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Dubai developers charging illegal fees, it is claimed

Legal firm Hadef & Partners claim in a report that fees of AED5,000 are being charged for registering a property and AED1,000 as a handling fee.

The lawyers point out that the Dubai Land Department (DLD) is the only body legally allowed to collect fees for registering properties. For an apartment worth AED1 million, for example, the DLD, charges AED 2,500 for registration, or 0.25% percent of the market value.

Yet some developers continue to flout the law by demanding additional sums, according to Michael Lunjevich, a partner in the firm, and author of the report.

‘Developers are split between those who are willfully ignoring the law in order to make a profit and those who are not aware the practice is illegal,’ Lunjevich said.

The problem also extends to service charges, a particular bone of contention between home owners and developers, the report found. Dubai law dictates that firms are barred from adding profit margins on to service fees and are only allowed to charge tenants the cost price of maintaining facilities.
Under Strata Law, developers are required to gain approval for their maintenance fees from Dubai’s real estate watchdog, RERA, until home owner groups are able to take over the accounts.

‘There are some developers who are taking a collaborative approach with the new owners’ associations and some that are not, where again, they see it as an opportunity to make some money in a down market,’ added Lunjevich.

Rows between tenants and developers over maintenance have soared in the wake of Dubai’s real estate crash. In locations such as JBR, Discovery Gardens and Nakheel’s Shoreline apartments, scores of owners have withheld service fees in protest at the poor upkeep of facilities.

‘The jointly owned property law is not about creating a profit centre for the developer, it’s quite the opposite,’ Lunjevich explained.

Analysts warn the practice of illegally charging fees to buyers could have a negative impact on Dubai’s already stalled real estate market, deterring potential homeowners and potentially forcing house prices to sag further.

‘It affects confidence in the market, which is required for the market to recover. And of course if people have to pay the fees twice, it might stop some them from entering the market because it will be too expensive for them,’ said Sadalla Abed, a senior consultant at Colliers International.

‘There could also be some legal implications down the road. If people haven’t registered their property they cannot sell it, there are so many things that they won’t be able to do with their properties,’ he added.