Tenants shun Palm over Nakheel service charges

Agents said the negative reports meant renters were reluctant to sign up to new leases
Tenants shun Palm over Nakheel service charges
Tenants are shunning apartments on Dubai’s Palm Jumeirah developments as the row over unpaid service fees continues.
By Shane McGinley
Wed 27 Jun 2012 09:59 AM

Tenants are shunning apartments on Dubai’s Palm Jumeirah developments as the row over unpaid service fees continues, real estate agents told Arabian Business.

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 week 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.

Some tenants are also seeking compensation from their landlords for the lack of access to facilities they were promised as part of their rental agreement, agents said.

“After this debacle, I would advise people not to rent at any Nakheel property,” a tenant, who recently moved to Marina Residences from Shoreline, told Arabian Business. “Many developers in the UAE are facing the problem of unpaid service fees, but not a single one has decided to go down Nakheel’s path,” she added.

Agents have warned that the ongoing negative publicity might have a negative impact on Nakheel’s reputation.

“The reports of emptying pools under the guise of "maintenance" will filter through to the wider global media and whilst Nakheel does not have many other options to recoup these losses, these reports will do more damage than good,” Volpi said.

Nakheel, Dubai’s biggest developer by assets, was hit hard by the global economic downturn, which saw property prices in the emirate decline by more than 65 percent from their 2008 peak.

The slump forced Nakheel to write down the value of its real estate by US$21bn and prompted a bailout from the Dubai government.

The firm's decision to ban residents from using its facilities has been heavily criticised. In an interview with Arabian Business earlier this year, UAE business leader Khalaf Al Habtoor, chairman of Al Habtoor Group, slammed the company, claiming the decision would never have been approved by the Dubai government.

“It was 100 percent [damaging] and unacceptable. If I am buying a house and using the beach and later told I have to pay for the beach, this is abnormal. This is damaging the reputation of my country,” he said.

“I am 100 percent sure that the higher authorities were not aware of such a thing because they would not have accepted it…. They would never have [agreed to] it but some people try to show they are making money for the government - they are damaging its reputation 2m times [over] for a few dirhams,” Al Habtoor added.

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