BBET Community Report

11 March 2013

Letter to RERA in response to Taziz prepared BBET Community Report

Copies to:            

Mr. Ahmed Hamdani and Mr. Khalid Alkazim, RERA

Mr. Mahmud PK Merali, Meralis

Mr. Nezar Oayda, Taziz

The members of the Tower B IOAB

On 3 March 2013 Taziz Property Management Solutions (Taziz) issued their first BBET Community Report to owners.

The document is misleading and fails to address the concerns of the Interim Owners Association Boards. The Taziz proposals for 2013-2015 are poorly thought through lacking timescales and measurement.

In the interests of providing relevant parties with a balanced perspective of issues at BBET I have reviewed the document page by page and comment below.

Page 1. Introduction.

Contrary to their report for three years Taziz has set out to avoid meaningful communication and engagement with the owners of property in BBET.

Taziz notes as an achievement that they have issued the audited reports for BBET’s 2010 financials. It is now March 2013. There is not a hint of embarrassment that the accounts were nearly two years late.

Taziz has shared the audited financials with the chairpersons of the Interim Owners’ Association Boards (IOABs). However, the IOABs cannot share the financial statements with the owners that elected them as Taziz has refused to give the IOABs any contact information for the owners. This is despite the fact that every owner at BBET is regularly contacted by real estate agents offering to sell or rent their property. Real estate agents may contact the owners; but the board that the owners elected to represent them cannot.

Taziz has not distributed the 2010 financial statements to owners.

Meralis are the BBET auditors. Their 2010 audit report raises a number of issues primarily.

The auditor states that “the Association” has appointed Taziz Property Management Solutions LLC as the managing agent. In 2010 the agent was originally Salwan Management LLC and from November 2010 it was Dubai Asset Management LLC. Taziz became managing agent in mid-2011. These appointments were not made by the owners or their elected representatives. The appointments were all made by the developer without consultation or tender. The developer is conveniently, although this is not mentioned in the audit report, the parent company of each of these three managers.  The accounts should have reflected the changes in manager and their appointment by the developer.

The appointed facilities management (Idama) and security company (Arkan previously Dubai Security) are also wholly owned by Dubai Properties. No tender of their services has been carried out. There appear to be no KPIs to measure the effectiveness of their work, to compare their services against other vendors or to ensure value for the owners.

Law No. (27) of 2007 Concerning Ownership of Jointly Owned Properties in the Emirate of Dubai has a code of conduct for Association Managers states in Schedule 2 that:

“Item 6. An Association Manager must not do anything that would have the effect of placing their interests in conflict with the interests of the Owners Association.

Item 7. An Association Manager must disclose all relationships in writing to the Owners Association regarding any actual, potential or perceived conflict of interest between the Association Manager and any other supplier of goods or services to the Owners Association. The Association Manager shall take all necessary steps to avoid any favoritism or impropriety during the selection process and negotiation of any contracts with suppliers.

Item 9. An Association Manager must take reasonable steps to ensure that goods and services procured by an Owners Association are procured at the most competitive prices reasonably obtainable.”

The Association Manager has not met its obligations under the Code of Conduct. The auditor reported that “no violations of the relevant laws and the rules of the co-owners constitution have occurred during the year.”

This appears inconsistent with the Association Manager’s actions.

Page 2 RERA Compliance

Taziz states in their report that “The OA allows owners to participate in a transparent process or management in the community.” For three years Taziz, and its predecessors, have successfully ignored this and ensured that the owners have absolutely no involvement in the management of BBET. The auditors even noted that “no tender process for contracted services was followed” in 2010.

The IOABs have been given no timeline to complete the registration process of the IOAB.  The IOABs have not been involved in, or consulted in, the review and drafting of the JOP, BMS and Theoretical Survey.

Pages 2 to 4. Our achievements.

Taziz and its predecessors have provided BBET with three years of missed deadlines, ineffective management and misrepresentation. They have failed to engage and work with the IOABs.

Deadlines: Deadlines, either self-imposed or advised to them have not been met. Just as examples, in Nov 2010 owners were advised that the access roads were to be completed in six months. They are still not complete. On July 26th 2012 we were told that 2011 service fees would be invoiced in August 2012. They were eventually invoiced on 13 November 2012. There are too many examples to list here.

Infrastructure: Lobby areas: Primary pedestrian access is through ground floor car-parks into temporary lobbies. These are poorly lit; dangerous due to fast moving traffic, poorly secured (anyone can, and does, walk in without any form of identification) and aesthetically awful (they look and feel temporary). A security card sits at a temporary desk. Elevators remain in poor condition with damaged walls and mirrors.

