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The great maintenance mess
Landlords blame developers, developers blame landlords, and tenants are stuck paying the price. Sam Potter is not amused by the current property situation.
July 20, 2010 4:18 by kippreport
Dubai has introduced a new property law designed to bring some measure of regulation to the property market, and release homeowners from the grips of big developers, who until now had control of the lucrative maintenance market in the emirate. In short, the law allows homeowners to choose companies to maintain the shared areas and facilities of buildings, taking the decision out of the hands of developers. In the process, they will supposedly gain greater control and potentially save money – so far, so clear.
But as far as I can see, the law doesn’t seem to be helping much yet, which begs a question: Until it is fully bedded in, what happens to current disputes?
Pity the poor residents of Lake Point Tower in Jumeirah Lake Towers, for instance, many of whom have been left without air conditioning after a dispute between landlords and the property developer escalated. The landlords have apparently failed to pay outstanding service charges to the developer, Distinguished Real Estate. The owners complain the charges are too high. Unable to reach agreement, DRE installed individual meters to each apartment (as opposed to the previous bulk meter for the whole building). To get an apartments meter up and running owners had to pay outstanding fees. And guess what: Some of them either can’t or won’t pay, leaving many tenants sweltering.
This incident is the latest in a number of problems we have seen in recent weeks, problems which the introduction of the new Strata law was supposed to address. A Strata law is designed to prevent exactly this kind issue by assembling a board of home owners (an association) to manage the administration of maintenance and maintenance fee collection for the common areas and facilities of a shared building. The theory being that because home owners run the show, there can be no doubts as to what money is needed for, spent on, and how much needs to be contributed by each owner.
The major question for me is, will a Strata law work in a city so full of renters? A Strata law is designed to offer owners an opportunity to oversee and have a hand in their properties, but this is a place where most residences are owned by investors who were looking for a fast buck during the property boom. Are they really interested in the active management of those purchases? We have already seen that when things were good, these investors were happy to pay the agreed maintenance fees for buildings thanks to all that juicy rental income they were getting. Now things have gone sour, and rental incomes are dropping, many show no interest in honoring their commitments. Suddenly they are questioning the fees.
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