Bloomberg News

Nakheel Can’t Charge Island Residents Extra Fees, Regulator Says

December 28, 2011

Dec. 27 (Bloomberg) -- Nakheel PJSC, Dubai’s largest property developer by assets, has no right to deny residents of Dubai’s palm-shaped island access to communal facilities by turning them into exclusive clubs, according to the emirate’s property regulator.

Nakheel stopped homeowners and tenants at the Palm Jumeirah from using the property’s beach, swimming pools and gyms earlier this month, according to leaflets the developer distributed earlier this month. The company plans to charge households 5,000 dirhams ($1,360) a year for access to these parts of the man- made island, the leaflets showed.

“By law, no one can stop an owner or a registered tenant from using the communal areas once they have paid service fees,” Marwan bin Ghalita, chief executive officer of Dubai’s Real Estate Regulatory Agency, said in an interview today. “If you bought something based on an agreement with a developer, he can’t change it.” A spokesman for Nakheel declined to comment.

Dubai developers are trying to generate income after the global credit crisis left many of them short of funding to complete projects across the emirate. Nakheel has incurred 78.6 billion dirhams in losses since the crisis began in the third quarter of 2008.

Membership Fees

Palm Jumeirah’s residents will have to pay annual membership fees of 5,000 dirhams to gain access to the beach, pools and gyms from Jan. 1, while non-residents will be charged 12,000 dirhams, according to membership application forms distributed by Nakheel’s staff at clubhouses. Guests would have to pay as much as 200 dirhams a day to use the facilities.

Nakheel, which owns the clubhouses between the shoreline buildings, can charge residents for the use of facilities and services that aren’t specified in their contracts such as poolside sun beds, towels, showers and changing rooms, bin Ghalita said. If the developer wants to block residents from accessing the clubhouses where gyms are located, it would have to provide gyms inside the apartment buildings, bin Ghalita said.

Many homeowners haven’t yet paid their services charges and Nakheel required temporary security cards to prevent those who haven’t paid from accessing the facilities, bin Ghalita said.

The developer and the Homeowners’ Association will soon reach an agreement that will resolve the standoff, according to bin Ghalita. Nakheel and other developers are in the process of submitting blueprints of their buildings to RERA to establish and define communal areas.

‘No Overpaying’

“We want to make sure that all non-communal areas aren’t included in the service charges, so owners won’t overpay,” bin Ghalita said. “That’s why we are taking our time to subdivide all of the buildings,” he said.

Nakheel charges around 25 dirhams per square foot in common area fees, Rakesh Sharma, a property consultant at RBA Real Estate which manages properties on the shoreline said.

Some homeowners say that developers are inflating the fees and using the charges as an additional source of revenue. The formation of homeowners associations should resolve the issue as owners would be in charge of the accounts and could manage the costs, RERA’s CEO said.

Several members of the shoreline’s homeowners’ association declined to comment when contacted by Bloomberg today.

In the past, Nakheel derived most of its income by selling properties before they were built. It also sold plots of land to smaller competitors after providing infrastructure such as roads, water, sewage and electricity. The company, which was forced to suspend work on two other man-made islands after the credit crisis, is trying to increase recurring income from rentals and shopping malls.

--Editors: Andrew Blackman, Inal Ersan.

To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.


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