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Sun 2 Sep 2012 07:46 AM

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Service charges: is the cat out of the bag?

Nakheel in recent months have provided me with the greatest mystery of my entire life

Service charges: is the cat out of the bag?
Service charges: is the cat out of the bag?

Some things in life just don’t make sense. No matter how hard you try, and how obvious the answer should be, it makes absolutely zero sense. Why do kids always end up taller than their parents? Never figured it out. How come women wear high heels? Total mystery to me. What’s the point of wearing a tie? Would love to work that one out. And why is it taxi drivers always stop working when it’s raining? Not a clue.

And so to Nakheel, who in recent months have provided me with the greatest mystery of my entire life; one that no matter how much I rack my brains, I can’t begin to solve. Maybe you can help me out.

Let me explain. Of the 20 buildings on the Palm Shoreline, only four don’t belong to Nakheel. Some years ago, Vakson Real Estate bought one of these, building number 18, from Nakheel. The intention was to turn it into a hotel. The property crash put paid to that idea, and in January this year, Vakson decided to sell off the individual apartments.

They are, of course, exactly the same as all the Nakheel-owned buildings. The facilities are exactly the same. The same beach. The same pool. The same gym. The same gardens. The same size. The same colour. Same everything.

Well, except one thing. Anyone owning an apartment in the Vakson building pays AED12.50 per square foot in service charges. Anyone owning an apartment in most of the rest of the Nakheel-owned Shoreline pays anything between AED20 and AED24 per square foot.

How on earth can the prices be so spectacularly different? What is even more absurd is that owners of properties in the 16 Nakheel-owned buildings can’t even work out what their exact service charge is. Nakheel used to break down its service charges into three areas: club house fees, master community charge and building maintenance fees. Since 2009, Nakheel hasn’t sent out any invoices for the master community charges.

This all begs the question; what is the real cost of service on the Palm Shoreline? I had a chat recently with a private developer who wanted to buy Building 18 from Vakson last year. What he told me was even more interesting: by his calculations, the true cost of providing services on the Palm Shoreline apartments is around AED8 per square foot. As he explained: “If I buy building 18, I could charge just AED10 per square foot in service charges, and still make a huge profit.”

I am reliably informed that next year, Vakson will look to bring down its service charges even more, closer to AED11 per square foot.

Nakheel, of course, doesn’t really like to talk about service charges. It has been busy naming and shaming owners who haven’t paid up, while banning hundreds of people from setting foot on their beaches and gyms over unpaid fees. So busy has it been chasing people over AED72m of unpaid (and disputed) fees, it still hasn’t got round to signing the Jointly Owned Property Declarations (JOPD) which would set out exactly who owns what, in terms of the beaches, gyms, pools and other probable common areas.

The result is that, so far, developers haven’t really had to explain how they calculate their service charges.

The flaw in this grand plan is when someone like Vakson Real Estate pops along and decides to charge nearly 50 percent less for the same service. Suddenly, the cat is out of the bag.

Anil Bhoyrul is the Editorial Director of Arabian Business.

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Peter Cooper 8 years ago

Market forces are a wonderful thing when they work in your favour... not so great in a property crash!

gordon 8 years ago

in some countries that would be considered fraud.

I recently went to rent an apartment on the Palm...I refused to touch anything that was Nakheel. This was for my protection.

I feel sorry for owners that are finding it harder to rent.

Alam 8 years ago

SERVICE fee in the hands of developers is a big mystery....and even though the cat is out of the bag....the cat is vicious and no one has been able to tame it so far.

I am a home owner in 2 DAMAC towers in JLT DUBAI. One in Cluster D Lake Terrace the other LAKE VIEW in cluster B. Both buildings in JLT, both same developer, both same areas, same facilities etc.

In Lake view we are being charged AED 13.50 per sq ft and in Lake terrace we are being charged almost AED 19 dirhams per sq ft. When we confront the developer they blame DEWA, DMCC and PDC.

In reality the word is out....it is out internationally that Dubai property is not a secure investment because of what Nakheel, Damac etc are doing. The reputation of Dubai is being damaged. It is sad. We home owners will have to fight for justice, fairness and protection of our rights.

Billo_TheGreat 8 years ago

Now that’s an article. I Haven’t seen such a well written piece on AB for some time now.
1) It makes sense. 2) It has first- hand information from primary sources. 3) It has analysis and a conclusion. 4) It has a sense of humor. Well done.
Hope to see more like this one

John 8 years ago

Clearly there is one set of rules for Nakheel and an entirely different lot for the rest. How Nakheel continues to blunder along, destroying the already tattered Dubai image more by the day and never having to account for itself speaks badly of the system in which it operates. It will never be able to repay its debts, even with massive haircuts, yet each day there is some new revelation of its incompetence.

Iain 8 years ago

1 August 2012: Nakheel chairman Ali Rashid Lootah said We're patient. I'm not in a hurry to pay - if they want to settle, they have to be reasonable." and expects contractors to accept up to 80 percent less than what they are owed. Nakheel Stand by your words and accept 80% less from your creditors!

John 8 years ago

At what stage does Nakheel have to wake up and listen to what the market is saying. They seem to live in a parallel PR universe, believing their own spin and never once being able to honestly counter the facts and the dull roar that is developing. If renters such as Gordon are voting with their cheque books, how long before the lenders demand their money back?

Erwin Schmits 8 years ago

Unfortunate state of affairs, developers like Nakheel and Dubai Properties continue to bully owners. RERA continue to protect them. No registred HOA's. No transparency, no audited books and no protection for investors. This is Dubai RE situation. All the rest is just blablabla. Investors know the situation and are avoiding these developers. In JBR the situation is worse than the Palm. DPG is changing the master plan, creating chaos for hotels and residents and again neither RERA or authorities are stopping them from killing the only beach area left in Dubai.

Doug 8 years ago

It's been out of the bag for years. I seem to recall a couple of years ago, the service charge bills for Discovery Gardens included fees for pool lifeguards.

Lifeguards for pools that don't exist.

Red Snappa 8 years ago

Good investigative journalism, merely exposing the unethical business practices at a state - owned company, with an unpleasantly aggressive chairman, that appears to be beyond the pale of regulation.

The firm would have been closed in any other jurisdiction.