RTA Roads: the RTA road network providing access to BBET has been shambolic for three years. For most of that time access has been on rough, unmade roads. Residents have had to put up with this but at times it has been disgraceful. Even now access is not complete and exits from both West and East Heights require use of temporary exits.

Car parking: external car parks were not a part of the initial renderings. But the developer did not provide adequate parking for office use or visitors. The Sheikh Zayed Road frontage is still known as Garden View; the rear is still known as Lake View. The reality is three side of the development are to be given up to car parking.

There has been no consultation with owners, or communication to owners, about the changes to the master plan or what mitigating efforts, such as landscaping, and recreation/play areas will be made to improve the aesthetics of the car parking.

Pictures of some of the original front and rear renderings:

All owners have designated parking places in their SPAs but these are not used in East Heights. I have not once parked in mine, which for the first year was used as storage for building materials.

In order to rent out office space Taziz has advised Aspect Tower tenants that they may use any available space in East Heights. Effectively Taziz provided access to parking spaces that have already been purchased by owners of BBET. Without parking Taziz would never have been able to let the office space. The more office tenants the worse the parking situation became. It also has led to drivers entering and accessing the building far too fast without thought of residents. There are no warning signs or speed bumps at the entrance and exit to East Heights. Problems with access to parking has led to unpleasantness between owners, residents and visitors and to many residents trying to block access to their space with cones, blocking devices and gates.

Safety and Security: The best that Taziz can say here is that they had a fire drill for the office tower. Given recent high profile fires in high rise buildings in JLT and Downtown Taziz could have made a far greater effort to ensure the safety and security of tower residents.

There remain far too many people who appear to have access to the common areas of the development without identification. Car parks are poorly lit and not secured. This is a particular concern for people that work late night shifts or come home in the middle of the night.

Retail: it would only be the most cynical who would observe that the artwork on Business Bay Avenue conveniently obscures the undeveloped space behind BBET which was originally set aside for a lake and recreational area. Once again there has been no consultation with owners about the future use of this space.

The water features on Business Bay Avenue have already been shut down and appear to be under reconstruction; after just one year.

Communication Channels: Taziz has been “looking into” a BBET Community Portal since 2010. A newsletter for owners and residents saw just three editions in 2011. There is little expectation of improved communication other than to issue service fee invoices.

Page 5 Audit Results.

See also notes above under Introduction.

Taziz claims that “the objective of the audit was to demonstrate the transparent process through which the owners are guaranteed that service charges are being collected solely for the purpose of the community.”

Let us deal with that claim. Firstly the audit was solely for the year to 31 December 2010. Secondly note 9 clearly states that “no tender process for contracted services was followed.” Secondly over AED3.3 million was due from BBET Tower B to Taziz and to other DPG companies. This represents 48% of total expenses; the balance of which is almost entirely made up of utility charges. Replicate these figures across 11 towers and there are substantial payments being made to DPG group companies for services that  appear to have no supporting contracts (as these have not been shared with the owners elected representatives) and that have no associated KPIs.

Transparency at BBET is a myth. The IOABs have requested the following documents from Taziz: Taziz’s most recent response on 3 February 2013 to this request is shown.

Community fee: The IOABs have not been provided with audited financial statements for the BBET master community. The Tower B fee of AED2.2million for 2010 does seem remarkably high; and of course is replicated across the development. There were no community facilities in 2010; no pool; no gym; no landscaping; no retail outlets; no road access beyond a dirt track. Without the ability to review the master community charges and accounts the IOABs are unable to fulfil their role of supporting the BBET owners.

Role of the IOAB: I have never understood why DAM/Taziz/DPG have consistently refused to work with the IOABs as part of managing the ET community. Among the owners are some talented, experienced and highly qualified individuals; many of whom were willing to give of their free time to support the development of the BBET community. The IOAB members were elected by the owners. It is clear from the Taziz response above that they have no intention of working with the Interim Boards.

I also cannot understand the rationale for not sharing owners’ contact details with the IOABs who were elected by those same owners.

Budgets and Services Fees: No budget has ever been provided to the IOABs for any year including 2012 and 2013. There is no detailed explanation of the 2011 and 2012 service fees levied on home owners and business entities of Executive Towers. The 2010 accounts were not signed until 11 November 2012.

