Real estate investors in Dubai and Sharjah demanded that the service fee clause be included in the initial contracts for real estate sales, noting that this would allow them to determine the expected investment return from their investment, in light of the exaggerated imposition of these fees by some developers. They told «Emirates Today», that this will have a good impact on real estate investment, noting that these fees are treated in terms of increases and decreases, and rental matters are also dealt with according to the market situation.
For their part, real estate experts evaluated the investors’ proposal, stressing the possibility of applying it according to certain controls and conditions, including that the fees be based on a careful study of the property. They pointed out that the implementation of the proposal will have a positive impact on the real estate market, in addition to enhancing confidence between the developer and the investor.
Advantage
In detail, the real estate investor in Dubai, Salem Al-Ali, said that if the service fees were included in the sales contracts, it would be of interest to the investors.
He added, “Being a real estate investor, I must know the expected investment return after deducting expenses and fees, including service fees, which are the biggest concern for me as an investor who wants to increase my investments in the sector.”
High fees
Habiba K said she has a real estate investment in Sharjah, but suffers from high service fees after the purchase, demanding that these fees be written in the sales contract clearly, and that they be treated in terms of increase and decrease as rental matters are dealt with according to market situation, to be reviewed every three years, and must be clear to investors.
Clearness
Real estate investor in Dubai, Ali Abu Taleb, agreed with al-Ali and Habiba investors that writing fees initially in real estate sales even initially or in an annexThe contract will have a good impact on real estate investment, not only in Dubai, but also in the UAE as a whole.
“As real estate investors, we prefer that things be clear from the outset, as well as the investor calculating his investment returns before starting to invest, and leaving these things undisbursed can affect investment in the future.”
Exaggeration
The investor in one of the large projects in Sharjah, who identified himself as A.A., said that if the service fees are not mentioned in the sales contract, the investor will have problems with the developer after receipt, stressing that this happened with him as he was surprised that the service fees were exaggerated and not commensurate with the services he expected.
Positive impact
In addition, the real estate expert, chairman of W Capital Real Estate Brokerage, Walid Al Zarouni, confirmed that the application of Such a proposal would have a positive impact on the market real estate, because such mysterious things put obstacles in front of the real estate investor and must be clarified in order to be assured of his investments.
Al-Zarouni said that the real estate developer should mention the service fees imposed in the sales contract, in order to enable the investor to calculate the return and be aware of the full fees he will pay, pointing out that the annual service fees are one of the obstaclesInvestment in the real estate sector at present.
Al-Zarouni added that the first investor’s inquiry is about the value of these fees, noting that the application of a decision by the Real Estate Regulatory Corporation or the Dubai Property and Land Department to set the price of fees is not difficult, so that fees are set in each area, at which point the developer must mention them exactly or at approximate value, for example, between AED 10 and AED 12 per square foot.
Increased confidence
Abdul Karim al-Mulla, chief executive officer of Standard Real Estate Management, said finding a mechanism to resolve this will increase confidence in the market.Local real estate increases the transparency standards required for the benefit of investors and market growthAs a whole.
Al-Mulla said it is better to set service fees with a sales contract, as the investor is surprised by an additional cost that he did not calculate before considering buying, affecting the expected return on investment.
Non-disclosure
“Some real estate developers do not disclose service fees before signing the sale contract, do not mention the old price and argue that they cannot specifically mention the price of a square foot, on the pretext that the owners’ association has not yet decided the price of a square foot,” said real estate expert Mohamed Abu Atahr.
Abu Ata’ad said that this is of course contrary to the laws of contracting and conditions with the developer, pointing out that this constitutes an obstacle for investors in determining the return on investment or the expected loss upon receipt of the property.
Calculating fees
Abu Ahareb suggested that the project manager communicate with the competent authorities in the owners association and determine the value of the actual construction and the quality of the actual finishing, which produces a mechanism to calculate the annual services fees correctly, and then these fees are included before the project is put forward, and the investor will be on a circuit at the total price of the fees of the real estate unit in which he invests, stressing that the approval of such a mechanism will be supportive of the marketReal estate enhances investors’ confidence to pump their money into the sector.
Good suggestion
Muhannad Al-Wadia, managing director of Harbor Real Estate, said that writing service fees within the sales contract as the contractors’ law is a good proposal, so that the owner or investor can calculate his expected investment return from buying the property.
He explained that there are three types of buyers in this regard, the first does not know about the service fees and then is surprised by them, and then complains about the payment of fees that he did not know what is considered a lack of awareness, while the second is the buyer who was not given the value of the service fees by the developer and was surprised by its value later, while the third type, who made the agreement With the developer on a specific value and was claimed higher than them.
Conditions
He indicated that there were some conditions to be met in order to apply this proposal is successful, most notably that the writing of service fees should be based on a careful study of the property and not just a number written in the contract, as the consultant working on the project must have an owners’ association management company and an expert in real estate management, to assess the value of the fees for the planned services.
One of those conditions was also to take into account the change in the value of fees in the event of an emergency, for example when applying A tax, or when there’s a big problem, a malfunction, or a fire. What increases the value of insurance, there are emergency things that need to be changed and reformed, as well as changes in the laws.
Rare condition
For his part, real estate expert Abdullah Kazem, said that the proposal to write service fees in the sales contract is an important step to build trust between the developer and the investor and enhance transparency between the two parties, pointing out that the reality of the marketToday it appears that although many developers place contract terms in dozens of pages, the development of a service fee clause is a rare case on the market.
The implementation of that proposal was a good initiative by some developers, which required legislation to standardize the contract system, so that there would be a unified sales contract for all developers.
Difficulty in Estimating
“In general, it is difficult to estimate and determine the value of service fees, some companies add them in the contract, but to entice buyers at the beginning to set low prices in the first year, then the buyer is surprised that the second year is prices by market,” said Mohammed al-Mutawa, real estate developer and CEO of Alwaleed Investment Company.
Maintenance prices change from year to year, so it is difficult to determine fees in the long run, he said, adding that they can be set for at least two years at the latest.
Legal opinion
Mohammed Al Qawasmi, a legal consultant specializing in real estate affairs, said that the fees for services in the sales contract are not fixed, because they depend on the nature of the services provided in the project, for example there are “five stars”, “two stars” or “one star”, and the level of services varies, so we find a project that puts the service fee of 30 dirhams per square foot and another puts only 10 dirhams. He added that determining the value of fees also depends on the actual cost of the service, pointing out that the Real Estate Regulatory Corporation in Dubai «RERA» provides an indicator of service fees showing the prices traded in the market, and there can be an annual budget that determines fees, whether by increase or decrease accordingly.
Fixed Fee
The managing director of Harbor Real Estate, Muhannad Al Wadia, suggested that the value of the service fees be given for the first year according to the agreement, that the service fee should not exceed the proposed figure, to be fixed for the first two or three years, and then if changes become, the buyer will be aware that after three years the fees will change.
Real estate investors demand inclusion of service fees in sales contracts – Economy – Local – UAE Today (emaratalyoum.com)