bill for AED316,000 ($86,029) is paid.

Many
other residents could soon face similar situations following defaults on
maintenance charges by home owners, according to property experts.

“It’s
a problem in a number of buildings,” said Kent O'Brien, the CEO of Strata
Global and a strata management expert, said. “The unfortunate thing is that a
lot of owners are refusing to accept the budgets that are being put up by the
developers and refusing to pay."

Default rates for maintenance
fees are around 40 to 50 percent in Dubai, he said.

Charles
Neil, the CEO of Landmark Properties, said he didn’t think Marina Diamond II’s
case was isolated and said the stalemate situation would do little to restore
investor confidence in Dubai’s flagging property market.

“The word in the
market is that there are a number of others in that situation [so] it’s not an
isolated case.

“It’s
going to have to be something that is carefully managed a) for health and
safety and b) for the confidence of investors and existing owners who are
living in these apartments and who are being penalised,” he added.

Strata
law, which allows property owners to take control of a building’s service fees,
was decreed in 2007 but only implemented in May this year.

There have not yet been any homeowners associations
registered with Dubai’s Real Estate Regulatory Authority (RERA). Until they are approved, developers and maintenance companies must take homeowners to court to recover unpaid service fees, a lengthy and time
consuming process.

“Liquidity
is drying up and, until the owners associations are legalised, you cannot use the
current regulations to enforce a collection without going through the courts,
which is why the problem exists,” said O’Brian.

As a result, new homeowner groups may find themselves insolvent as soon
as they take over the running of their buildings because scores of property
owners have defaulted on fees.

“The owners association will technically be responsible
for repaying those fees that haven’t been collected back to the developer so
they’ll be in a deficient situation. They won’t actually have any cash until
they start collecting the fees themselves,” said Neil.

In
Marina Diamond II around 20 percent of the owners have defaulted on their
maintenance charges, according to Fares Saeed, the chief executive of Diamond
Investments, which owns the building.

The developer covered the shortfall for
the last three years but is now refusing to do so, according to reports. This
week DEWA sent a notice to all of the residents threatening to disconnect the service unless the bill was paid.

One
Marina Diamond II homeowner, who spoke on condition of anonymity, told Arabian
Business
he had refused to pay his maintenance charges because he didn’t
feel the maintenance company was looking after the building properly.

“The
swimming pool lay empty for more than a year and was never cleaned and they
weren’t taking care of the communal areas. The only reason I paid was because
my tenants had their security passes taken away from them," he said.

DEWA
and Diamond Investments did not respond to requests from Arabian Business
for comment.

 

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