For Tower B RERA approved a 29% increase in service fees for 2011 compared to 2010 (remember there was a surplus in 2010). No explanation has ever been provided for this increase. Any documents or information shared with RERA to obtain approval of the fees were not shared with the IOABs.

Page 6 Our Objectives for 2013-2015

This is a feeble and short list of platitudes without any performance measurement criteria. Most of the objectives relate to internal management issues within Taziz that will be of little obvious tangible benefit to owners.

What is included:

·         Increase operational efficiencies. There are no example and targets.

·         Enhance current strong financial management. Improvements in processes, systems and controls.

·         Establishment and formalisation of associations. No target dates are given. No details of the steps to be taken are given. Since Taziz has failed to work with elected interim boards why does the formalization of associations make any fundamental difference?

·         A community life cycle plan will be commenced in 2014. Why is this not starting immediately? The auditors have already commented that they are unable to assess the adequacy of the sinking fund without such a plan.

What could be included in 2013-2015 objectives?

This list is not intended to exhaustive but would represent genuine improvements for owners and residents. Liaising with the IOABs would produce a more thorough list and would align the owners’ expectations with the manager’s capabilities and the BBET budgets.

·         Finalise car parking and issue of parking access tokens. With completion date.

·         Publish cleaning schedules for each tower so that performance may be monitored. For instance window, lobby and car park cleaning.

·         Publish schedule for regular maintenance programs.

·         Present plans for agreement of owners and complete landscaping at front and rear of BBET. Review and completion dates.

·         Carry out substantial renovation of elevators and of lobby areas. Budget and schedule required.

·         Elimination of all façade creaking across BBET. For some towers this remains a serious issue that the developer and its appointed manager have consistently failed to address.

·         Issue of 2011 financial statements. Set date. Financial statements to be sent to all owners.

·         Completion of all steps to register owners associations by 30 September 2013.

·         Issue of 2013 budget to IOAB. Date.

·         Set up budget teams with IOABs to review financial situation of each tower and issue an agreed 2014 budget to OABs (not interim) before end of 2013.

Page 7: Our future engagement with you.

Note that there is no mention in these last two paragraphs about registering the owners’ associations and working with the elected representatives of the owners.

It should be noted that an almost identical community report was recently issued for JBR.

Please note that these comments are not exhaustive and are based upon my review of the BBET community report. Other owners and IOAB members may well have additional comments on the report.

RAScott

Executive Towers Update - 29 March 2010

Time for another update from the wasteland also known as Tower B.

1. My letter to Salwan's CEO. So far this is the only reply -

Dear Mr. Robert,

Thank you for contacting Salwan Property Management.

As per your request, your e-mail has been forwarded to Mr. Saeed Bushalat for his review and reply.

Should you require any further assistance; please do not hesitate to contact us.

With Best Regards,[/I]

2. The false fire alarms are now a regular feature at Tower B. Between 5 - 10 times a day and night.

3. We had a friend to visit a few days ago -first time that we have dared let anyone else see the place. Their first observation was that - "it does not look like a new building - it is so run down." And she was right. The access corridors are dusty, damaged, have no ceiling. Door frames are slowly being stained and repaired etc etc.

4. Pictures of the pool and gym are at the bottom of this link :
http://picasaweb.google.co.uk/rascottdotcom/ExecutiveTowersTowerBHandover#

The pool may be no more than a month away but can it open before the rest of the gym and changing rooms which are months away.

5. Our snagging is more or less finished. But it has been like pulling teeth. And contacting Salwan or Idama to get anything done is pointless. The only way to get work done is to have the phone number of one of the Al Habtoor foremen.

6. Has anyone else noticed how dusty the apartments are? Although ours is cleaned each week after only a couple of days there is a fine dust over everything. I assume this comes through the cooling system.

7. This morning the only working elevator around 10.30am was the freight elevator by 01/02. And that was not stopping at the 34th floor. It took 30 minutes to get to the Ground floor. And an elevator only arrived (there were at least 7 or us by then) because I called the Al Habtoor contractor....30 minutes wasted. No point in yelling at Salwan - as far as I can tell they could not manage their way out of a paper bag.

8. And a question. Is anyone else disturbed by loud banging sounds - almost sounding like something is banging into the outside of the building - seems to affect the East side of the building the worst ? It is loud enough to wake anyone sleeping. I have no idea what the sound is.

9. A request. Could people please use caution in the car park - and maybe even park in designated parking spaces.

I was away last week. And had been careful to park in a designated space at the side - away from the main traffic.

