Developers delaying handovers to buyers in Dubai

Dubai developers resisting handover due to profits they can generate from IOA and service charges. Photo: Shutterstock.

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Developers in Dubai are delaying handing building management over to the owners association (OA) because they're able to generate income from service fees, say industry experts.

Under Dubai's Strata Law, OAs must be registered with the Dubai Land Department [DLD] to allow them to open a bank account, pay bills and hire contractors to oversee building maintenance. But experts say developers are dragging their heels in filing paperwork with Dubai Land Department, leading to delays in handing over the management of their properties to buyers.

Graham Yeates, head of owners association management at Cluttons, said there was little incentive from developers to register the OA  because they saw opportunities to make profit from them and service charges as other revenue streams dried up.

Until

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the IOA is registered it is not a legal entity and as a consequence is unable to open a bank account or sign agreements. Created by the Land Department to get owners involved in their building so that once the OA is registered the owners can take over in confidence, the IOA has no legal standing.

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“The government now sees the management of OAs as a source of income,” explained Yeates. “In the Burj precinct Emaar controls all the OAs and as a result controls all the service providers.

“Contracts with FM companies in the OA environment are supposed to be transparent but how can that be with Emaar which owns several FM entities? I asked a gardener if he worked for Emrill and he said "no, I work for Emaar Landscaping." How can that be at arm’s length?”

A spokesperson from Emaar responded by saying: "RERA has stringent measures in place to ensure that only licensed and registered OA Managers can manage an OA. Emaar Community Management, a subsidiary of Emaar Properties PJSC, has been licensed by RERA to offer management services for the proposed OAs.

"Currently, there are 46 active interim boards currently operating in the various communities of Emaar communities in Dubai. All activities (financial) of the OA are also scrutinized by third-party auditors who are approved by RERA and interim boards."

An Emrill spokesperson added that the FM company is a shareholding entity with several shareholders including Carillion Plc their operating company.

"Emrill has established itself as an award winning market leader in the UAE offering innovative solutions to various industry sectors. Emrill’s clients include Royal Bank of Scotland, Deutsche Bank, Dubai Festival City and Aldar Properties."

While Brent Baldwin, associate, Hadef & Partners, said he could see more compliance from developers as they realised the law was here to stay, Yeates said he was not as confident because the current process suited most major developers.

“I don't believe any OA's are registered and until that occurs, the developer must remain in control. I'm thinking 2012 won't be much different.”

Edward Sanders, director at Dubai building management firm, Place, told CW's sister magazine Arabian Business, “There certainly are delays. Dubai has excellent legislation for joint ownership property but it’s not being enforced,” he said. “There is a perspective from developers that they’ll get around to it when it is being enforced.

“They think it’s a good idea to try and hold onto the development for as long as possible… because they think there is a revenue stream there or a benefit.”

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