Abu Dhabi, UAEThursday 22 August 2019

Building repair timebomb as homeowners fail to set aside enough money, experts warn

Experts warn that some building associations have inadequate reserve funds, making it hard to replace fire extinguishers, chiller units for air conditioning, water tanks or lifts that may break down.

DUBAI // Homeowners who fail to set aside sufficient funds for long-term building repairs may have to deal with major safety and maintenance issues in coming years, experts have warned.

They warn that some building associations have inadequate reserve funds, making it hard to replace fire extinguishers, chiller units for air conditioning, water tanks or lifts that may break down.

“We are estimating that in 5 to 10 years we’re going to see some major failures in building equipment; these are big money items,” said Douglas Ralph, chief executive of Snap & Inspect, a property inspection and consultancy firm and also president of the newly formed Middle East Real Estate Inspection Association.

“We try to spread the message that inspection means protection. If we don’t get to maintenance and the quality of the reserve fund, we are going to have bigger and bigger bills further down the road.”

Typically, experts found that owners associations set aside 2 to 3 per cent of the overall service charge budget for such repairs, with some putting aside up to 10 per cent.

But they said the percentage was inadequate for major renovations, adding that 25 to 30 per cent of the budget for service fees would be ideal.

The problem is exacerbated by the fact that some homeowners just do not pay their service fees, in part due to the transient nature of the expatriate and investor population.

“We got a shock when we were asked to pay Dh20,000 suddenly after regularly paying service charges,” said Jenab B, an Al Qusais resident. Homeowners in her building were each asked for the amount two months ago to overhaul the lift but, until now, they have not paid and it remains broken.

“When I bought this apartment I didn’t know I would be also paying money to a reserve fund. Many residents have refused to pay this extra amount. They say they may not be here after some years. It’s creating long queues and causing everyone hardship,” she added.

A reserve fund study and a building condition audit were made mandatory a few years ago for service charge budgets to be approved by the Real Estate Regulatory Agency (Rera) in Dubai.

Unlike a general fund for routine maintenance, a reserve fund is specifically for expenditure that does not occur on a regular basis, such as replacement of roofs, external cladding, repair of parking areas, fire safety systems and common area utilities.

Repair costs can run into millions depending on the age, size, equipment and assets of a building. Martin Gregory, a costing and facilities management specialist, said in cases where funds were low, the owners association could issue a special levy.

“Owners need to take the problem seriously in case a chiller breaks down, you need to replace cables - a transformer can cost a fortune,” he said.

“If a chiller breaks down, you could be spending a lot with no money in the reserve fund to pay for it. All owners will be hit with special levies that are going to be very high, so people won’t pay, the chiller won’t work and the building will be dilapidated and the value will be reduced.”

Chillers breaking down due to poor maintenance is a common problem in Dubai, driving residents to despair in summer months.

Craig Ross, head of projects and building consultancy at Cavendish Maxwell, said massive price hikes for service charges were required.

“The problem is low service charges set initially by developers to entice people into buying the property,” he said. “When it’s too low, there is not enough to put in the reserve in the first place. You have buildings that are well maintained and the flip side is you have buildings that look like they are well maintained but, in the background, they are actually falling apart.”


Updated: May 29, 2016 04:00 AM