Dubai homeowner associations in limbo

Dubai: The October deadline for the formation of homeowners associations in Dubai's freehold developments is in sight, but the stakeholders in the process continue to drag their feet. It's not just the developers alone, but the homeowners as well.

This is despite the fact that homeowners associations are being set up in part to ensure their interests are also taken care of. "Some developers are moving quickly to form interim associations, part of the progression to permanent ones," said Gary Bugden, executive chairman PRDnationwide.

"The vast majority though haven't done anything when they were supposed to have started the process already."

Ideally, the developer should convene a meeting with the interim homeowners association, and elects a committee to register with the Real Estate Regulatory Agency (Rera).

Then both, in consultation with Rera, will set up the structure and documents to form a formal body representing homeowners. After its registration, the first annual general meeting (AGM) takes place to elect a board. Then, of course, the homeowners take control of the running.

Riddle

It all sounds simple enough, but the process can fast become a riddle. "The theory is perfect... if developers would follow the guidelines by the letter, but in practice there are a lot of obstacles," said Samer Al Omari, chairman of Emirates Gate Real Estate.

One such obstacle is the fact that all board members — between five to seven — need to take a Dh3,000 course payable by the homeowners association.

Al Omari reckons the expenditure with people regularly moving in Dubai won't come easy and doubts that associations can be created on time. "Most are away on holiday and the process is quite complicated," he said.

"If the developer doesn't register, homeowners can. But if neither does, homeowners risk Rera taking the community under administration and fines of Dh100,000." Mixed-use developments add to the complications, and many of the existing developments come with turbulent histories.

"We have started discussions with Dubai Properties Group (DPG) to create the homeowners association and they are willing, (it's) just that the conditions are not clear," said Hamid Hamri, who heads Jumeirah Beach Residence's interim association.

"They want to keep the upper hand on the facility management role, with Idama for example."

Conflict of interest

By law no service provider related to a developer should look after the building because of a perceived conflict of interest.

Hamri, however, would welcome Idama to stay on. "They know the buildings, we need goodwill from all sides," he said. "If people behave unreasonably, everyone loses. DPG simply has to rebuild trust it lost over time."

DPG wasn't available for comment, but Hamri explained the main issue is past monies paid by homeowners. "We don't know what they were used for as DPG has auditing issues and we're not sure about their existing contracts with their providers."

By law, developers will have to appoint an independent auditor and refund any money of the charges collected that were improperly spent, said Brent Baldwin, associate at Hadef & Partners.

Homeowners at Jumeirah Beach Residence paid their services fees in 2007 and 2008, but discontinued — or paid at the old rates — in 2009 when fees were raised to a disputed level.

"Hardly any maintenance was done and now service charges still end up in a Salwan and not an escrow account as per law," said Hamri, who disputes the contention that Salwan did not get enough money from homeowners to keep service levels up.

"Once the homeowners association is established people will pay again willingly." However, Bugden says absentee landlords — depending on the project this could range from 10 to 50 per cent — not paying their service charges has a logical effect on service levels. "Developers have to subsidise the service charges or cut down on services," Bugden added.

Stipulation

Soon this will be the responsibility of the individual homeowners associations. The regulations stipulate if a homeowner fails to pay service fees for three months a file against him can be opened in court and he has 15 days to pay or object.

After that the property can auctioned. But where does that leave a tenant?

"The auction lends teeth to the regulation, however, I don't think that tenants could be kicked out just like that," Bugden said. "Registered leases have protection."

The Jumeirah Beach Residence is only one example of a development in Dubai where such issues have cropped up. A homeowner in Discovery Gardens does not believe the strata law will help their case.

"Nakheel says they are breaking with the project," said Qasar Khan, who owns a property there. "I don't believe it, they will never let go."

Omari said Nakheel has not yet moved towards creating homeowner associations. However, the master-developer made it quite clear that it welcomes the introduction of strata law regulations. "It further enhances the maturity of the property market in Dubai and the UAE," a Nakheel spokesperson added.

Ultimately homeowners can group together to serve a developer with a notice to submit a joint property declaration and, failing that, take over the process. But it isn't in the developer's interest to lose control, said Bugden.

Developers' obligations

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