I came back to find my bonnet and grill have been badly damaged.

To the offender's credit he or she did call the police - and a green report was left under my windscreen. But I now have no car for 2 weeks.

But after giving him or her some credit - to do that much damage he/she must have been reversing at speed. Pathetic.

That's this week's update. There is news today that Dubai Holdings is looking to restructure some US$20 billion of debt. No great surprise. I guess they must have overspent at Dubai Holdings palatial HQ building. Rarely have I seen so many people wandering around doing so little.

Executive Towers Update - 4 March 2010

I should be happy today. Idama were going to come this morning and complete the snagging work. And Du were going to instal tv/internet/landline.

But this is Executive Towers; and nothing goes as planned.

Idama did not appear. Despite so many promises yesterday.

And Du did come; and were very pleasant - and very apologetic.

There was nothing that they could do because the contractor has failed to instal a power socket in the equipment box above the apartment entrance. I don't know whether i am unlucky or whether this is a fault with the whole building.

So the contractor has to instal the power socket; then I have to re-schedule the Du installation.

I am so effing cross.....

Executive Towers Update - 3 March 2010

There has been no progress by the contractors since the 14 February update.

But we did get an entertaining visit from one of the Idama managers today; it was a bizarre visit.

Yes they can move the main bathroom toilet roll holder - but we have to pay for it. It is in the wrong place; it is not our fault. It is the far side of the bidet; rather than between the bidet and the toilet. All the apartments are the same said our Idama man. It was fitted this way because of the drainage.

What is this Executive Towers disease where people need to lie about everything.

The apartments are not all fitted like this. Let me show you. 3402 and 3601 (both unoccupied) have the toilet roll holder in the correct place.

There is no toilet roll holder in the spare bedroom. Drainage he said. So why does 3402 have one?

Does anyone have a bathroom plug? I have not seen them in any apartment.

The chipped and stained bathtub seemed to amuse him rather be of concern. I doubt anything will be done.

The second bedroom still has almost more paint on the floor than the ceiling; and the tiling and plaster work still needs to be redone around where the build in wardrobes were stripped out and changed.

One piece of good news. DU has completed their network installation and just maybe we will have internet and tv access tomorrow.

The car park is getting busier - which means it is harder to find a car parking space when so many are being used for building material storage.

Road access all but got washed away by the rain.

Executive Towers - Online Comments - 23 February

This is from a web forum: written by another owner or tenant:

"Has anybody noticed how bad the smell from the air ducts (the metal boxes in the walls - in the lounge/bedrooms etc) is !!!

It is horrible.

At first they blamed the sewage in the bathrooms, but later we found out the truth (from workers/engineers)... read on.

I was told by the engineers that the ET buildings were ready & sitting for the last 2 years & during this time 'RATS' had infested the buildings (and had been happily eating away the plastic/cables/wiring/everything etc) !!!

Al Habtoor have used rat poision & killed a majority of them - that's what the aweful smell is !!! There are dead rats all over the building & air ducts etc. (all the Towers).

This is REALLY BAD & unhealthy specially for children and we wonder for how long it will continue...?!? There is nothing they can do about the smell.

To quote DP "The ET apartments come equipped with modern amenities, high-tech facilities and internationally designed interior spaces that embody superb architectural innovation and breathtaking views of the winding Creek." INDEED !!!"
 
Executive Towers Update - 14 February 2010

We have now moved into our building site apartment. And it is time for an update:

I have painted walls in the living room and main bedroom and put a bit of colour in the place. And made far less mess in the process than the contractors.

Discoveries: The bathrooms were all designed by very small people. A dwarf's bathroom. Which makes little sense in a 1,550 square foot apartment. The bath is so small that it does comply with Dubai's rules on conservative behaviour. Because there is no way in the world that you could get two people into the bath or shower.

There is a woeful lack of storage space and the built in cupboard units were obviously designed by a man who has only one suit and one pair of shoes....and must have been designed by a man - a woman would have known better.

The kitchen has an opening to the lounge/dining room but still has a kitchen door. Why ? Better to have no door and create some space in the small kitchen.

The living room is cold.

The apartment gets a lot of dust and dirt. Not healthy. Presumably through the ventilation from other rooms.

If the contractor says that he will be there for 2pm today - it could mean any time or never. Three times I was told after two pm on different days last week. Three days I sat in waiting. No one ever appeared.

