By Claire Ferris-Lay
Analyst says buyers may favour buildings with registered homeowner associations
Dubai has given approval to 78 homeowners associations in the emirate since January as buyers move to take control of their buildings, the head of the real estate watchdog has said.
A total of 228 associations have been registered, said Marwan bin Ghalaita, CEO of RERA, allowing the groups to legally open bank accounts, pay bills and hire contractors to manage the maintenance of their building.
Homeowners must receive a letter of no-objection from Dubai police to join the board of their association, said Ghalaita.
“You can’t be a board member if you don’t get a clearance certificate from the police. But you can join the home owners association as you are a home owner,” he said.
Dubai Land Department said in June it expected a 70 percent rise in owner-managed properties by the end of the year, but analysts said the overall figure remained low.
“It’s obviously progress but there is a lot more properties,” said Craig Plumb, of real estate consultancy Jones Lang LaSalle.
“There would be in the thousands of projects where there would need to be a homeowners association created so this is still a relatively small proportion of the total.”
House prices in Dubai, the Gulf’s worst-performing market in the last three years, have fallen more than 60 percent from their peak in late-2008.
Service fees have been a particular bone of contention between developers and homeowners, with buyers accusing developers of charging inflated fees for building upkeep.
In projects such as Nakheel’s Discovery Gardens and the Palm Jumeirah, default rates on service charges among homeowners are estimated to be as high as 50 percent.
Future buyers may favour buildings with approved homeowner associations as supply across the city increases and the issue of service charges comes to the fore, said Plumb.
“It shows that the process is starting to work and more home owners associations are being registered,” he said. “The whole issue of service charges and management is going to become much more important for the residential market over the next few years.”
Jones Lang LaSalle said in June it expects a further 18,000 new homes to hit Dubai’s saturated market by the end of the year.
“With increased competition….the projects that have the best management and the most reasonable service charges are going to be the ones that will attract tenants,” he said.
Strata law, which allows property owners to take control of the upkeep of their building, was outlined in a decree 2007 but only implemented in Dubai in May last year.
RERA's pace on this has been glacial; 78 since January is equivalent to less than half of Discovery Gardens alone.
Well a step forward but a long way to go. Presumably the owners associations that are set up and actually operational, a different status completely, are now receiving the accounts for service charges from developers and arranging to have collected service charges diverted from the developer into their new bank accounts? Imagine that could be the complex functional stage.
Follow that with a review of the existing services and what's required, then identify those firms best placed to bid for the maintenance business, then the tender receipt and review process. We could easily be talking years I suspect and some practical changes in the law in between to best reflect working practice.
Couple of questions:
Is the homeowners association equally as applicable to Dubai state developers projects? Discovery Gardens and International City for example may prove a challenge with low rates of service charge collection? What about buildings where the developer still owns a % of the units?
How do I find out if Discovery Garden's Home Owner's Association has received approval among the 77 association that have received RERA blessings?
Positive move, possibly would bring ray of hope only if it is positively implmented. Defenitely, premium properties are in but labour camps are doubtful!!
"then identify those firms best placed to bid for the maintenance business" May I point that this would be the first, or at least one of the very first, situations where competition has been allowed?
This is a very protectionist business environment, I find hard to believe that competition with local RE firms will be allowed.
The problems is that lots of developers are manipulating the homeowner association (HA) election, and you will find an HA following the developper interest. plus in this way there will be more possibility of corruption (more people to make happy). The only think that can really control this market will be to introduce an investigating auditor from RERE for all the project and their maintenance fee and another one from the international auditor appointed by the HA.
I wish RERA action was 50% of what they declare. Dubai property market would be in better shape. RERA start implementing existing laws first. Dont complicate life for owners who want to do community work by introducing everytime more conditions. Developers are the ones that should get Police NOD's for not delivering on what they sold and they are not paying back investors.
I find this bizarre, why does a board member (home owner) need police clearance certificates for their own owners association? Who is going to want to bother with the red tape and hastle you have to go through to get this on top of the rest of the red tape you have in daily life in Dubai? Yet more ridiculous beaurocratic red tape to make life harder. Nowhere else in the world have i ever owned property and needed a police clearance certificate to be a board member of my own residence association (and yes i have been on many in other countries)...we need to be asking why you need a police clearance certificate for this and what will be done with this? Will the board members, as individuals, become liable in any way etc?What is the purpose of the police clearance certificate?
The answer is obvious enough.
And I guess that is all that is to say in this forum :)