Residents on the rise
The increasing cost of service charges has angered homeowners in many recently completed master-planned developments. Do they have cause for complaint or are they expecting something for nothing? FM Middle East reports on the rise of the residents.
The large-scale development of new master-planned residential communities across the region has introduced a new phenomenon to cities such as Dubai – the ‘Resident’s Association’.
And what they all want to talk about is the service charges they are being asked to pay to cover the high costs associated with maintaining expansive developments in a harsh desert climate.
Now the industry is expecting the arrival of new legislation, which will address the level of service charges being demanded by developers.
Despite residents’ complaints, many developers are discovering that if anything, they may have under-estimated the costs of maintaining their schemes and now they are turning to FMs for help.
“The [UAE] Government is working on service charge legislation that we believe will be published in the next six months.
They realise this is an issue and they are going to create legislation to regulate it,” explained Ronald Hinchey, resident partner at real estate consultant, Cluttons.
The likely content of the new legislation is not yet known, but Hinchey believes it will help to regulate and control the charges currently being levied on residents.
“The reason big developers are not allowing the resident associations to maintain the building or complex is because they don’t trust them to do it properly,” he explained.
“They feel that if they don’t look after and maintain the building, it will start to deteriorate and the value will drop.”
He added: “Whatever the developers charge, people will complain.
They will always look for ways at reducing the service charge.
That’s why the developers are reluctant to hand over day-to-day development to the residents association.”
Earlier this year the IMF warned that inflation was the biggest single threat to the UAE economy and as the costs associated with maintaining large-scale residential communities rise, developers are bracing themselves for a corresponding rise in maintenance costs.
Serco Gulf general manager, Andrew Barker, believes that there are really only two options for developers when assessing the future maintenance requirements on their developments.
“If you have, as has been the case on certain developments, established a service charge that has not been sufficient to meet the expenditure, and then you want to take on an operator – either the developer will have to put its hand in its pocket to subsidise the operator or the operator will have to do the best it can within the budget it has.”
“If it chooses the latter, it will mean that it probably doesn’t have enough people to answer the phones or enough people to drive the vans or enough vans and so on.”
“That can’t go on.
As residents committees develop and take more power over the running of their estates, it may make them more cost conscious in terms of the services they’re using.
Barker believes that this realisation may encourage residents to look at cost saving measures such as recycling.
“You might find residents committees strongly encouraging people to use less water or recycle more as that will cut down on the waste disposal charges and in the same way if they want a better service they may have to pay a higher service charge, so I see that as an area that will develop, particularly as the larger estates fill up,” he said.
And there is evidence that some developers are already seeing the wisdom of encouraging energy conservation and waste recycling.
Emaar has launched a new recycling initiative called ‘earth watch’.
A spokesperson for the developer said: “The current Earth Watch initiative is free and will not raise service charges in any way from residents.
It does not put any added burden on facilities managers.”
The additional service will first be introduced to all villas in Emirates Living, followed by the Arabian Ranches and The Greens.
It is hoping to reduce home waste by 30 to 40% and recycle some 25,000 metric tonnes a year.
Its overall goal is to reduce the amount of waste in its communities by around 80% – a significant drop.
While the environmental bragging rights of such schemes are what developers will want to talk about, their potential to reduce the overall cost of waste disposal and by extension, the costs of service charges, may be what drives their adoption elsewhere in the region.