The built in wardrobes in the spare bedroom have been finished (again) - but they have taken tiles off the skirting board and plaster off the surrounding walls.....more work for the working men to do - if anyone remembers old Flanders and Swann songs.

One afternoon last week this guy walks in with a jacket that says Dubai Security - just walks into the apartment - who are you I asked - I am security - he is clearly checking on my friendly labouring team - so I had a go at him - telling him he had no right to simply walk in to a private apartment...and that next time I expect the courtesy of a front door bell and he can wait until I invite him in.

Internet/TV/Telephone - were due to be availble from Du by 28 February. As of last week that is now 12 April 2010. But their web site still says on schedule. Jokers! Someone has to explain to me why a building that is two years late has not already been wired by Du.

These were apartments that were supposed to "come equipped with modern amenities, high-tech facilities" according to the Dubai (take your money and run) Properties.

There is only one elevator operating in the building. Which is a real problem for removal and delivery people. But it is leading to some fun conversations with other owners and tenants in the elevator. No one has a good word to say about the building or DP.

The contractors proved to be highly entrepreneurial last week. They seem to have a period of overtime that starts at 5pm precisely.

Executive Towers Update - 23 January 2010

Dubai Properties - who I remain convinced are the least customer friendly organisation that I have ever dealt with - insisted that the apartment that we have bought in Executive Towers had to be handed over and paid for in full by 6 January 2010 - or we would be found in default - and potentially liable to lose the 70% already  paid on the apartment.

Building Dreams is the Dubai Properties tag-line. Delivering Nightmares is the reality.

Unusually they insist on payment before they identify any snagging work that needs to be done. So here we are - we have now owned this apartment for 16 days - we are paying DEWA and cooling fees. The apartment is not ready to be lived in. The entire Executive Towers complex is months, maybe years from being complete.

The snagging list was prepared on 6 January. As of yesterday no work had been done. These are a just a few of the pictures:

Executive Towers - The Reality

The Dubai Properties Development named Executive Towers at Business Bay was originally due for completion in Q1 2008.

At the end of that quarter a press release was put out by Dubai Properties on 27 March 2008. It is, in hindsight, either shameful, embarrassing or simply hilarious. Yet no one is held accountable. No notice was given to purchasers concerning the delay.

"Dubai: 27 March, 2008 - Dubai Properties, leading master real estate developer, today announced the AED 3 billion Executive Towers, which are markedly visible from Sheikh Zayed Road and Al Khail Road, is nearing completion, and the anticipated Handover date will be during the fourth quarter of 2008.

Work is proceeding simultaneously on all 11 buildings of the Executive Towers, which include nine residential units, the Aspect Tower, and the Business Bay Hotel. The development's outdoor component, the Bay Avenue, is also on its way to deliver 175,000 square feet of retail space as well as water-front terraces.

With all the units of the Executive Towers sold out, the handover of all towers will commence in the fourth quarter 2008....

Al Zarooni said: "With 5,400 on-site workers, we are delighted to inform that our ambitions for the Executive Towers will soon achieve fruition. The towers and the lifestyle they represent are geared towards people who celebrate success and an intelligent way of life, and we are confident the development will set new benchmarks in the industry."

Termination and refund clauses for failure to deliver the project within a year of the original completion date were contained in the property sale and purchase agreements but were worthless. As a buyer you could have tried to fight Dubai Properties in a local court but you would have needed great patience, a good lawyer and to afford significant legal fees.

So the only option has been to sit and wait for completion and handover of the property. In the meantime I (and I am sure many others) have incurred the costs of two additional years of property rental.

On 21 June 2009 Samer Zabian, the Director of Customer Service (never has a department been so badly named) wrote to the owners to announce: " We are delighted to announce that the completion date for the Executive Towers project is now confirmed as 20 July 2009."

More fiction. This was nothing more than an attempt to bring in some cash from the final payments. It was clear that a summer 2009 handover was impossible.

Another email (this time) on 15 November said that Tower B would be handed over from 30 November. And the threats started – “failure to book your handover appointment by 26th November 2009 may result in your account being marked delinquent.”

No matter that the building was already almost 2 years late.

A December handover appointment was then replaced by a January appointment; although I only knew that when I rang the customer service department to confirm the December appointment and was told there was a further delay.

Now lets look at the handover process. How should this work; the purchaser examines the property; prepares the snagging list (defects to be addressed before handover) and ensures the snagging list is resolved before the final payment is made and the property is handed over by the developer.

