Investors angry over cost hikes to Dubai units

Investors angry over cost hikes to Dubai units
By Sarah Townsend Arabianbusiness
Tuesday, 14 June 2016 10:37 AM

Investors angry over cost hikes to Dubai units

Dubai’s real estate regulator has intervened in a real estate dispute involving investors in a newly completed residential scheme who claimed they were hit with extra costs on handover that in some cases almost doubled the original price of their property.

Three investors told Arabian Business they were among several who have been informed they no longer have to pay those additional costs following a meeting between the developer and the Real Estate Regulatory Agency (Rera).

It came after a representative for as many as half of 400-odd investors in ACW Holding’s Hanover Square development in Jumeirah Village met with Rera officials to raise serious concerns about the developer and the costs it was demanding from the scheme’s investors.
In one instance, a buyer claimed his 1,013 sq ft two-bedroom apartment – bought off-plan in 2007 – had doubled in size by handover this year and he was asked to pay an additional AED463,000 ($126,000) on top of the AED908,776 ($247,424) price stipulated in the sales contract.

In another instance, the buyer claimed to have signed an agreement in 2007 to purchase a 648 sq ft apartment for AED591,394 ($161,013). On completion this year, the flat had increased in size by 60.9 percent and the developer asked for payment of an additional AED239, 556 ($65,221).
In a third instance, a buyer claimed he was asked to pay AED478,000 ($129,861) – 51 percent – more than the original cost of his apartment after it increased in size by 3 percent on handover.
Investors said they were initially offered two payment options – the first requiring payment of the outstanding sum, discounted, this year, or a second option requiring the investor to settle a larger sum by way of an interest-laden repayment plan over a longer period of time.
But they said they were angry and anxious as they were unable to pay the additional cost and would never have agreed to purchase their properties had they known they would be hit with substantial extra costs, including the hike in service charges the amendment incurs.
Another investor reported that his unit at Hanover Square had decreased in size on completion but he had so far been unable to secure a refund from the developer.
Hanover Square is located in the Jumeirah Village cluster in Dubai, which encompasses the neighbourhoods of Jumeirah Village Circle (JVC), Sports City and Jumeirah Village Triangle.
Investors claim the scheme has been significantly delayed from its original 2009 delivery date. Throughout, they say they continued paying their installments as specified in sales and purchase agreements (SPAs). On handover, they allege, the developer demanded they “unfairly” comply with new rules from DLD this year requiring investors and developers to pay an 8 percent fee on late registrations of property disposals, rather than the 4 percent fee in place at the time many of the sales contracts were signed nearly nine years ago.
A spokesperson for ACW said in a statement: “We have already paid the 8 percent fee in respect of property registration and can provide documents issued by the DLD to this effect. Investors can pay direct if they wish.”

Meanwhile, investors say ACW has taken a long time to respond to enquiries and complaints. One investor, who asked not to be named, said: “Communication from ACW has been atrocious. Their customer service people are useless and the managers hide behind this as they take weeks to respond to our queries.”
Many have yet to receive the title deeds for their properties – even if they are not impacted by changes in unit size – and therefore are unable to start renting out their properties and generating a return on their investment.

A spokesperson for ACW responded: “Title deeds are being applied for at the DLD and when received they are available for collection. This is ongoing and is subject to availability of issue by the DLD, which is completely out of our control.”

One investor who asked to be described as A.D., told Arabian Business this month: “In my particular case, the size increase of my apartment is 51 percent, which works out to an additional AED477,000. Needless to say, I cannot afford this and in the absence of any reasonable solution I may have to default.

“I am not alone in this – none of us investors were informed of the size increases until after the initial handover based on original spec. The options offered were to pay the contract price in four quarterly payments or a discounted price for immediate settlement. The ideal option would be to cancel the contract.

“ACW provided no documentation regarding the governance of the change nor sought agreement with the investor. They referred to a clause in the SPA which stipulates [size] increases over three percent are the investor’s responsibility. This begs the question: if they were to double or triple the apartment size, would we still be expected to pay?”

A.D. continued: “What is particularly galling is that the increased area is basically glorified sand (minimal construction cost) [the additional space is a balcony] and attracts a full service charge on the extra area.

“Instead of looking forward to an asset and retirement income I am now faced with the real possibility of a material loss.

UK-based compliance expert Yousouf Jhugroo who is also an investor in Hanover Square and chairman of the Property Investors Consortium, which he set up to represent aggrieved investors in delayed off-plan schemes around the world, said he met with representatives of RERA and ACW at separate meetings last month and asked for action to be taken to appease investors. He said the costs being demanded were “exorbitant” and that some of the size amendments represented “material increases that should be the developer’s liability, not the investors’”.
Shortly before publication, a handful of investors said they had been contacted last week and informed they no longer have to pay the full cost of the size increase following an intervention by Rera. According to an email seen by Arabian Business, ACW met with Rera officials on May 30. Neither Rera nor ACW responded to requests for further information about this meeting and the action that has been taken since.
In a statement to Arabian Business sent earlier this month, an ACW spokesperson said the developer “has broken no real estate laws or contractual agreements with our investors and will continue to provide our investor partners with regular feedback, reports, independently audited accounts and a good return on their investment at all times, following the agreement made between the parties.”
The spokesperson added: “The project has been delayed past the agreed original date of delivery. There are remedies in the contract for this occurrence.
“The Hanover Square development has increased overall in size by approximately four percent. This is perfectly normal with off-plan property. Investors who have been affected by this either have been or will be contacted in order to discuss options.”
The spokesperson said the additional cost does not represent a breach in contract, “as the SPA includes clauses related to this matter and there is a published Dubai law if this arises”.

Investors claimed the terms of the SPA are misleading, but the ACW spokesperson said the director was away and the company could not provide clarification in response to further questions in his absence.

ACW’s initial statement said: “If any investor was dissatisfied with the SPA they should ask themselves why they continued to make payments knowing the position with regard to the terms and conditions of the SPA from day one.”

Investors allege they were threatened with late penalties if they complained that the requisite construction milestone had not been reached and asked to postpone the next payment until it had.

On allegations that ACW has been “hard to deal with”, the spokesperson said: “We deal directly with investors and have a dedicated team of customer service representatives.

“We are not stating that everyone we speak with is 100 percent satisfied but we endeavour to answer queries and questions quickly and professionally and in line with contractual agreements.”

Hanover Square has been fully operational since April, according to ACW’s website.

This is not the first time investors have hit out against ACW over delayed projects in Dubai. In 2009, disgruntled buyers set up a lobby group urging other investors to withhold further payments until installments are linked to construction. Rera reportedly approved the construction-linked schedules and investors were obliged to pay.

Posted on June 15, 2016 in Property, Real Estate

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