Around 60 to 75 per cent of landlords across all Nakheel's communities have not paid their service charges, acting Nakheel chief executive officer Sanjay Manchanda has said.
In order to retrieve the Dh72 million in service charges owed by landlords at their Palm Shoreline Apartments, the developer has implemented a ‘name and shame' strategy, barring access to the buildings' beach, swimming pools and facilities for those who have not paid.
The ban also affects tenants who have paid their rent but whose landlords are in arrears.
Since the ban was imposed, Nakheel has collected 50 per cent of its unpaid fees. According to Manchanda, a similar collection method will be implemented at Nakheel's other properties, including the Discovery Gardens and International City.
"Access cards at Discovery Gardens and International City will be coming up very soon. Security cards are a good security measure if only legitimate people have access. If I find an owner has let his property out and has not paid his service charge, I can lead with a much better manner," Manchanda said.
Owners of the Shoreline Apartments have been arguing they should only have to pay the 2010 and 2011 fees approved by the Dubai Real Estate Regulatory Authority (Rera).
However, Nakheel said it has the right to charge all fees.
"When the crisis erupted, for two years we stopped a lot of activities to focus on the financial restructure. As a result maybe we did not do the billings. Recently, we did the catch-up and we started billing. As far as the backlog is concerned, it is a function of what we went through but it doesn't mean the owners can turn their back on us," Manchanda said.
There is also contention over the additional charges for the apartment's clubhouse. In December, Nakheel distributed leaflets to Palm Jumeirah residents warning that it planned to charge residents up to Dh5,000 to access the beach, pools and gyms.
"The clubhouse needs to be funded. Who should pay for it? Gym equipment gets replaced every five years; do you think that should be included in the cost of the apartment? If people want to use the service, they should pay for it," Manchanda said.
Residents have also protested that guests should not be charged to use the beaches.
"For the moment the decision has been taken to institute these charges. Maybe subsequently we want to review. There is a lot of cost involved in keeping these beaches clean," Manchanda said.
According to Manchanda, one of their biggest issues is landlords sub-leasing their apartments on a short-term basis.
"An owner can lease his apartment for a year. If you're going and doing sub-leasing of less than a year with a high turnover, then it's not equitable for the owners who live there and want to use the facility. An average family of [a] husband, wife, children as compared to a 20-person turnaround wanting to use the facility is not the same," Manchanda said.
"These are the people causing all the damage to the property. They are not long-term residents. They come for fun, destroy things, litter the beaches they use all kinds of things, which we then as a developer are responsible for fixing. I have to bring up a mechanism to try and keep this nuisance away," he added.
According to discussions Manchanda has had with Rera, what these landlords are doing is illegal.
While a short-term lease is allowed if the landowner registers for a licence, Manchanda says that none of the landlords has that licence, as far as he's aware of.
Hunt for alternatives
Owners are now moving to replace the Nakheel-owned property manager with an independent company, which they believe will cut costs. Five of 13 owners' associations at the Shoreline residences have so far been registered.
However, according to Sanjay Manchanda, acting Nakheel chief executive officer, Nakheel's rates were among the most competitive and were likely to drop this year across all its communities. Service charges are expected to be reduced by 25 per cent this year.
"We are making every effort to provide quality service at a cost which we believe is competitive. That has been verified by Rera [Dubai Real Estate Regulatory Authority]. In 2012 our estimate is that we will have further savings which will be passed on to the community," he said.