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Service arrears developers' fault

By Parag Deulgaonkar

Developers are at fault for letting property owners accumulate service charges over the years and should have developed a payment enforcement mechanism earlier than compel owners now to pay the arrears in lump sum, says a legal expert.

“Developers are at fault for failing to collect past due service charges for previous years. They have had control of the projects and all of the owners’ accounts from the outset. And they should have had sufficient time to accurately calculate the service charges as of the project handover date.

Therefore, it was incumbent on them to timely collect and to develop effective avenues for enforcement,” Ludmila Yamalova, Managing Partner of HPL Yamalova & Plewka JLT, told 'Emirates24|7'.

In many cases, developers are now trying to collect services charges several years back, without timely notifying owners that they would be subject to such charges and without giving them advance notice to allow reasonable repayment.

“It is unreasonable for developers to expect owners to come up with a lump sum payment of rather significant amount on a moment’s notice. Annual service fees are already, by accounts of many, exorbitantly high, making it difficult to settle them especially as a one-time payment. Expecting owners to [pay] several years’ worth of fees is especially unfair and unreasonable.”.

Earlier this month, Nakheel Chairman Ali Rashid Lootah had said there had been cases where owners in Palm Shoreline Apartments had not paid service charges since 2008. He went on to say that owners could not refuse to pay their service charge arrears on the pretext of not getting their invoice regularly.
“… even if they didn‘t get it [invoice], they have to budget it in their account,” he then said.

It is just not Nakheel but there are a number of big and small developers facing the same issue. Although developers have threatened to take legal action against the defaulters, none have taken any due to the high legal cost attached to the move.
In order to reduce the number of defaulters, developers and Interim Owners Associations have introduced late penalty clauses. But, the move hasn't paid off at all?

Yamalova says that delays in payment of services fees in Dubai are often a result of owners refusing to pay them because of the disconnect between the amount of the service fees and the quality of the services provided.
“Also, the lack of transparency as to how the services fees are calculated and how they are spent is yet another reason for why owners tend to hold back paying the fees promptly,” she adds.