Not so with Dubai Properties. They take your money first thank you. Then you can go to the property and prepare you snagging list. You are now paying utilities and management fees for a property that is not yet fit to inhabit.

Incidentally Dubai Properties did not put management of Executive Towers out to tender. They just appointed their subsidiary management firm - Salwan LLC. A company that has no history of property management and that appears able to charge whatever management fee it wishes. This appears to be around AED14.50psf - for what??? Employing a security gurad in the car park to take my name every time i go to see the apartment that I own.

Salwan did retain some UK consultants to advise on the handover process. The consultants said completion of the pool, gym, public areas is further delayed. The pool may be ready by the end of March. Lanscaping will not start for six months.

Some of the consultants have been retained by Salwan to manage the handover. They are openly and honestly embarrassed to be handing over the project in this condition.

Simply put Executive Towers is not ready to be handed over. And it should not have been handed over in this condition.

The pool may open in by March.

The gym may open by June.

The mall area may open in six months. I suspect this is closer to the year end.

But remember these are Dubai Property dates so are subject to lengthy delay.

There is no landscaping. The towers currently sit on a mud and sand patch with no proper road access.

At present there is no safe access to the building. Access to my tower, Tower B, is available through the car park only. Only one of the three elevator banks is working. The car park is dirty, dusty, poorly lit, full of building materials and is base camp for the many labourers still on site. I am sure they are delightful people but I do not think my wife should have to walk through them if she comes home alone to the building. I do not regard it as either safe or secure.

 My car parking spot is B13. That and the surrounding spaces are currently being used as storage space for building materials.

Then the big moment - you get to your apartment and see it for the first time.

The view out over the Burj Khalifa. Lovely.

Inside - I have never been more disappointed. The plasterwork, grouting and paintwork all looks like it was completed by five year olds using playdoh.

The flooring is stone tiles; it looks like the tiles that you might use on a garden path.

There is mould/fungus on the wall of one of the bedrooms. The built in wardrobe there is showing signs of rotting and warping.

There are panels missing. There are chips, marks, damage throughout. Door fames are damaged. Doors are chipped. Switches and sockets are missing. Cracks in the plaster work have been painted over. Tiling is uneven. Doors do not fit properly etc.

The quality of the materials that have been used is very poor. The doors and door frames are especially bad. This looks like cost cutting of the worst kind.

The saddest part is that there appears to be absolutely no quality control and no sense of a duty of care. Isn't this what customer service is supposed to do. There can have been no check of my apartment to ensure that basic fixes had been done; that obvious damage had been repaired. None of this is rocket science. The contractor should be signing off on this apartment before I am expected to review it.

The schedule of finishes in the sale and purchase agreement said that "All finishes, fixtures, construction and installation will be to relevant international and local standards." That must have been in the fiction section.

The Dubai Properties web site eulogises on Executive Towers : "The Executive Towers comprise 12 towers: ten residential towers, one commercial tower known as Aspect Tower; and one hotel called the Business Bay Hotel. The apartments come equipped with modern amenities, high-tech facilities and internationally designed interior spaces that embody superb architectural innovation and breathtaking views of the winding Creek."

It makes me weep to see the reality.

Khalid Al Malik, Group CEO of Dubai Properties Group, said: "The handover of The Executive Towers confirms Dubai Properties’ commitment to the continued development of Dubai’s landscape by delivering projects that surpass our customers’ expectations."

My expectations were pretty low already - and they could not even meet those !! Pathetic; shameful; incompetent.

It is now three weeks from the handover date. Firstly we were told it would take two eeks to complete the snagging work. Then we were told the work would start on 17 January. But now three weeks after the handover and final payment no work has been done.

I have now been promised that the work will be done in the next week. I have little confidence that this will be achieved or will be satisfactory. I

It is a shame. The people on site from Salwan and Idama do appear to care. But the contractor is not interested and Dubai Properties management have simply taken the money without any thought of their customers.

For those of us who have made a long term committment to working here, investing here and living here, this project is bitterly disappointing. The abiding and long term feeling is that the purchasers and investors have and continue to be treated incredibly poorly. As for the so called Director of Customer Service - he should be ashamed.

If I can find a way to post pictures of the defects to this forum i will do so.

Anyone who wants to compare notes or to confirm the accuracy of this commentary is welcome to contact me.

New strata law in Dubai

15 June 2010

The process has been set in motion to make developers relinquish their carte blanche over managing jointly owned property in Dubai. The recently announced guidelines to the Jointly Owned Property Law (Law No. 27 of 2007) have put the onus on developers to establish interim owner associations (OAs) and elect an interim board for completed property within the next six to nine months.

