Property buyers face improper fees

Dubai developers are overcharging buyers, property experts say - with video.

Dubai developers are overcharging buyers, property experts say. Jeff Topping/The National

Developers in Dubai are routinely overcharging home buyers thousands of dirhams in registration fees and for service charges, property experts say.

The practice is "massively widespread", said Michael Lunjevich, a partner in the law firm Hadef & Partners.

More buyers are complaining about the fees in Dubai, as cash-strapped developers finish projects started in the boom years.

Ratnakar Mallar is challenging Dh8,000 (US$2,100) of administration and registration fees a developer is demanding before he can take over a two-bedroom apartment in a new development in Dubailand.

"It is not fair," said Mr Mallar, who works in the construction industry. "It's not part of the agreement and it adds salt to the injury of an already loss-making proposition."

In some cases, developers are ignoring the law by asking buyers to pay inappropriate fees, said Mr Lunjevich, a property specialist. A survey of 350 buyers and industry executives conducted by his firm and released yesterday found developers were commonly imposing service charges without following Dubai's new strata guidelines.

"The survey confirms that many developers are not aware of or are wilfully ignoring the current regulations surrounding jointly owned property," the law firm's report said.

The Strata Law, which went into effect last year, requires developers to obtain approval of their fees from the Real Estate Regulatory Authority (Rera) and provide audits of expenses until homeowners can form their own associations.

But many developers have delayed turning over control of maintenance in projects to interim homeowners associations, said Graham Yeates, the head of ownership management for the UAE office of the property firm Cluttons.

"They see it as a profit centre," Mr Yeates said. "If owners take over, there wouldn't be a profit margin."

Many of the laws governing registration and administration fees date to 2008, but there is still confusion about what developers can and cannot charge.

Only the Dubai Land Department can legally collect fees for registering property, Mr Lunjevich said. But some developers charge a separate property registration fee, often as much as Dh5,000.

"People don't know [the developers] can't charge, so they just pay," Mr Lunjevich said. "I can't think of how many thousands of fees have been paid without questioning."

Developers can charge only a Dh500 administrative fee for projects under construction, according to the Hadef & Partners report. However, unexpected administrative fees are a "widespread issue throughout Dubai", the report found.

Buyers are also being charged between Dh500 and Dh5,000 by developers for no-objection letters, required by the Dubai Land Department to transfer properties.

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"The basis of calculating these charges is unknown and there is no hard and fast rule in Dubai that makes it mandatory for developers to be transparent about the costs they intend imposing on purchasers or owners of freehold properties. Buyers are confused," said Tomas Ghassemi, the managing director of the Property Store.

There was often no way to predict what fees a developer would charge, he said.

The fees were hurting the property market and making purchases costly and complicated for many investors, Hadef & Partners concluded.