Defaulters have no place to hide

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Defaulters have no place to hide                                                                                                                                                                                                                                                                              Mid-income pitch
                                                                                                                                                                                                                                                                                                              helps The Wave
By Manoj Nair                              weeks. But many of these
                                                                                                                                                                                                                                                                                                              ride out slump
Associate Editor                           properties are owned by in-                                                                                                                                                                                                                                        Plans 300 to 500 new residential units a year
                                           vestors who have no inten-
Dubai If you own property                  tion of actually moving in.                                                                                                                                                                                                                                        By Manoj Nair                                the pricier villas cost Dh5
in Dubai and have repeat-                  “It is certainly the case that                                                                                                                                                                                                                                     Associate Editor                             million and more.
edly failed to meet your ob-               the high level of absentee                                                                                                                                                                                                                                                                                        “We want to have ongoing
ligations by way of service                investors in Dubai’s real                                                                                                                                                              Dubai By creating a wider                                                                                                availability of new products
charges, it’s time to mend                 estate market poses unique                                                                                                                                                             residential portfolio early                                                                                              as quickly as market de-
your ways. Those who con-                  problems for owners asso-                                                                                                                                                              last year, The Wave, Mus-                                                                                                mand dictates,” said Lenar-
tinue to test the limits may               ciations seeking to enforce                                                                                                                                                            cat has been able to chart                                                                                               duzzi. “There is the new of-
soon have owners associa-                  service charge obligations,”                                                                                                                                                           a better way through the                                                                                                 fering of what we call twin
tions that have assumed re-                said Taylor. “Clearly where                                                                                                                                                            current trough in the                                                                                                    villas, which are smaller
sponsibility for properties                an investor is domiciled                                                                                                                                                               Gulf’s property markets. It                                                                                              formats compared with the
coming after them for over-                outside the jurisdiction, it                                                                                                                                                           was in March last that the                                                                                               standard ones. There will be
due payments.                              presents greater obstacles.                                                                                                                                                            developer created smaller                                                                                                new villas on the waterfront
  With that, the neighbourly               However, where a tenant is                                                                                                                                                             format properties pitched                                                                                                and apartments overlooking
atmosphere that exists in Du-              in occupation of the unit,                                                                                                                                                             at mid-income buyers.                                                                                                    the marina.”
bai’s freehold clusters would              many owners associations                                                                                                                                                                 “Initially, most of the
come under severe strain.                  are liaising with the ten-                                                                                                                                                             projects launched at the Good offtake
Repeated failure to meet pay-              ant as a means of applying                                                                                                                                                             time were fairly skewed          To date, about 1,000 units
ment obligations would also                pressure on the owner.”                                                                                                                                                                towards the upper end, have been sold, of which de-
invite stiff penalties as laid                                                                                                                                                                                                    there wasn’t too much va- liveries number 650 proper-
out under the Strata Law. It               Withholding services                                                                                                                                                                   riety,” Michael Lenarduzzi, ties, creating a community
could even have retroactive                  When appealing to the                                                                                                                                                                the firm’s CEO, said in a of 500 residents to date.
effect, as non-payments in                 better sense of an errant                                                                                                                                                              telephone interview from         Another 350 units will be
periods before owners as-                  owner fails, owner asso-                                                                                                                                                               Muscat. “What we are doing ready before the year’s end.
                                                                                                                                                                                                     KAREN DIAS/Gulf News Archive
sociations took over can also              ciations can always force                                                                                                                                                              now is broaden the offering Going forward, the plans are
be pursued. And the “good                  the issue through tougher                              Management dynamics                                                                                                             to appeal to a wider range to complete between 300 to
people next door” may well                 measures. Key services, in-                            Towers at the Jumeirah Beach Residence. The high level of absentee investors in Dubai’s real estate market poses unique of markets. It’s worked ex- 500 residences a year.
