Separating the developer from homeowners associations

There will be some conflicts of interest, but its worst influences can be lessened

It is always encouraging - and heart warming, to say the least - to read about any move to empower homeowners in Dubai. I believe any such step will be in the interest of investors, ultimately.

I have been advocating this step - remove conflicts of interest between developers and OA (owners association) companies - for the past 10 years plus, with the idea that this would be fair to the actual homeowners. I have repeatedly asked for more transparency in vendor selection for OA property management firms, since this is the one step that removes the possibility of awarding contracts to the detriment of the actual owners.

I have insisted on clarifications on related-party transactions with the same motive of achieving cost reductions.

My experience does tell me that there is a sizeable portion of the service fees that are relatively non-transparent, and these surely work against the interest of the owners.

Power to choose

I do believe that in the interest of the owners or investors, it is important that there is proper and judicial vendor selection policy, based on the twin ideas of picking the right vendor as well as getting good value for money. To prove my point I distinctly remember when in one of the communities I was working with us as an independent owners association member, I realized that a particular line cost item was exorbitant by any standard.

Besides, there was the fact that the vendor at the time was never into that particular line of business. Ultimately, after many deliberations the developer, had to refund some of the money by way of a credit note.

Capping the conflicts

Another point to make here is that whether it is natural for a developer to promote his own OA property management company. There is nothing wrong with this, but I feel that if the related business is to become a vendor, then it is but fair this is done after evaluations on costs received from the open market for similar services.

The one question I would have for the authorities is whether their new ruling - on conflicts of interest - will come in with retrospective implication.

Time of implementation does matter a lot, such as the ruling on late payment fee waiver resulted in a dent to the coffers of the communities. A retrospective implementation of the ruling will surely help shore up some much needed funds for the respective communities.

I must once again be honest in that I am not at all opposed to the OA management companies I deal with. They do work hard... and work under pressure. They have the onerous task of maintaining a fine balance between the actual owners and the developer.

That is never easy and could do with the right sort of back up from the authorities.

- Gautam Patel is a Dubai based property investor.