The Case of the Elusive Service Charge

If only we all had the luxury of open-ended contracts which developers in Dubai and Ras Al Khaimah seem to be able to use with impunity, life would be so much simpler. It would be a lot easier to sell our unwanted gifts on ebay by getting buyers to accept very flexible and loosely worded terms and conditions of purchase, which means buyers would have very little recourse of compensation in the event of items having been ‘creatively’ described.

But there is a problem - on ebay the negative feedback from dissatisfied customers that will build up against our profile will mean that soon nobody will be willing to buy from us. Unfortunately this model does not apply to Al Hamra Estates, as they seem immune to any amount of negative feedback, and continue to market their merchandise with open-ended contracts designed mainly to protect themselves.

The matter of service charges which every investor will eventually have to face up to is just such an example of the use of ‘creative’ contracts by Al Hamra Estates. Investors may recall that very little information was provided on this matter and generally kept low profile even when questions were asked. With information gleaned from various sources, we will however attempt to summarise the possible charges that investors will have to cough up on handover of their unit.

A Single Offshore Company License Fees
The freehold within Al Hamra Village is based on a single offshore company license, plus yearly fees to be paid to the Ras Al Khaimah Investment Authority. First year charges quoted by Al Hamra early 2007 were AED 2,500 for studio, 1-bed, 2-bed and 3-bed units, and AED 5,000 for Townhouses, Duplexes and Villas

Project Maintenance Fees (figures for the first year)
These were originally estimated as AED 7 per sq ft for apartments, and now have been increased to AED 10 per sq ft. Figures for Townhouses and semi-detached duplex villas were originally mooted to be AED 520 per month, and for luxury villas type B & C AED to be AED 840 per month

Connection Charge (electricity & water)
AED 1,000 (refundable meter registration) plus AED 300.00 per KVA*(load of your particular unit) - one time payment.

Registration Fee
2% of the purchase amount on completion & full payment of the unit (one time payment to the Land Department of Ras Al Khaimah).

Visa (optional)
AED 4,000.00 per person (includes administrative fee, medical, visa, transportation, etc.

So taking a one-bed, 1000 sq ft apartment costing AED 550,000 as an example, the costs stack up as follows:

Offshore Company License Fee AED 2,500
Maintenance Fees AED 10,000
Connection Charge AED 5,000
registration fee AED 11,000

This brings the total to AED 28,500. The charge has already gone up from AED 7 per sq ft to AED 10 per sq ft, so the total figure for the first years associated charges stacks up to a whopping £4,750 for our friends over the channel (based on an exchange rate of 6.0).

Let's hope the dream that is Al Hamra Village lives up to expectation and is worth the money we will be forking out to pay the service charge.