While the Real Estate Regulatory Agency (Rera) and the Land Department have established a regulatory framework to manage communal real estate, stakeholders are still seeking clarifications on numerous counts. "We think the biggest hurdle will be to get the developer to react to the new laws, i.e. to prepare all documentation, including surveys, leading to the registration of the project, then convening meetings to enable the creation of the OA and so on. Some developers seem entrenched in their manager role, which has now become redundant," says Graham Yeates, strata expert, Cluttons Middle East.

There are also concerns among some developers that entrusting building maintenance to an OA could be to the detriment of their brands.

"The main concern of brand dilution is for developers of hotels or serviced apartments under the jointly owned property regime," says Nima Khanpour, commercial director at Stratum, an OA management company.

"The biggest concern is from an investment perspective. There are not going to be many companies coming here to invest in the development of hotels if the law doesn't allow protection of their rights."

Given that developers have a short time frame to hand over management to an OA, Dubai's strata management companies should see a deluge of enquiries. "Some of the developers are unaware that they are required by law to have all this set up within a six-month period," says Gary Adamson, CEO, Stratum.

"If they don't, the owners can give a 30-day notice and in the event that the developer still doesn't register the interim OA, then the proprietors can take their own action to have it registered and bill the developer for it."

Interim OA boards

While interim OAs have a mandate to prepare members for the transition of power, they are merely consultation committees which will help homeowners identify their liabilities and obligations under the new regime. The directors of interim OAs will take over once the OA is registered and the first annual general assembly is convened. There has to be a minimum of five and a maximum of seven members on the interim board of directors, with three reserves. These owners have to be nominated first, then elected and no one can hold more than one position on the board - a point that restricts the clout of developers still holding substantial stock in a building.

"Once the OA is registered, a developer with unsold units will be rendered as just another owner within the complex," says Gary. "The building and all the services provided within the scope of the OA have to be maintained and every proprietor will be allocated a unit entitlement, which is the proportional liability to contribute towards all the expenses of the property.

"If they don't, they will be subject to the same law as everyone else and a penalty will be imposed. Developers will also need to pay service charges for units that have not been handed over."

Dispute resolution

Rera has also put a mechanism in place to recover service charges from owners who have fallen into arrears (‘delinquents'). Although a penalty of 12 per cent per annum will be initially levied, a public auction of the property would be the last resort.

"The feedback we are getting from developers is that the delinquency rate could be upwards of 50 per cent," says Gary. "There are also some developments with a delinquency rate as low as 7 per cent, where the owners are happy with the way the developers have been running them."

Graham says the guidelines remain silent on dispute resolution. "Ideally, there should be a specialist tribunal that would allow owners to air grievances without the need for protracted legal wranglings that sometimes occur."

There are provisions in the guidelines to restrict developers' ability to enter into supply agreements on behalf of the OAs. "Any contract that has been entered into by the developer can be cancelled at the OA's first annual general assembly," says Gary. "A disclosure clause must now be attached to all property sales and purchase agreements, which outlines how OAs cannot contract with companies unlicensed in Dubai. There will also be different licenses for facilities management companies and OA management firms providing services in jointly owned property."

"The new laws create an owners association as a distinct legal entity. Normally, this would override the pre-existing arrangements and the OA would be able to call tenders for components of their required facilities rather than accepting a blanket cover," says Graham.

Rera will, however, have the power to temporarily administer a development to deal with breach of community rules by owners. "Initially, the developer framed the community rules. Once the OA starts operating, it can change those rules, depending on the specific circumstances relating to that particular development and depending on where they sit in the scheme of things," says Graham.

For homeowners being handed over new properties, the regulations could give them recourse in the event that a developer provides "inadequate" facilities or common areas in a site plan. According to Article 11 of the directives, "The Department may refuse to register a Jointly Owned Property Declaration if (in its opinion) the Developer has withheld areas, services or facilities from the Site Plan or common areas site plan, or has included them within a Unit on the Site Plan, to the extent that the Common Areas are inadequate to cater for the reasonable needs of the Owners and Occupiers of the Unit or it is otherwise unreasonable to have done so."

Mixed-use buildings

Applying the Jointly Owned Property Law to mixed-use buildings is more challenging.

