service charges law in UAE – If you’re thinking about buying real estate in the UAE, there are a number of charges to consider before making the purchase.
As a general guideline, you should budget for a one-time expenditure that is around 7% of the value of your property as a buffer to control your costs which would include trustee costs, DLD registration fees, and mortgage expenses.
You should also consider the building’s service charges, which are paid yearly, in addition to your monthly mortgage payments (if any). In order to more accurately estimate your expenditures for buying a property in the UAE, our advocates in dubai provide all the information about the new service charges law.
What Do Service Charges Mean?
According to our best uae lawyers, a service charge is the cost of keeping your property in good condition. This fee typically covers maintenance, cleaning, and repair work in the property’s common areas. It may also contain chiller fees.
The development’s owner’s association normally picks the service provider for these. Please keep in mind that various apartment buildings charge varying rates for including balconies/terraces, which means you may be required to pay a lower charge. Furthermore, take into account that most villa communities impose service fees based on the plot area.
Jumeirah Golf Estates is an anomaly in this regard, charging based on the built-up area.
In addition, you will make a small contribution to a “sinking fund.” This sinking fund is used to help maintain annual service charge fees and prevent significant fluctuations in service charge fees.
The funds are typically used for costly repairs, particularly in towns with district cooling units that require chiller replacements. It will also be used in circumstances where elevators need to be repaired or rebuilt, as well as for facade cladding maintenance.
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Service charge law in Dubai | property lawyers in dubai
The owner is responsible for paying the service charge and master community service charge under Law Number 6 of 2019 on Ownership of Jointly Owned Property in the Emirate of Dubai (the “Dubai Law”) unless the unit rental states otherwise.
If the tenant does not pay the service charge and master community service charge as required by Dubai Law, the owner is still obligated to pay them.
Article 25 of the Dubai Law states that the owner must pay the management’s portion of the service charge to cover the management’s expenses, operation, maintenance, and repair of the common areas.
The service charge for unsold units as well as units sold in which the developer is required to pay the service charge for the buyer in the contract of sale or attachment in line with the conditions agreed upon in the contract.
When computing the owner’s portion of the service charge, the area of the unit recorded in the Land Registry should be used.
According to Article 32 of the Dubai Law, the Management has a lien on each unit for unpaid service charges. The unit shall not be disposed of until the management allowance has been paid. However, if the owner fails to pay their share of the service charge or any portion thereof, the management may demand payment within thirty days after being notified by a written notice approved by the RERA.
If this time restriction is not met, the financial claim made by the management to the owner will be enforceable before the execution court in the center in line with the rules and procedures in place.
In order to recover the owed service charge, the competent execution judge may, if needed, sell the unit whose owner has not paid his part of the service charge at a public auction. If the owner fails to pay his portion of the service charge, he must pay the legal fees, expenditures, and lawyers’ fees as assessed by the competent execution court.
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FAQ about service Charges law in UAE | legal advocates in dubai
1- What happens if you don’t pay the service charge?
As per the best law firm in dubai, if any of the owner members of the association refuses to perform their responsibilities and pay the service charge, two significant repercussions may occur.
First of all, we must keep in mind that money is assigned to the general and reserve accounts, which are utilized for the property’s upkeep and maintenance. Insufficient money results from outstanding payments, resulting in the cessation of services, insurance, and repairs that the building may require at the time. These will be phased out till adequate finances are available.
Second, the service charge is a legal requirement mandated by DLD. If the owner misses the deadline specified in the invoice, the management agency will most likely send them reminders asking for payment. If the remaining balance remains unpaid, RERA will publish a legal notice outlining the implications if the service charge is not paid.
2- What is the purpose of a service charge?
Its importance extends beyond the upkeep and maintenance of the property’s amenities; the funds collected ultimately allow the management agency to fully optimize the building’s common areas and provide a pleasant living experience for all residents, while also contributing to the developer’s vision and legacy.
3- How is a service charge collected?
After the Dubai Land Department (DLD) updated Common Properties Law No.6 in 2019, property owners became responsible for invoicing and collecting service charges, exempting property developers from this responsibility. Nevertheless, the Owners Association may delegate this responsibility to the management firm approved by the Dubai Real Estate Regulatory Agency (RERA). DLD developed the electronic system Mollak to offer homeowners transparency and data indicating where the collected funds are utilized.
The funds are collected in seven designated banks. A breakdown of the service charge is given to the owners to provide clarity and transparency about how the various fees affect the building’s maintenance and upkeep.
4- What Happens if Service Charges Aren’t Paid?
Service charges and arrears may always be resolved by speaking with your landlord or property management firm. If you do not pay the loan, the freeholder may take legal action against you, and you may lose your house if you do not pay.
4- Is service charge a legal requirement?
According to the legislation, the leaseholder has a legal right to withhold payment until the service charge is asked properly if the demand does not meet one of these criteria.
Founder & Managing Director
Jouslin Khairallah is the Founder & Managing Director of Khairallah Advocates and Legal Consultants. She’s one of the top lawyers in Dubai.
+971 4 427 0845
Khairallah Advocates provides professional services in service charges cases as an experienced law firm with many accumulated years of legal activity. If you are not based in the UAE, you may provide us with a Power of Attorney that is notarized in the country where you are presently resident and attested by the UAE Ministry of Foreign Affairs and International Cooperation.
We will approach the bank, the court, and any other relevant authorities on your behalf in order to offer documentary proof and reach an early settlement.