Nakheel’s bid to privatise the beach clubs at its Palm Jumeirah Shoreline development could spur other property firms to attempt to monetise communal facilities in their projects, as homeowners pay the price for hastily-signed boom time contracts.
The state-backed developer plans to charge homeowners at the Palm apartments up to AED5,000 a year to access the building’s pool and gym facilities, in a dispute that has raised questions over ownership rights to communal areas in Dubai residential projects.
At the heart of the matter is the gap between the marketing literature used to sell offplan properties during Dubai’s real estate boom, and details outlined in investors’ contracts.
Homeowners that failed to check the small print in their sales and purchase agreement (SPA) may find they do not own the rights to communal facilities, potentially clearing the path for developers to now privatise them, said Brent Baldwin, associate at law firm Hadef & Partners.
“In most cases the definitive document governing who owns what will be the SPA,” he told Arabian Business. “Purchasers need to check….that what they think they are buying is covered in the SPA.
“I’m not saying a brochure wouldn’t stand up in court but, if the developer refuses to accept that the brochure is legally binding, then going to court is all you might end up with.”
Service fees and additional charges have become a particular bone of contention between developers and homeowners since the collapse of Dubai’s real estate market in late-2008.
Developers who once saw millions of dollars in profit during Dubai’s real estate boom have struggled to stay afloat after the emirate’s property bubble burst, leading buyers to accuse companies of charging inflated fees for building upkeep or access to promised facilities in a bid to maintain a revenue stream.
Any move to retrospectively charge for access to beach and pool facilities in buildings would be a further deterrent to investors mulling property deals in the emirate, said Charles Neil, CEO of real estate consultancy Landmark Properties.
“Developers overpromised and under delivered,” he said. “It’s really bad for the development community because investors in future just aren’t going to trust them and that’s why they’ll never get an off-plan market going again – because investors now want to touch it, feel it and see exactly what’s on offer.”
Marketing literature distributed to buyers of Shoreline apartments states each group of four apartment blocks will have access to “to their own exclusive health club” and other leisure facilities. But under plans proposed to residents in September, Nakheel Marine & Leisure will charge residents AED5,000 a year and open the beach club up to non-residents for AED12,000.
In a letter to Dubai’s real estate watchdog (RERA), homeowners have called for the agency to step in and declare them the legal owners of Shoreline’s communal areas, a move that would smooth the way for a housing association to dictate its own service charges for facilities.
“[This] is not what the owners want. All the boards of all the owners associations believe that the clubhouses are part of the common property of the Shoreline,” said one investor, who asked not to be named. “The description laid out in the UAE law [law 27 of 2007] points to them being common property as well.
“All the [owner associations] have written to RERA letting them know what we thought we had purchased - i.e. what we believed we were sold by Nakheel.”
Maria Rubert, partner at legal firm Cramer-Salamain, said the dispute raised questions over whether tighter curbs were needed to ensure marketing peddled by developers was an accurate reflection of the end product.
“Obviously this would raise huge questions [regarding marketing] because these represent what they were selling with this literature,” she said. “I am aware of cases where this kind of literature has been used against developers.”
Tenants living at the Tiara Residence on the Palm Jumeirah were told last month their families and guests must pay AED200 to use the pool, gym and beach at the weekends. Developer Zabeel Properties said in a circular to residents that the move was measure to reduce overcrowding.
Dubai Properties Group told Arabian Business in September that tenants in its $1.6bn Jumeirah Beach Residence development would also have to pay for access to its long-awaited beach club when it opens later this year.