Will Dubai’s property service charges remain unchanged?
SURPRISES IN SERVICE FEES UNLIKELY BUT INFLATION COSTS COULD BE THERE
Property owners in Dubai are unlikely to see sharp rises on their 2023 service charge payments as Dubai Land Department and the various owners association (OA) management companies work on the numbers. If at all there are any increases, those will be related to the inflation costs, industry sources say.
Service charges across most freehold locations in Dubai have remained within range in the last two years, even as the property market recorded sharp spikes in rentals and property values. The authorities have during this period made it clear that every attention will be paid to keeping property owners’ costs in check.
But homeowners may soon need to get their accounts right if they have service charge dues to pay off. Continued failure to do so could impact defaulting homeowners’ credit scores, in the same way that any missed payment deadlines on bank loans or even telephone/utility bills. OA management companies and the Etihad Credit Bureau have been in talks to get non-payment of service charges too to be included when computing a UAE resident’s credit ratings. (A decision either way is imminent, according to property market and OA sources.)
Homeowners may soon need to get their accounts right if they have service charge dues to pay off.
Mixed reports
There are mixed reports on where service charge collections stand. Some in the industry say there was significant improvements in the first-half but that payments of dues tailed off from October onwards. According to Saeed Al Fahim, CEO of Stratum, one of the biggest OA management firms in the UAE, “With regards to collections, litigation processes in place have allowed for greater due paybacks. We are hopeful that with oversight from the Dubai courts and — hopefully — with reporting by the Etihad Credit Bureau, that collections increase further. The property management industry is moving towards normalisation after consolidation in 2022 where some mid-sized OAE managers were bought out.”
Though there were reports of some OA companies raising services charges unilaterally, across most locations, any changes during 2022 were kept to a tight range by the Land Department. Under recent rule changes, the Land Department along with third-party audit committees set the service charges for a particular building or community at the start of each year. They do take feedback from the concerned OA companies, by the final word belongs to the DLD. This way, the authorities have sought to reduce the influence of developers and their associated OA companies from setting service fees. To a great extent, this has worked well.
“Service charges on a per square foot (psf) basis are only higher for newly handed over developments at the time of submission of the first budget,” said Sameer Lakhani, Managing Director at Global Capital Partners. “For existing developments, 2023 budgets are to be strictly monitored by Rera, and can only be amended if OA board members change and/or through the introduction of new services in managing the property.