"There will be provisions within the scope of the legislation to determine the service charge levies not only on the basis of square foot, but also as per the usage of the service area," says Nima. "For instance, the seven different volumetric components within the Burj Khalifa can be partly charged on the basis of their use of common facilities, such as lifts, car parks and so on."

With the democratisation of facilities management, many in the industry believe that service charges are likely to decrease on average across all areas in Dubai.

Gary raises the possibility of how a building with a majority of owner-occupiers is likely to have higher service charges than one with long-term investors.

"All the investors are looking to get money out of tenants and if they can keep the cost of maintaining the building down, they will do that," he says. "But at some stage, the building will get to a point where it no longer generates sufficient income and they will have to put money back in to bring it back to a certain standard."

With owners assuming control of building maintenance, service charges may be adjusted upwards or downwards for a number of reasons. "Some of the service contracts were negotiated two years ago. These are fairly high compared to what is being negotiated today," says Nima, adding that variable costs - such as a concierge, marina maintenance and so on - lead to the variance in service fees in most buildings.

As a prerequisite to registration, every jointly owned building will need to present plans identifying common property and individual unit boundaries to the Land Department. The surveyor, in turn, will certify the accuracy of the subdivision and units of entitlement compared with the original design plans. (Units of entitlement determine which units must pay higher fees than others. In some cases, the higher the fees, the more clout the unit owner has in terms of contesting issues.)

For projects under construction, developers must submit drawings to the surveying section in the Land Department. "Land surveyor registration and methodology are fully catered to in the new regulations, but valuers are not. In most cases, the valuer is concerned more about market values and comparison with other properties in the area than mundane OA issues, unless there are well-publicised faults or litigation and so on, in a particular building," says Graham.

Meanwhile, the Land Department's surveying wing will set out rules and guide surveyors when calculating the dimension of units and common area entitlements.

In the meantime, common areas and each unit's floor area in existing buildings will be determined by architectural and engineering plans - something that has created confusion among those who expected all buildings to be subjected to the upcoming surveying regulations. Kent O'Brien, CEO and managing director of Strata Global says, "The current confusion in the market relates to what facilities are common areas and where the measurement of the unit title commences. The title boundaries under the new survey regulations are measured to the centre-line of the wall adjoining common property (including windows and balustrades) and also the centre-line of the wall between units."

Investor confidence

Until the time when the the Jointly Owned Property Law guidelines are outlined in an officially published document, they are unlikely to boost in investor confidence. "More important is the adjustment of price expectations, which, on average, still do not meet investment criteria. More specifically, for most investors, the current and projected yields simply do not justify local property investment," says Jesse Downs, director of research and advisory services, Landmark Advisory. The disclosure of OAs' books and records to prospective buyers may help restore investor confidence. "Prudent investors will be able to access the OA records. If full disclosure is available, intending purchasers will be able to make informed decisions. It is all part of the need for transparency, which can only benefit the property market," adds Graham.

Input from the experts

Jesse Downs
Landmark Advisory

"Recent clarification about the implementation of strata law shows some progress; however, we really need to have everything outlined in an officially published document that clarifies the implementation of the law. Generally, progress in the clarification of the owners association laws can help to solidify confidence. However, there are still a number of steps that will need to be taken to significantly boost confidence and improve liquidity."

Kent O'Brien
Strata Global

"Many developers have excised many areas, such as pools and gyms... out of the common areas of the development and added these into title property under the developers' ownership. This has led to disputes with owners who subsequently find they have to pay for membership to use these facilities. Rera has stepped in and will adjudicate on the plan before approving registration of the plan of subdivision."

Graham Yeates
Cluttons Middle East

"Australian experience has shown that a building sold as strata yields a much higher return than a single ownership one. This applies to both residential and commercial. The sum total of the separate strata lots will far exceed the value of a one-owner building. There has been comment about the difficulty of letting a commercial strata building where a tenant requires more than one lot, such as a floor and a half. There's no reason for strata title to impede such occupancy. Rental returns improve in such situations as space in those buildings is taken by this expanding tenant."

Survey regulations

Properties yet to be occupied as of April 13 will need to have their common areas and units determined in accordance with the upcoming survey regulations. Kent O'Brien of Strata Global believes the regulations will be released soon. "However, surveyors are currently lodging plans according to Land Department directives which follow the general directions relating to surveys," he says. "At present the department has been accepting theoretical site plans for existing projects that are complete and occupied based on as-built plans as a transitional arrangement. These will be subject to resurvey within a stipulated period by the owners' association and unit plans must be surveyed at the owners expense when resale occurs."