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Tue 27 Dec 2011 06:25 PM

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Nakheel has no right to charge for facilities - RERA

Dubai's regulator says developer can't deny residents access to pools, gyms

Nakheel has no right to charge for facilities - RERA
The luxury Shoreline apartments on Dubais Palm Jumeirah

Nakheel, Dubai’s largest property developer by assets, has no right to deny residents of Dubai’s palm-shaped island access to communal facilities by turning them into exclusive clubs, according to the emirate’s property regulator.

Nakheel stopped homeowners and tenants at the Palm Jumeirah from using the property’s beach, swimming pools and gyms earlier this month, according to leaflets the developer distributed earlier this month. The company plans to charge households AED5,000 ($1,360) a year for access to these parts of the man- made island, the leaflets showed.

“By law, no one can stop an owner or a registered tenant from using the communal areas once they have paid service fees,” Marwan bin Ghalita, chief executive officer of Dubai’s Real Estate Regulatory Agency, said in an interview on Tuesday.

“If you bought something based on an agreement with a developer, he can’t change it.”

A spokesman for Nakheel declined to comment.

Dubai developers are trying to generate income after the global credit crisis left many of them short of funding to complete projects across the emirate. Nakheel has incurred AED78.6bn dirhams in losses since the crisis began in the third quarter of 2008.

Palm Jumeirah’s residents will have to pay annual membership fees of AED5,000 to gain access to the beach, pools and gyms from January 1, while non-residents will be charged AED12,000, according to membership application forms distributed by Nakheel’s staff at clubhouses. Guests would have to pay as much as AED200 a day to use the facilities.

Nakheel, which owns the clubhouses between the shoreline buildings, can charge residents for the use of facilities and services that aren’t specified in their contracts such as poolside sun beds, towels, showers and changing rooms, bin Ghalita said. If the developer wants to block residents from accessing the clubhouses where gyms are located, it would have to provide gyms inside the apartment buildings, bin Ghalita said.

Many homeowners haven’t yet paid their services charges and Nakheel required temporary security cards to prevent those who haven’t paid from accessing the facilities, bin Ghalita said.

The developer and the Homeowners’ Association will soon reach an agreement that will resolve the standoff, according to bin Ghalita. Nakheel and other developers are in the process of submitting blueprints of their buildings to RERA to establish and define communal areas.

“We want to make sure that all non-communal areas aren’t included in the service charges, so owners won’t overpay,” bin Ghalita said. “That’s why we are taking our time to subdivide all of the buildings,” he said.

Nakheel charges around 25 dirhams per square foot in common area fees, Rakesh Sharma, a property consultant at RBA Real Estate which manages properties on the shoreline said.

Some homeowners say that developers are inflating the fees and using the charges as an additional source of revenue. The formation of homeowners associations should resolve the issue as owners would be in charge of the accounts and could manage the costs, RERA’s CEO said.

Several members of the shoreline’s homeowners’ association declined to comment when contacted by Bloomberg today.

In the past, Nakheel derived most of its income by selling properties before they were built. It also sold plots of land to smaller competitors after providing infrastructure such as roads, water, sewage and electricity. The company, which was forced to suspend work on two other man-made islands after the credit crisis, is trying to increase recurring income from rentals and shopping malls.

Allen 8 years ago

THANKS RERA...

I don't even own property Dubai Palm, but if Nakheel was able to set a precedent to such an unjust action, I am certain it would drastically undermine the confidence in Dubai U.A.E market and the domino effect, which other greedy developers would jump on the band wagon and start seizing the common properties of what is already sold and delivered, would be nothing less than a complete disaster to Dubai investors, current and future real estate market and, finally, in turn the whole economy. No body would win, but few greedy and short sighted developers.

This was a very wise and timely move by RERA and I can't emphasize the impotence of this move and the appreciation I extent to RERA as and investor.

SSDubai 8 years ago

This could be RERA's defining moment. They can really build trust in Dubai. It will show to all that everyone is accountable - even companies like Nakheel. I hope they follow through with this. If they do .. then well done RERA - you will have done Dubai a great service for the long term.

Ahmed 8 years ago

Good job RERA

Red Snappa 8 years ago

A step forward, but an absolutely essential stamp of authority for RERA if it wasn't to be dubbed a toothless watchdog. Nevertheless, don't be surprised by a Nakheel legal challenge to RERA's position. This is a statement in an interview, not a formal ruling, and it would seem reading between the lines that the definition of what is a communal area and what's not will be hashed out between homeowners associations (which I understood in an earlier AB article or quote therein, to be temporary or interim status at the Shoreline Apartments), not by RERA.

Admittedly an incentive to gather the outstanding service charge into the RERA escrow account. However, what about those owners objecting to the quality of service and repairs? So the position remains that unless 1,300 + owners have paid their service charges, regardless of complaint, no access to beach clubs. Plus the fine print 'temporary security cards'

Chargeable and locked, sunbeds, towels, showers, changing rooms, toilets next?

opsecusa 8 years ago

RERA is saying the right things here so far however, action here is warranted. RERA must act, they are the enforcement arm of regulations that protect the investors. This could be the single most important act by RERA that will bring confidence back to investors/tenants in Dubai, it is time to shine RERA.

Skeptic 8 years ago

Didn't Nakheel's Chairman publicly announce that Nakheel had already received approval from RERA for their plan? I guess he must have been referring to a different RERA.

Pankaj Shah 8 years ago

I am shocked , surprised and delighted by RERA's stand. Some weeks ago I had approached them with a complaint against my landlord who was breaking many RERA rules but I was curtly told to approach the courts as RERA "only registers tenancy contracts". If Mr. Ghalita can stick to his guns on this one he will restore some faith in RERA as a "regulatory" body and investors can once again hope for justice. I for one had given up.

The Rulers need to look at the functioning of many departments where often victims are re victimized by the system. My landlord has broken so many rules of Dubai Municipality, Civil Defence and RERA He threatens and harasses most of his tenants but repeated complaints have hardly seen no action being taken against him. In what amounted to adding insult to injury , Civil Defense inspectors, slapped several of my neighbors with warnings on minor and perceived infringements rather than taking action against the landlord for major safety violations.

charles 8 years ago

well done RERA.
In view of this earlier comment from Nakheel, what next?

"“Read your contracts. We checked legally ... went to Rera. We abide by the law and respect the law,” Nakheel Chairman Ali Lootah"

ScotsExpat 8 years ago

At last RERA shows its teeth. But, I am slightly bemused that Nakheel can charge for poolside furniture use, showers etc. They are probably going to be the most expensive furniture rental in the world, once they work out how much they will have to charge...

ScotsExpat 8 years ago

Does anyone else note the 'slip of the tongue'? I believe you meant to say "emphasise the IMPORTANCE of this move@....

Made me chuckle....