By Will Milner
Industry experts say it will help tenants signing a new lease for property in Dubai
Dubai landlords may soon be required to declare whether or not they have paid service charges on their apartments when they are entering into a new rental agreement with a tenant, Arabian Business has learned.
“We are aware that RERA (Dubai’s Real Estate Regulatory Authority) is considering introducing such a requirement, however full details are unknown at this stage,” said Dean Cheesley, senior legal consultant at DLA Piper legal firm in Dubai.
“The introduction of a disclosure obligation on landlords is likely to benefit residential tenants in terms of making them aware of the current position at the time of entering into a lease, which is an improvement on the current situation. In theory this will allow tenants to make a more informed decision as to whether they should enter into a lease with that landlord or renew for a further term,” he added.
Matthew Green, head of research and consultancy at property consultancy firm CBRE, said information on the proposed scheme was “minimal” at present, but the industry would welcome the move.
“There have been various ongoing issues with service charges. This will help to safeguard tenants from unscrupulous landlords. It is another step in the right direction and will improve transparency,” he said.
However, Green added “more still needs to be done on the transparency in terms of service charges themselves. A lot needs to be done to improve transparency for investors when they are purchasing properties.”
The issue of service charges has become a hot topic in Dubai and real estate agents told Arabian Business last month some tenants were shunning apartments on Dubai’s Palm Jumeirah developments as a result of confusion over service charges.
Master developer Nakheel’s long running battle with its customers on the Palm Jumeirah started last December, when it banned more than 1,300 residents from using the beaches and gyms at its Shoreline Apartments residences and claimed it was owed US$20m in unpaid service charges.
The row escalated last month when Nakheel drained all six swimming pools at another development, its prestigious Marina Residences towers after it was revealed over US$4m in service charges remained unpaid.
While Nakheel has since begun refilling the pools, real estate agents said the ongoing negative publicity has meant renters are now shunning its developments on the Palm and some existing tenants are demanding a rebate on their rent or are seeking to relocate.
“The articles written recently about the problems of service charges or lack of payments to properties on the Palm are, I am sure, having a negative effect,” said Mario Volpi, head of residential sales and leasing at Cluttons.
“When we are offering a wide selection of properties there does now appear to be a reluctance [towards] the Nakheel properties on the Palm. The questions from prospective tenants are mainly along the lines of whether the landlord is up to date with his/her maintenance payments,” he added.
Patricia Fernandes, assistant manager of residential sales and leasing at Better Homes, echoed this sentiment and said tenants were now “being extremely cautious” about renewing leases on the Palm.
“It’s been noticed that quite a few tenants who have been renting on the Palm for a while now are extremely frustrated and no longer wish to renew their leases, or are looking to break their lease for the obvious reasons of limited or no access to on-site amenities," she said.
Maybe RERA should first make sure developers do comply with the Strata Law, register HOA's, allow owners to monitor the finances, stop acting as the place managers and using their own companies in complete disrespect of healthy competition, and comply with all their contractual obligations. After they can ask landlords to declare if they paid the SC's. There are priorities or the market will just see another deep.
how about making it law that the landlord pays the real estate agent the commission as pretty much everywhere else in the world.. oh and the retaining of security deposits a bigger crime too..
too many issues to mention here, how about fixing the issues faced by tenants and not just protecting landlords
First of all RERA needs to make sure that there are appropriate and CLEAR strata laws. The methods of approving service fees is really surprising. I visited RERA to question them as to why they had approved such high service fees. They did not give me any documents and were not happy to discuss this. Instead they asked me to go and talk to the OA of the tower.
They have taken forever to approve the OA and now they are still not permitting the OA to open bank accounts and undertake self managed activities.
Before blaming the landlords who do not pay, RERA should penalize the developers who are overcharging and providing inferior service.
This regulation would benefit the tenant more than the landlord, which is good. A tenant would know in advance if there is a chance of being locked out of facilities, because his landlord has outstanding service fee payments. This "new law" is the step in the right direction to protect tenants, the other landlords, who pay and the upkeep of the common property.
I BEING A LANDLORD TOTALL AGREE WITH MANAV THAT ON WHAT BASIS RERA HAS APPROVED THE SERVICE CHAREGES WHICH ARE NOT JUSTIFIABLE FOR EXAMPLE RERA APPROVED AED 17/SFT FOR A BUILDING AND THE RENT OF THAT BUILDING IS AED 25,000/YEAR FOR A 500SFT FLAT, THUS THE LANDLORD HAS TO PAY AED 8,500 IN SERVICE CHARGES WHICH IS EQUVALENT TO 34% OF THE RENTAL INCOME, IN WHICH WORLD THIS IS FAIR TO PAY SUCH HIGH SERVICE CHARGES WHICH ARE MAINLY GOING IN DEVELOPERS POCKETS. RERA SHOULD ACT ON THIS URGENTLY.
RERA is not fir to investors or any small player in Dubai market. They are always protecting developers against their obligations. They make statements about regulating the market but they don't act when a developer doesn't comply. What is the origin of all issues in Dubai RE market? the answer developers. They sold the apartments but impose the manager, the security, the maintenance, the cleaning company and the service charges. They don't disclose anything to owners. And RERA approves their service charges without questioning them. Other emirates have a law and they implement it. Only Dubai is not implementing the laws. This will have an impact as investors will sell in Dubai and buy in another emirate. RERA was the first to issue the law and is the last to implement it. the disfunctioning at RERA is every day more obvious
This will not benefit tenants as many owners will just lock the apartment and will refuse to rent. This will increase the rental cost in Dubai and make some areas ghost towns. Developers will be badly hit as their shops will have no more customers and they will close. developers wil loose on rentals as well. Empower and Dewa will loose on income. just another bad move from RERA.
cases of default on service charge for maintenance are on the rise and all that OA can do is to restrict access to the pool, gym & some other minor facility. In modestly finished & modestly priced projects residents are not addicted to use common facilities. So defaults could rise resulting in ghost towers/projects with adverse impact on the real estate market which just picking up after the 2008 collapse.
Stricter punitive measure like preventing access to the flat is necessary and inescapable.
Simultaneously, the rate at which service charge is levied needs to be scrutinized and made affordable.
I too am a property owner in dubai, international city. I am facing huge problems with Nakheel at the moment in trying to receive my title deeds. I need advice and quickly. Nakheel have reccently billed me a huge bill for Service Charges dating back years since i bought the property and when i query them on them they have nothing to say apart from contact RERA. I cannot obtain my deeds until these charges are paid, i have never once received invoices for these charges and i feel they have no right at this stage to charge me. It really is frightening how they have landed me with this bill now..
Can anyone advise me on this issue and also on trying to obtain title deeds.
I understand people saying about the tenants but please understand as a landlord who invested in dubai, these charges are out of order and way too high for any landlord to pay when rents are so low and also when no invoices are sent from the company. PLEASE help me....
Sorry for Rera, I don't trust their word more than I would trust a service charge calculation of any developer in Dubai. Service charges are basically a hidden extra income for developers. No one can ever question and no developer has ever shown bills to prove their expenses. Let's be clear. UAE is a tax free country but its' full of hidden fees and small robberies.