Homeowners take tough line on service fee defaulters

Owner associations that have taken control of some of Dubai’s residential buildings are threatening to cut off essential services to buyers that default on their annual service fees. Horizon Tower in Dubai Marina has warned owners it will disconnect air-conditioning to flats with unpaid maintenance fees in a bid to force payment of the AED90,000 it estimates it is owed in service charges from 2006. It also posted a list of names of all 34 non-payers in the main reception, who individually owe amounts ranging from AED7,151.50 up to AED144,596. “There are still unit owners who persist in not paying their service and chiller charges, even though they continue to enjoy access to the lifts and other parts of the building,” the homeowners association said in a notice posted in one of the building’s elevators. “This is wrong and unfair to other unit owners. Why should we have to subsidize people who are simply freeloading?” The board would consider introducing late payment penalties in addition to other legal remedies in accordance with RERA’s advice, the notice said. A property manager for some Horizon tower apartments, Vip Patel, said service fees had already increased given the vast amount of building maintenance needed, in part because of defaulters. “[In recent months] they hiked up their charges a lot,” he told Arabian Business. “I presume it was because of all the non payments. And plus there were a lot of things that still needed sorting out. The pool for example was a year out of commission and hadn’t been fixed. And there was a major problem with the chiller which needed fixing. But I think they’re doing this to force these people to pay what they owe.” Dubai has seen a spate of disputes over service fees in the wake of Dubai’s property crash, with many homeowners accusing developers of charging inflated fees for building upkeep. Buyers have also blamed developers for delaying the paperwork for homeowners associations in a bid to retain the revenue stream of service fees in a tough economic climate. In projects such as Nakheel’s Discovery Gardens and the Palm Jumeirah, default rates on service charges are estimated to be as high as 50 percent, leaving buildings drastically short of maintenance cash. Lawyers said many homeowner associations had opted for tactics such as naming and shaming non-payers and cutting off access to essential services to force owners to pay up. “The issue of non-payment of service fees is not unique to [Horizon Tower],” said Nick Clayson, partner and head of real estate at the Dubai branch of international law firm Norton Rose. “The legal remedies currently may not be cost effective and as such, some are taking a different approach to procure payment. One such example is naming and shaming by public notice, others include the restriction of access to particular services such car parking. “Both of these present a risk. There are strict laws relating to defamation in the UAE, and cutting essential services may be unlawful.” Fees may also go unpaid due to apartments being empty or because owners are not residents in the UAE, under which circumstances, the restriction of services is relatively toothless, he said. Owner associations could rely on payment when the owner comes to sell the apartment, as units cannot typically be sold when in arrears of service fees, but in a relatively illiquid market, this could be a long way off. “The intention of the strata law is that the service fees cover the cost of maintenance. However, this only works if all owners make their payments. If they don't there will be a shortfall and compliant owners will be the ones that suffer if service standards and maintenance cannot be sustained,” Clayson said.