Business | Property
Stalemate continues at Discovery Gardens
With authorities refusing to intervene, the dispute between homeowners and Nakheel over service fees goes on.
- By Deepthi Nair, Sub Editor, Property
- Published: 00:00 March 1, 2010
- Image Credit: Kishore Kumar
- Discovery Gardens has established itself as the preferred residential cluster for the mid-income market
Has the time come to make a judgement call on the ongoing dispute related to service fees in Discovery Gardens between the master-developer and homeowners? More pertinently, is this the only solution available to resolve the impasse?
"If, in the absence of strata regulations, there is no binding Constitution governing the operation of a homeowners' association, one could turn to the provisions of the sale and purchase agreement (SPA) entered into between Nakheel and individual owners," says Jerry Parks, partner and head of real estate at Taylor Wessing, the law firm.
"My understanding is that the Discovery Gardens agreements provide that any disputes which cannot be settled amicably (with or without the Real Estate Regulatory Agency's intervention) should be referred to the Dubai International Arbitration Centre for consideration by a single arbitrator whose decision shall be final."
If this dispute does end up in front of the Dubai International Arbitration Centre, it will be a watershed moment for the local property market, irrespective of what the judgement delivered may be. Future wrangles involving developers and homeowners will take their tone and tenor from what transpires here.
But, how did things get to such a stage in Discovery Gardens, which over the last 12 months has established itself as the preferred residential cluster for the mid-income market? After the informal homeowners' association (OA) took up cudgels for a reduction in the steep Dh29 a square foot being levied as service fees last year, Nakheel, the master-developer, acquiesced and dropped it by Dh5. But residents then took issue with the promises made — and then never followed up on — in regard to community amenities. Matters reached a new flashpoint with OA representatives refusing to pay the first installation of service fees for the first quarter of2009-2010.
After contacting alternative maintenance providers for competitive quotations — which, in some cases, were substantially lower than what Nakheel was charging — the OA claims the revised fee of Dh22 a square foot is still exorbitant for a mid-income community such as Discovery Gardens. With rents sliding precipitously across all of the primary residential hubs in Dubai, the homeowners at Discovery Gardens lament that they are paying back half of their annual rental revenue as service fees.
Their pet peeves relate to a significant reduction in the general community upkeep, a non-existent security presence, the deteriorating traffic situation, undelivered swimming pools and false fire alarms going off at wee hours. They maintain that the issues remain unaddressed by the master developer and are insisting that Nakheel send them a revised general fund and master community service fee.
With the Real Estate Regulatory Agency refusing to intervene, OA representatives then approached the various contractors appointed by Nakheel, who claimed not to have received payments for services rendered.
Unfair charges
Several owners complain that the district cooling charges are unfairly high and are seeking meters to gauge the actual consumption in each apartment. Currently, the Palm District Cooling bills the overall consumption of all units to the Owners' Association, which in turn, invoices these costs to individual owners based on an apartment's internal area.
For investors smarting at having to pay for incomplete facilities such as swimming pools, a clause in the service fee invoice clarifies that any surplus funds available due to the non-expenditure of budgeted items in 2008-2009 will be carried forward.
Outsourcing bid
Discovery Gardens' homeowners warn of outsourcing maintenance to an alternative provider and placing the service fees in trust with a legal firm, which, in turn, will drip-feed it to the developer on a case-by-case basis. "A few facilities management firms have contacted us," informs Michael Aldendorff, who co-ordinates the informal OA. "We are awaiting a response from Nakheel."
On the face of it, this may not be legally feasible. "It's highly unlikely that the contractual documents relating to Discovery Gardens entertain the idea of the OA sourcing services independent of the developer at this stage, or of the OA drip-feeding payments to the developer on any basis," states Parks. "Assuming the contractual documents do not accommodate it, any proposal of this nature would not be legally permissible without the cooperation and agreement of Nakheel.
"The sales and purchase agreement refers to the possibility of services being withdrawn and utilities being disconnected in the event of non-payment of service charges, although I would suggest that this sanction would be inappropriate in the case of genuine disputes of this nature."
If a speedy resolution does not happen at Discovery Gardens, its residents certainly would wish that Nakheel shares Parks' view.
Deadline extension
Discovery Gardens homeowners have requested an extension for the deadline to pay the service fees and a Nakheel spokesperson confirmed the late payment fee has been deferred until April 1. "Nakheel takes the views of its community residents seriously and we continue to work closely with (the) homeowners," a spokesperson said in a statement. "We are confident our current discussions will result in a favourable outcome to all relevant parties.
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