Interim owner associations (OA) in Dubai are facing charges of up to AED15,000 ($4,038) a month from developers as they await approval from the emirate’s land department.
Some developers are asking unregistered OAs, which are unable to legally open bank accounts, to pay flat rate fees in exchange for the company paying bills on their behalf.
A member of the OA for Concorde Tower in Jumeirah Lakes Towers said it was charged AED15,000 a month by developer 32 Group Properties to use its account to pay for maintenance costs. The OA is waiting for approval from Dubai Land Department.
“At the minute we are paying AED15,000 a month to the developer of the tower where we live just to have money paid into that account. It is a cost to all of the owners in the building for the pleasure of transferring funds into their [the developer’s] account,” the owner said.
“We said to the developer that we needed to collect the service charges [because] there was a lot of money outstanding and they control the money that is paid into their account… meanwhile there is essential maintenance work that needs to be done.”
32 Group Properties told Arabian Business the fee was to pay the full-time accountant they had employed to oversee the Concorde Tower account.
“We have offered this [deal] because of the delay [in RERA approval] and said this is what we would be willing to do to solve this issue right now. They could have said ‘no, we don’t want to pay this, we’ll follow up with RERA’,” said a spokesperson for the developer.
“We are a group company and we have other accounts, we don’t have a policy [that allows an unregistered OA] to check our accounts or even give the responsibility of the account.”
Under strata law, OAs are entitled to oversee the maintenance budgets and contracts of their properties, but must be registered with the emirate’s land department. Without Dubai Land Department registration, OA’s have no legal standing, meaning they cannot open a bank account, pay bills or hire contractors to oversee building maintenance.
Developers are seizing the opportunity to charge interim OAs waiting for license, said Michael Ryall, director of Place Community Managers.
“In some buildings the developer maintains the bank account on behalf of the owners association [but] I am aware of some developer’s which do charge for that,” he said.
“In other buildings the manager will work out a financial control procedure with the boards who will operate the account on the board’s behalf.”
Developers who once saw millions of dollars in profit during Dubai’s real estate boom have struggled to stay afloat after emirate’s property bubble burst 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.
OAs still waiting for Dubai Land Department approval are stuck in a legal limbo, said Brent Baldwin, associate at Hadef & Partners. “The issue is that for someone to be able to open a bank account they have got to have some sort of legal personality; you have to be an individual or a properly incorporated company or a registered partnership,” he said.
“A bank obviously wouldn’t want to open a bank account for an entity that wasn’t properly legal constituted because then you get into issues over who owns the money and who has the right to sign for various things. That leads to the wider issue, which is if OAs aren’t acceptable to banks yet to open a bank account, then do they actually have that legal personality?”RERA last week said it had given approval to 78 homeowners associations in the emirate since January. A total of 228 associations have been registered, said Marwan bin Ghalaita, CEO of RERA told Arabian Business, reflecting a small proportion of the number of properties in Dubai.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.
From / Arabian Business News