be the ones taking the onus                cluding utility, could then                            problems for owners associations seeking to enforce service charge obligations, an analyst said.                                tremely well for us.”            On whether there was
of meting out the penalties                be cut off. “In some cases,                                                                                                                                                              Indeed. On their launch any move to raise the resi-
to those falling back on their             owners associations can                                                                                                                                                                last year, 70 per cent of the dential element beyond
obligations.                               suggest to tenants that to                                                                     CASHFLOW ISSUES                                                                         170 units were snapped up what was initially project-
  But there are things that                prevent an interruption of                                                                                                                                                             in 48 hours and the rest soon ed, the CEO said: “We have
need to be in place before
owners associations can
start getting tough. For one,
                                           services, they should make
                                           payment of the service
                                           charge directly, and deduct
                                                                                                                        Selling titles an onerous option                                                                          after. The master developer kept the masterplan, in the
                                                                                                                                                                                                                                  will stick to the same formu- broad sense if you like,
                                                                                                                                                                                                                                  la — and hope for a similar pretty consistent. We have
“[An] owners association                   the relevant amount from                                          Associations would be entitled to block sale pending clearance of arrears by investor                                set of results this year too.   changed the mix, but the
can only take action after it              the rent payable to the                                                                                                                                                                  While an entry-level one- numbers haven’t changed
has assumed management                     owner,” said Taylor. “Ulti-                         By Manoj Nair                            “In the event of non-payment it           Owners associations armed with                  bedroom apartment at The too much — it has been
of the development,” said                  mately, owners association                          Associate Editor                       is extremely important that other the writ to go after unmet payments                       Wave, Muscat would have around 4,000 units right
Jerry Parks, partner and                   can look into the possibility                                                              owners have a legal right to pursue can, however, upset investors’ hopes.                   a price tag of Dh740,000, from the word ‘go’.”
head of real estate at the                 of forcing a sale of the unit                       Dubai Investors facing cashflow the person or entity in breach,” said              “The issue is not that the landlords
law firm of Taylor Wess-                   to recover unpaid service                           problems related to their properties David Quinns at the property con- are absent per se but that many of
ing. “From that date on-                   charges, although to our                            may soon have to place these assets sultancy Cushman & Wakefield. the foreign investors were motivat-
wards, however, it can seek                knowledge no such order                             on sale. A proviso in Dubai’s Strata “Proper management of a building ed by the speculative opportunities
to enforce payment obliga-                 has — to date — been is-                            Law states that owners associations is fundamental and non-payment of to ‘buy and flip’ and never intended
tions which arose prior to                 sued by the Dubai Courts.”                          can block a property’s sale unless service charges can have a negative to hold the assets on a longer term
the owners association as-                   Clearly, for those home-                          the owner clears all arrears related impact on the day-to-day enjoyment basis,” Quinns said.
suming management of the                   owners with a history of un-                        to service charges.                    of the property and can put its fu-         “The downturn in the rental mar-
development.                               paid service charge bills, the                        But these investors still have some ture value at risk,” he added.             ket has placed many of the real es-
  “There should be no loop-                time to pay up starts now.                          wriggle room. Owners associations        “However, should the associa- tate owners in a situation where
hole for defaulters who                                                                        would need to formally assume tion prevent the sale of a property the rent doesn’t cover the cost of fi-
may wish to argue that past                                                                    charge before they can go after un- of a person in financial difficulty nance. The financial pressure of an
breaches on their part can-                Have your say                                       met payments. But in a difficult mar- it may exacerbate the issue as the asset which does not cover the cost
not be addressed by the                    Do you think Owners Associations                    ketplace, doing so can prove a hard sale of the property may be the on- of borrowing combined with man-
newly empowered owners                     are well equipped to oversee                        sell. A way out would be for owners ly way he can obtain the funds to aging an asset in a foreign country
associations,” he added.                   service charges? Will this move                     associations to take a longer view of pay the outstanding charges. The has lead to these investors lacking                                                                            Supplied picture
  All of this will leave little            result in a lack of compliance? Tell                the problems confronting some of appropriate remedy has to be con- the interest to ensure the proper
room for defaulting home-                  us what you think at                                its members.                           sidered on a case-by-case basis.”         management of the assets.”                        Building on demand
owners. The pace of hando-                                                                                                                                                                          The Wave, Muscat is applying a business plan: to come out
vers has picked up in recent                                                                                                                                                                                                      with new products as quickly as market demand dictates.

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