The collection of service charge fees has been the most pressing issue faced by management companies. Lack of timely payment of service charge fees by the owners adversely impacts the capabilities of the management companies in performing their responsibilities to maintain the property and initiate the enhancement work for the welfare of the community as well as its residents.
One of the primary reasons for the delays and deferrals in the collection of service charge fees is the lack of a clear mechanism for the payment of service fees among the owners. To overcome this challenge, in a historic move, the Real Estate Regulatory Authority or RERA has released Circular No. (3) 2021 which clearly outlines the mechanism for collecting service fees and procedures before heading to the Rental Dispute Resolution Center.
What are Service Fees or Charges?
Service fees/charges are the recurring fees which homeowners pay for the maintenance and upkeep of the building, community, and common areas. It comprises all the fees towards cleaning, MEP services, waste collection and disposal, landscaping, gym equipment and swimming pool maintenance, security services, maintenance of CCTVs to ensure safety standards of the residents, and general upkeep of the building as well as the collection of the Reserve Fund for the future replacing of the assets and Master community fees.
Average Service Charges in Dubai Real estate
According to the reports from Dubai Land Department (DLD), the service charges for a property in Dubai range between AED 3.00 to 30.00 per sq. ft. or sometimes even more, depending on the number of factors, including but not limited to the location of the building, size, and age of the building, type of the community (residential/commercial, villas or low-mid-high rise building) facilities available, cooling type (district cooling/chiller cooling) and many more. The report titled – ‘Service charges comparison for flats and villas in Dubai’ by Bayut states that the Service charges in Dubai are applicable to all types of properties. These recurring fees are charged on a square foot basis and can range anywhere between AED 3 and AED 30 or sometimes even more.
Responsibilities of the Developer and Management Company in the Collection of Service Fees
Here are the responsibilities of the developers and the management companies in the Collection of Service fees as outlined in Circular No. (3) 2021 –
a.) Responsibilities of the Developers
Documentation: The developer is obligated to deliver the documents related to the receipt and delivery of units to the buyers. These documents are considered records of the property, and service fees are calculated according to these documents.
b.) Responsibilities of the Management Company
Here are the key responsibilities of the management Company as per the Circular No. (3) 2021 –
1.) Invoicing and Usage charges to Owners: The management company is obligated to send invoices for service charges and usage charges to the owners of jointly owned properties on the specified dates without delay.
2.) Issuing Payment Notices to Owners in Case of Payment Failure: In case the owners of units fail to pay the fees due on them at the specified times, the management company has the right to issue payment notices so that the owners are given 30 days from the date of the notice to pay the amounts due from them.
3.) Accuracy of the Data: The management company shall be responsible for the accuracy of all data contained in the notification (the owner’s address, e-mail, financial statements, etc.).
4.) Delays in the Submission and Approval of the Budget: In case the management company delays in submitting the budget and approving it by the institution, it must pay the service fee amounts in installments to the owner and not be required to pay them in one payment.
5.) Non-compliance by the Owners in the Payment of Service & Usage Fee: In case of non-compliance by the owners to pay the due fees for services and usage fees, the management company has the right to register a case with the Rental Disputes Resolution Center.
6.) Prerequisites for the Management Company before registering the case with Rental Dispute Resolution Center:
The management company must, before registering the case with Rental Dispute Resolution Center, fulfill all the necessary steps and requirements. These requirements include –
a.) Verifying the validity of the amounts owed by the owners and their breach of payment
b.) Checking the amounts of fees due by one of the auditing offices approved by the institution in accordance with the scope of the audit and the approved fees from the institution and the attachment in this circular
c.) the auditor must clearly and accurately state the result of the audit and the amounts owed by the owners, with the stamp of the audit office in the report which must be attached to the case file.